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Advantages And Disadvantages Of Developing Companies In Developing Countries

792 Words4 Pages

Low economic growth rates, obsolete technology, low levels of capital, high rates of unemployment and poor standards of living are the characteristics of developing countries, according to UNCTAD (2008). From the above research it is evident that multinationals will experience advantageous and disadvantageous environments when setting up in developing countries.
The rise of capitalism during the 19th century in Europe facilitated multinational foreign direct investment into developing economies from organisations primarily controlled from France, Germany, Britain and Holland, (United Nations Conference on Trade and Development, 2008).
Dunning 's eclectic paradigm, Rugman (2010) states that multinational enterprises must conform to three prerequisites for their existence. Firstly, host countries must offer certain location-specific advantages to entice multinational enterprises to invest there. Secondly, to counteract with some strategic capabilities with foreign markets, the company must provide unique strategic competencies or inherent-specific advantages. Lastly, companies must have some internalisation advantages or organisational capabilities to earn good returns from leveraging its strategic strengths internally rather than externally through licenses or contracts, (Rugman, 2010).
Originally, one of the key motives for companies investing abroad was to secure key materials to be used during the production process, (Rugman, 2010). Organisations such as Standard Oil

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