Factors Influencing the Relocation of Corporate Headquarters Overseas in the Consumer Electronics Industry

Introduction

Today, many business corporations, especially multinationals are relocating their business unit and corporate headquarters to overseas nations (Birkinshaw et al., 2006). The fact that this trend is on the rise especially in the Swedish Companies makes it to merit and attract academic research consideration. The purpose of this research will be to determine the motive behind the decision to relocate corporate headquarters overseas by Swedish top forty companies based on sales revenue. The paper will use case study research within selected multinational companies. The object of study is arguments for the relocation of headquarters by corporations to overseas countries. The subject is specific reasons which make Swedish MNCs shift their corporate headquarters to overseas nations.

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The paper analyses the decision of MNCs to move their corporate headquarters overseas. It is established through research and argued in this paper that the MNCs do move their corporate headquarters overseas in response to the changes within the internal configuration of their business operations as well as the demands of the goods and services markets where they operate. It is also held in this particular paper that companies move their corporate headquarters in response to the needs and demands of the external stakeholders. These demands are mostly exerted by the global financial markets and shareholders.

This study will have two main hypotheses. They include the following:

1. MNCs move their corporate headquarters overseas because of the shifts in the internal configuration of activities as well as the demand for product markets where present.
2. Corporate headquarters are relocated to overseas in response to the external stakeholders' demands, especially global financial markets and the shareholders.

Research Questions

1. Why do the Swedish companies relocate corporate headquarters to overseas countries?
2. What is the main argument explaining the relocation of corporate headquarters to overseas countries by most MNCs?

Significance and Relevance of the Study

The high level of relevance and significance of this study to the field of corporate governance cannot be gainsaid. The discovery and general content of this paper will play a big role in informing corporate players about the various motivations behind decisions to relocate headquarters to overseas nations. This study was motivated by the emergence of a trend where many multinational corporations now engage in relocating corporate headquarters overseas. It is meant to play a significant role in filling the informational gap between logical reasons and rationale for such decisions. Many people have come out to fault the decisions to relocate the corporate headquarters overseas, without paying attention to the motivations behind such moves in the field of corporate governance (Benito et al., 2011).

This research does add to the existing understanding regarding the role played by corporate headquarters in any multi-national business company. It is vital to understand the fact that any geographical location of an organization impacts the competitiveness of the firm. Consequently, decisions related to the relocation of specific headquarter operations overseas significantly influence future success in an organization (Barner-Rasmussen et al., 2007). Theories of agglomeration exist in the reviewed literature and they show many people agree that proximity to the specialized labor, access to the complementary suppliers as well as wide customer base and contact with deep knowledge regarding business lead to the success of companies (Laamanen et al., 2012). The corporate headquarters of companies normally play a major role in providing the link between the business units of a multinational organization and its external stakeholders.

The Gap

While the trend of headquarters relocation is now high, there are no sufficient and clear studies which specifically address the question of reasons which make companies relocate to overseas nations. The current focus seems to be much on the benefits which countries gain from moving their headquarters abroad. Therefore, an information gap regarding the information which explains the reasons for headquarters relocation does exist in the modern corporate world.

Object and Subject

Object

Relocation of Corporate Headquarters Overseas

Subject

Specific reasons, which make Swedish MNCs operating in the consumer electronics industry shift their corporate headquarters from home country to another country where they do business.

Paper Summary

The main task in this study will be conducting a case study to establish the reasons companies relocate their headquarters to overseas nations. This paper is divided into sections. The following section presents the theoretical framework of the study. This study was premised on a theoretical framework about corporate operations within multinational corporations. Therefore, chapter one will be about the theoretical aspects of the study. The second chapter is about the analysis of the methodology and data analysis. In this case, case study considered is described. The final chapter is about results and recommendations. The conclusion of the report is at the end of the paper.

Chapter One: Theoretical Aspects

Business contracts normally involve agreements that are based on promises of things to be fulfilled in the future. This kind of agreements usually depends highly on trust and faithfulness among the parties to it. It is the reason business contracting entails numerous ethical issues. Despite the fact that contracts are legally binding documents, they are normally just effective when applied within an ethical framework. This ethical framework is one that assumes people all the parties to a given contract fulfill their agreed obligations. There are significant ethical issues, whose observation is essential to the efficient functioning of an economy. Unethical behaviors in contracting may deny a company contracts, especially with the government (Erlandsson & Fjeld, 2017). Moreover, unethical behavior is the reason many companies end up in legal battles where resources are lost.

