Question

economics now

Check Your UndeRstanding 1. Indicate whether each of the following trans- d) DaimlerChrysler AG and Mitsubishi Corp. agree jointly to build an automobile assembly actions represents an example of vertical integra- tion, horizontal integration, or corporate alliance: a) General Motors Ltd. and the Goodyear plant in Mexico. e) Coca-Cola Corp. purchases a plant that manufactures aluminum cans. Rubber Co. collaborate on the design, testing and marketing of a new line of safety tires. common shares of Petro-Canada. US Steel. 2. Prepare a comparison organizer to summarize b) Ford Motor Co. buys 51 per cent of the the advantages and disadvantages of small and big business ventures. c) The Steel Co. of Canada is taken over by 3. List the positive and negative attributes of multi- national corporations.

Answer 1

(a) Collaboration for Innovation between a firm and its supplier: Corporate Alliance

(b) Ford Motors buying Petro Canada shares: Vertical Integration ( Ford would need fuel for its cars)

(c) Steel Co of Canada and US Steel- Horizontal Integration

(d) Jointly building an assembly plant: Corporate Alliance

(e) Purchasing a plant which will be supplying to the main unit: Vertical Integration

2. Small and Big Businesses:

Small Business	Big Business
Cannot affect market price and quantity	Can affect market price and quantity
Inefficient, smaller profits, faces high competition	Efficient due to economies of scale, large profits, has the ability to eliminate competition

3. Benfits of MNC: More Trade and exports, Employment, Competitiveness of the economy, access to better technlogy and more efficient production

Cons of MNC's: Can eliminate competition in the country, especially smaller firms, Repatriates profits abroad, saves/avoids taxes via transfer pricing etc. Affects the environment, too big to control for governments and regulators.