Discussion Questions

It is seen that multinational enterprises (MNEs) prefer certain locations within a country as compared to others. In this context what are the advantages of the State of Gujarat in India?

  • The State of Gujarat has emerged as an investment hub on account of favourable investment policy measures that are specific to the region. The automobile industry was among the earliest to take advantage of these state-specific industrial promotion policy initiatives and several MNEs such as Hero Motocorp (Japan), Peugeot (Italy) and Maruti Suzuki – a joint venture between Maruti (India) and Japan’s Suzuki have set up manufacturing units in the State. Ford India is said to have selected Gujarat because of its location – its ports allow for possible exports to western markets, its cost and logistics considerations, business environment and the state government’s ‘transparent and competitive’ offers to start and implement a business proposal. Gujarat has better labour-industry relations than other Indian states, infrastructure that includes good roads and ample electricity and water and a central location between Delhi and Mumbai.

What is the role of special economic zones (SEZs) in attracting investment into a country?

  • Special economic zones (SEZs) are set up to attract investment, since they provide preferential treatment for taxation, land use, infrastructure access and government assistance to MNEs. These special enclaves offer location advantages, which are not available in other regions. For instance, China created its first SEZs in the towns of Shenzhen, Zhuhai and Shantou in the Guangdong province and Xiamen (Amoy) in the Fujian province. These new SEZs soon attracted foreign investment and became the hub of rapidly expanding light and consumer goods industries and growing populations. Shenzen transformed into a megacity and became a world-class tech hub, home to the Shenzhen Stock Exchange and one of the busiest financial centres in the world. The earliest investors in Shenzen were MNEs Intel and IBM (USA), and also Toshiba (Japan) and Samsung (South Korea).

Singapore-based Olam International is an exporter of agricultural products such as cashews, grains, sugar and palm oil as well as rubber, fertilizer and wood products. It is one of the world’s leading suppliers of cocoa and coffee. Olam is a highly diversified organization spread across 60 countries, 20 products and 10 functions. What is a suitable organizational form for the MNC – Matrix or Network?

  • Olam should be organized as a matrix organization, with a three-dimensional structure organized around products, geographies and functions to fit its strategic vision. This is appropriate as for Olam to be a highly coordinated, cross-functional and high-performance organization, integrated across multiple businesses, geographies and functions. Its corporate centre will be the catalyst for the integration of its multi-business company by developing a shared vision and agenda, installing common operating systems, and embedding a common culture across the organization.