Critically discuss the reasons why location has again become a Essay

Critically discuss the reasons why location has again become a critical issue in explaining the global competitiveness of firms - Essay Example They should use all the resources at their disposal to make their markets competitive globally, while at the same time reducing any international trade barriers and limitations. On their part, businesses need to make adjustments in order to compete effectively in the global market since they cannot purely rely on good location as was the case before this trend. They must heavily invest in information technology and adopt cost effective management practices to reach this new status. Moreover, they need to adopt international management practices and culture as well as develop a positive attitude for efficient management. Companies should also consider making regional and global partnerships and connections but taking into account all pros and cons of such ventures. This paper examines the role of location in global competitiveness of multi-national enterprises, MNEs. It then investigates why location has ceased to be the only factor in the success of international business. Role of location, competitiveness and advantage The geography of international business activities greatly depends on the entry mode and competitive advantages of the firms involved. This interdependence becomes clear when one tries examining the dynamics of the activities of knowledge intensive multinational enterprises, MNE (Dunning, 1998).... economy characterized by the emergence of intellectual capital as an important wealth creation asset, globalization of economic activities due to advancement in transport and communication technologies and the emergence of collaborative capitalism. These developments have had an impact on the geography of the activities of foreign direct investments, FDIs and MNEs (Dunning, 1998). The role of spatial transaction costs is slowly shifting, reflecting the liberalisation of cross border markets and the varying attributes of economic performance (Yip, 2002). This cost reduction caused the formation of more market-seeking FDIs and at the same time boosted a welfare enhancing division of labour and also favoured the spatial bunching of firms engaged in allied activities, so that each may gain from the existence of the other, and having access to localized support services, specialized factor inputs, custom-made demand patterns, distribution networks and shared service centres (Tallman and Yip, 2001). Complementary foreign asset and capability sought after by MNEs who wish to add value to their main competitive advantages are progressively more of a knowledge facilitating type and that is mostly the case as their affiliates become more firmly rooted in host economies. A good example is the increasing of value addition in Japanese manufacturing subsidiaries of Europe and North America. An exception to this is some low value-adding activities in the under developed areas of the globe (Tallman and Yip, 2001).As the calculated asset acquiring investment has turned out to be more essential, the location requirements of corporations have changed from the market-oriented or natural resource-oriented to those concerning access to knowledge intensive assets and learning