these areas. Again, the concept of economies of scope is not unique to multinational
concerns, but they are more likely to have a diversified portfolio of companies,
thereby increasing the opportunity to apply economies of scope.In the next chapter, we will discuss how MNCs with different strategic goals use
these three sources of competitive advantage.
8 SUMMARY AND CONCLUSIONS
This chapter has set the background for the remainder of this book. In the first
section of the chapter, we used statistical material to demonstrate that both
international trade and FDI have increased sharply in the past few decades. In
the subsequent sections we discussed a number of theories which might help
to explain why international trade and foreign direct investment, or multi-
nationals, exist. We then tried to discover why certain products are produced in
certain countries and described current changes in the international division of
labour. This led us to two important conclusions. First: the competitiveness of
nations is determined by many more factors than simply (an over-abundance
of) labour, land and capital. And second: increasing globalization has had a
tremendous impact on the competitive position of various countries and may
lead to far-reaching social changes. Finally, in the last section we dealt with the
sources of competitive advantage for multinationals.
This chapter started its analysis at the level of the country, proceeded to
the multinational level, returned to the country level, progressed yet another
step to the global level and finally returned to the multinational. For the time
being we will remain at this level; the next three chapters will discuss the strat-
egy and structure of MNCs, recent developments in International HRM and the
role of HRM in mergers and acquisitions.
9 DISCUSSION QUESTIONS
1 Porter’s diamond analyses the competitive advantage of nations. Show how his
analysis about the role of location in international competition can be useful for
multinational companiesin two distinct ways.
2 What do you think of the future scenarios mentioned by Reich? Which scenario
seems most likely to you, and why? Would your answer differ for different
30 International Human Resource Management