Introduction
Technology refers to information that can be used to accomplish a set task. Transfer is the movement of goods and information from one individual or corporation to another that did not have it originally. Technology transfer is, therefore, the flow of information and processes from a group that has a specialized technical skill to another that does not(Anderson & Anderson, 2010). Multi-national companies operate in different geographical and administrative regions to provide a common good or service to its large client base globally. These companies require the adoption of a viable technology transfer policy that will ensure that the processes carried out in the host nation are replicated throughout the companies' various branches across the globe.
Technology transfer involves a source of the technology and a target market of the subsidiary. The transfer of technology allows the target country or market to carry out the processes of the corporation. The main categories of technology of transfer include technology in the form of tangible products, processes for completing tasks as well as knowledge and skills acquired through research and development (Boyce, 2002).
Multinational companies tend to practice technology transfer for many reasons. Ideally, a company will transfer technology from another corporation because it is easier and cheaper to develop products using these methods. Transfer of technology is also a convenient way of adopting new processes from the main office to a branch or licensed subsidiary without infringing on existing patent laws. Multinational companies engage in the practice of technology transfer as a potential source of income. A large corporation such as Coca-Cola licenses its products to the various bottling companies and in return, they receive royalty payments.
The process of technology transfer first requires the parent company to establish legal ownership of the process or good. Ownership is established through patents, trademarks, copyrights and trade secrets. Once legal ownership has been established, a strategy that will enable the transfer process to be carried out in the most cost-effective and profitable way is picked. The strategy must take into account the cost benefits and the host country’s regulation policies.
Technology transfer processes include licensing, Foreign Direct Investment (FDI), research and development and joint ventures. These strategies guide a company’s entrance into a new foreign market and are selected based on their individual advantages and disadvantages.
This paper will look at four cases of existing multi-national corporations and the ways through which technology transfer has impacted their operations. These four companies are Coca-Cola Company, E.I du Pont de Nemours and Company, Nestle and Kawasaki. These companies have a combined service in over 230 countries worldwide and assets valued in the hundred billion. The study will be conducted on how globalization and technology transfer strategies have influenced the way these companies are run and operate in the various geographical areas. Similarities in strategies and problems encountered will also be highlighted to give an in-depth analysis of how multinationals transfer technology across borders.
Kawasaki Heavy Industries is a manufacturing multinational company based in Tokyo and has operations in North and South America, Asia, the Middle East and Africa. The company produces ships, vehicles, aerospace and gas machinery(Datamonitor (Firm), 2000). The company reported a 38.6 Million Yen Income in 2014, making it one of the most profitable businesses in Japan. The company has adopted technology transfer through partnerships and joint ventures. These two strategies are designed to make the company have a greater market growth and develop partnerships that allow for the cheap transfer and acquisition of technology. The company forms partnerships with other businesses to exchange technology and gain profit in new markets.
Coca-Cola Company is the world's leading beverage maker with its flagship soft drinks sold in over 200 countries worldwide. Transfer of technology is through licensing its products to local bottling companies(Cortés, 2013). The local bottlers sell and distribute the non-alcoholic beverages in the host nation while paying royalties to the main company.
Nestle is the largest food and nutrition company with more than 500 factories worldwide. The company is based in Switzerland but operates on five continents(Kose, 2007). The company relies on FDI and research and development to transfer its technology to the 80 countries in which it operates. Foreign Direct Investment is achieved by the company setting up operations in the host country and actively running them. The companies need to be in compliance with the host nation's regulations. Research and development ensure there is a continuous flow of new information and processes among the company's subsidiaries.
DuPont is the third largest chemical corporation in the world, hiring over 50,000 employees with operations in over 92 countries. The company is involved in the production of agricultural, personal care and industrial products(E.I. du Pont de Nemours & Company, 2006). The company operates mainly on intellectual property basis and as such has adopted three primary ways to transfer its technology. The company focuses on research and development to customize products for local markets. Licensing its products minimizes risk exposure in foreign countries, and joint ventures allow for the exchange of information among similar companies. DuPont sets out to make its products a global household name.
Common Strategy that is best for all MNCs
The best strategy for the transfer of technology across different countries is licensing. Licensing is leveraging the intellectual property of an organization to other smaller operations in the host nation for a royalty fee. Coca-Cola and DuPont have integrated this policy in their operational organization in various countries. The licensee of a parent company's product is allowed to produce, distribute and sell the product in the host nation under the parent company’s brand name.
This strategy has benefits for both parties. The multi-national company can offset the risk that comes with direct investment into a foreign country since the licensee of the product will put up the greater part of the capital investment. Countries that are politically unstable and located in poor economic countries tend to pose a huge risk for multinationals and through licensing this risk is minimized. Licensees also gain by gaining access to lower production costs, an extensive world market and an already established supply network. The licensee also acquires the benefits of using a globally recognized brand, thereby attracting more clients.
Common Barriers to Technology Transfer
The biggest barrier faced by all companies that operate in different administrative and geographical areas is the administration controls they face. The major factor behind this problem is the different regulation process across the various countries. The national institutional laws that govern the operation of foreign businesses often differ in the various countries with policymakers favoring the growth of local businesses over the international ones.
Some countries practice strict regulation of foreign investors which often translated to these companies paying more tax and revenues to the host nation. The pressure to standardize operations across borders often presents a big challenge in economies with regulations that do not favor profitable entry. In such situations, the company may decide to adopt a different strategy such as licensing to minimize the overhead cost of operating in these countries.
Another common problem faced by MNCs is the protection of intellectual property in foreign countries. Some countries have relaxed copyright laws and company’s products are usually copied, altered a bit and sold to the local market. The multi-national companies run the risk of having their technology copied and reproduced in the host nation. Infringement of copyright laws leads to unfair competition and long legal battles that can prove costly to the companies.
References
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