The first ethical issue in business contracting is the determination of prices or considerations of the contract deal in an ethical manner. Human beings are self-serving creatures. Therefore, every party to a deal would always want to set a high price or consideration in order to derive the maximum benefit from the contract. This kind of price or consideration determination is one that is quite subjective and biased in nature. However, it is vital to ensure that the price determination is based on objectivity and the market forces of demand. It is vital to develop a deterministic model for price determination in any contract. It is ethical to set prices based on a standard framework (Wullink, 2007). This approach normally makes the whole contract to be ethical in nature. It is common to find contractors who mostly base their considerations or prices on sheer manipulation or deceit. Such contractors normally use the ignorance or lack of knowledge of the customers to entice them and lead them into accepting exaggerated prices during contract talks. This practice is quite unethical in contracting. It is an ethical issue that continues to mar all business contracts.

Moreover, the presentation of the determined consideration or price by the contractor must be done in a manner, which is transparent in order to convince the clients. The ethical issue common in most contracts is hiding costs while presenting the determined price or consideration to the customers (Goldkuhl & Lind, 2007). To make a contract highly ethical, it is vital that it is negotiated between the different parties to it. Notably, these hidden cost factors are meant to hoodwink customers into purchasing a given product. Negotiation is an effective tool for striking an ethical balance in a contract since the customer anticipates in the whole process of determining the agreement terms. There is also a balance between the benefits to the contract supplier and the purchaser. Implementation of a successful contract based on negotiation usually gives benefits to both parties in it. Furthermore, both parties usually have the chance of avoiding problems in it.

Additionally, another issue of great concern in contracting is a conflict of interest with one of the parties. Conflict of interest is a case where the party to a contract is in an advantaged position over the other person. There are conflicts of interest, which are ethically unacceptable. Some of the conflicts of interest that are ethically unacceptable include bidding on a job where the same bidder is the one who decides who is offered the contract. Another case where a conflict of interest issue may arise is awarding the contract in which the customer is the owner of the contracting firm (Hammerschmid et al., 2017). There are many cases where chief executive officers give contracts to construction firms belonging to them or in which they have significant stakes. To avoid the conflict of interest issue, it is important to ensure that the contract is carried out in a transparent manner.

Another significant ethical issue in contracting is unfair competition. A competitive market usually gives feedback on the value one is offering to the customers relative to the other companies. When a company gets a contract award through a competition that is fair, there is a feeling of satisfaction that one is able to deliver quality service. Unfair competition in bidding for contracts is quite unethical and one of the most challenging issues facing the contracting industry today. Notably, unfair competition usually takes place through collusion or price fixing. Collusion or fixing the prices normally takes place when a person secretly agrees on the elevated bid prices with your competitors. When contractors secretly decide and agree on the higher than normal bid prices, market effectiveness is normally hurt greatly. Understandably, the companies that offer well as well as high value get orders at the expense of the one with best prices and highest quality. In this case, all the signals of the market are normally distorted and the genuinely fair players lose greatly in the long term.

There are laws and regulations, which guide the whole contracting process in countries. Disobedience and contravention of these laws as well as regulations is a major ethical issue in the modern world. Understandably, these laws and regulations are normally quite demanding on the part of the contract players. They entrench tedious bureaucracy meant to ensure fair play and credibility of deals. It is also known that many contract players find adhering to these laws a quite costly and time-consuming exercise. Therefore, there is always the temptation of disobeying and contravening important regulations as well as laws required in the implementation of contracts (Sugrue, 1978). Notably, this practice leads to the formation of illegal contracts that cannot be enforced before a court of law. It is a major ethical issue in the modern-day contracting industry.

There is also the issue of corruption and bribery in the process of tender as well as contract awards. Players competing for a given contract usually resort to unethical means of convincing the client like bribery. In this case, bribery is the amount of money paid by the potential contractor in order to win a given tender from the client. Bribery is currently a major problem i...