If there is a term which can best subsume current trends in development of politics, society and economics it would be globalization. Major drivers of the globalization process are multinational companies (MNCs). The value of their foreign direct investments (FDI), as part of internationalization strategy, has enormously increased in the last decades. This development allows for their continuous strive for competitiveness through opening up new markets or lowering their costs as a result of economies of scale or a beneficial business environment in the target countries. Thereby the degree of international division of labor shows an upward trend underpinned by the increasing permeability of borders in regard to goods, services, capital and people. Above all lower communication barriers facilitate the operation of cross-border production networks.
As the thesis will state Central European Countries have experienced a tremendous increase in FDI inflows in the last 10 years which definitely contributed to a faster privatization and deregulation process. Their attractiveness to foreign investors has increased in that way that locations in Central Europe take an important part in the production network of MNCs.
The key question of this thesis is: What are the major reasons for multinational companies to invest in Central Europe through foreign direct investment and which role do production networks play for an international company? This question will be examined by regarding the example of Continental AG - a German component supplier to the automotive industry.
The hypothesis is first that Continental AG has established a multinational production network. Secondly it is to be proven that locations in Central Europe play a significant role for Continental AG due to cost-based as well as marketbased considerations.
Table of Contents
1. Introduction
1.1 Key Question and Hypothesis
1.2 Methodology
1.3 Structure of This Thesis
2. Foreign Direct Investment (FDI) in Central Europe
2.1 Definition and Types of FDI
2.2 FDI Development Worldwide With a Closer Look on Central Europe
3. The Attractiveness of Central Europe for Foreign Investors
3.1 Favorable Location Factors in Central Europe
3.2 Description of the Business Environment in Selected Regions
4. Multinational Companies (MNCs)
4.1 Definition of MNCs
4.2 The Importance of FDI for MNCs and their Basis for Decision-making
5. Continental AG as an MNC Operating in Central Europe
5.1 The Development and Character of the Automobile Industry
5.2. Continental AG - Structure and Strategy
5.3 How does Continental Automotive Systems Organize its Production Network with Special Regard on Central European Locations?
5.3.1 Overview on Continental Automotive Systems
5.3.2 How does CAS Organize its International Production Network – The Example of Brake Booster Production
5.3.3 Which Reasons Determine the Location Choice for CAS – The Example of a Greenfield Investment in Slovakia
6. Conclusion
Research Objectives and Topics
This thesis investigates the primary reasons why multinational companies (MNCs) undertake foreign direct investment (FDI) in Central Europe and examines the role of international production networks in this process, using Continental AG as a specific case study.
- The impact of globalization on FDI flows to Central Europe.
- Analysis of location factors driving investment in Central and Eastern European countries.
- Strategic decision-making processes within MNCs regarding international production networks.
- The restructuring of the automotive industry and the shifting role of component suppliers.
- Evaluation of Central European locations for brake booster and brake caliper production.
Excerpt from the Book
1.1 Key Question and Hypothesis
If there is a term which can best subsume current trends in development of politics, society and economics it would be globalization. Major drivers of the globalization process are multinational companies (MNCs). The value of their foreign direct investments (FDI), as part of internationalization strategy, has enormously increased in the last decades. This development allows for their continuous strive for competitiveness through opening up new markets or lowering their costs as a result of economies of scale or a beneficial business environment in the target countries. Thereby the degree of international division of labor shows an upward trend underpinned by the increasing permeability of borders in regard to goods, services, capital and people. Above all lower communication barriers facilitate the operation of cross-border production networks.
As the thesis will state Central European Countries have experienced a tremendous increase in FDI inflows in the last 10 years which definitely contributed to a faster privatization and deregulation process. Their attractiveness to foreign investors has increased in that way that locations in Central Europe take an important part in the production network of MNCs.
The key question of this thesis is: What are the major reasons for multinational companies to invest in Central Europe through foreign direct investment and which role do production networks play for an international company? This question will be examined by regarding the example of Continental AG - a German component supplier to the automotive industry.
The hypothesis is first that Continental AG has established a multinational production network. Secondly it is to be proven that locations in Central Europe play a significant role for Continental AG due to cost-based as well as market-based considerations.
Summary of Chapters
1. Introduction: Defines the research scope regarding FDI, multinational companies, and the role of Central European locations for automotive suppliers like Continental AG.
2. Foreign Direct Investment (FDI) in Central Europe: Explains the definitions and theoretical types of FDI and provides an overview of worldwide investment trends with a focus on Central Europe.
3. The Attractiveness of Central Europe for Foreign Investors: Analyzes economic, political, and infrastructural factors that make Central European countries attractive, including labor costs and tax environments.
4. Multinational Companies (MNCs): Discusses the nature of multinational companies and the theoretical basis for their FDI decisions, particularly regarding value chain management.
5. Continental AG as an MNC Operating in Central Europe: Examines Continental AG's structure and strategy, detailing how the company organizes its international production network with specific case studies on brake booster and brake caliper production.
6. Conclusion: Summarizes the thesis findings, confirming that FDI in Central Europe is driven by a mix of cost-based advantages and market-seeking strategies within an integrated production network.
Keywords
FDI, Central Europe, Multinational Companies, Continental AG, Automotive Industry, Production Networks, Globalization, FDI Inflows, Cost Advantages, Market-seeking, Value Chain, Brake Booster, Brake Caliper, Slovakia, Greenfield Investment
Frequently Asked Questions
What is the core focus of this thesis?
The thesis focuses on why multinational companies invest in Central Europe through FDI and the role production networks play, illustrated by the example of Continental AG.
What are the central themes discussed in this work?
Central themes include the attractiveness of Central European countries for foreign investors, the development of multinational companies, and the organizational strategies of automotive component suppliers in response to global competition.
What is the primary goal of this research?
The primary goal is to examine the reasons for FDI in Central Europe and prove the hypothesis that locations in this region play a significant role for Continental AG due to both cost-based and market-based considerations.
Which scientific methodology is employed?
The author uses a combination of classical desk research, including literature, journals, and studies, alongside primary research through interviews with responsible persons at Continental AG.
What does the main part of the thesis cover?
The main part covers theoretical background on FDI and MNCs, the automotive industry context, and practical case studies of Continental AG's production and location strategies in Europe.
Which keywords characterize the work?
Key terms include FDI, Central Europe, Multinational Companies, Continental AG, Automotive Industry, Production Networks, and Value Chain.
How does the author explain the selection of Central Europe as a production location?
The author highlights factors such as political stability, favorable tax environments, low labor costs relative to Western Europe, and the importance of geographic proximity to automotive OEMs.
What specific production networks are analyzed?
The thesis analyzes the cross-border production networks for brake boosters (involving Germany and the Czech Republic) and the decision-making process for a greenfield investment in Slovakia for brake calipers.
- Arbeit zitieren
- Jana Scharfschwerdt (Autor:in), 2005, FDI in Central Europe: How Companies Organize Production Networks? Applied to a subcontractor to the Automotive Industry, München, GRIN Verlag, https://www.grin.com/document/44915
