International Political Economy

UC3M
Practice Class 2021/2022

Role-Play Exercise: Multinational Corporations

(MNCs)
Order of negotiation

1. Kawgod flies to Chile accompanied by a representative of the Chinese

govt. There, they are hosted by the officials of Chilean govt and
Chilean Company which will undertake a joint venture with Kawgod
https://www.youtube.com/watch?v=50rXYrFCQMw
2. Kawgod and Chinese govt representative fly to Brazil to meet
Brazilian company and Brazilian govt representative
https://www.youtube.com/watch?v=wQ9npstl9g0
3. China parties evaluate the proposals of Chile and Brazil parties to
make a decision as to which host market to choose for their highly
strategic investment
Instructions
Kawgod is a giant Chinese based MNC specialized in electronics, a competitor of
Samsung and Sony, is looking for a host country to invest in.

Kawgod will produce mobile phones for regular use. Additionally, and may be more
important, it will also produce special chips/non-traceable product/ cyber-security
monitoring devices which will be used in the defence industry of the prospective
host market. So, there is a strategic component to this investment which would
require a close cooperation with the Chinese govt as well as the host country
governments.

Kawgod would like to market its products both to the domestic markets of the
prospective host countries, and also the export markets. Thus, International trade is
essential.
Instructions

This exercise is designed in two steps:

First step (negotiation stage as discussed earlier):
Meetings and negotiations between the Kawgod (expectedly accompanied by the
Chinese government and the Chile and Brazil parties, so that Kawgod chooses one
of those host markets at the end.

Second step (Nationalization):

10 years into the respective investment of Kawgod, the host country (whichever
country chosen in the first step) decides to nationalize the company due to issues
related to environmental as well as security-related concerns.
Step 1: Investment negotiation

Stimulate a negotiation between the MNCs and local companies (in

Chile and Brazil), the Chinese govt, and the government’s of the
country Chile & Brazil
Step 1: Selecting a host country
Kawgod : You have narrowed down your list, and now Chile or Brazil are the most likely options as
host countries, as you know they are both major producers & consumers in the respective sector.
Which host country will you choose?
What matters the most in your choice?
• Market size? Human resources? Bureaucracy? Skills?
• Proximity to the home market?
• Rules & regulations including restrictions about foreign investment and trade?
• Economic indicators?
• Political stability and political regime types?
• What else would you consider in your investment decision?
You have to justify your selection based on the opportunities (along with potential concessions)
Chile and Brazil offer and also the risks they impose on potential foreign investment.
Organize a meeting and negotiate with the officials of Chile and Brazil if you need to consider things
such as: ability to invest, registering property, protecting investors, paying taxes, human resources,
ease of exportation, fair competition, etc.
Team roles
Team Roles

4? Chinese Govt

2 Kawgod

3 Chile govt and Chile Company

1 Brazil govt representative

5? Brazil company
 Step 1: reflections
Players need to read the instructions carefully
The host country players (Chile and Brazil) need to understand and elaborate on top 10 challenges and
design measures taking into account those challenges in order to offer the best conditions to the Kawgod
• They know that the respective MNC is negotiating with both countries simultaneously, yet they
do not know the conditions imposed and/or benefits offered by their competitor.
• The players of both countries (2 and 3) need to understand the cultural issues and reflect them in
the negotiations of both the culture and “the top 10 challenges to invest”.
• MNC has to decide which country offers the best conditions. It also needs to consider infrastructure
and its challenges in the respective countries.
• The MNC also needs to take into account cultural differences in doing business and communicating
with business executives—and may be state officials as well.
What kind of cultural differences did you notice in your negotiations?
Which market offered better terms?
Is there any political or economic uncertainty that you have to consider for this particular investment?
Decision-making regarding where to invest?

You have to base your arguments depending on the opportunities Chile and Brazil will offer
you after a meeting. You might be able to negotiate things like:
• Ease of foreign investment,
• registering property,
• protecting property rights,
• taxes,
• ease of exportation,
• fair competition,
• human resources
Step 2: Nationalization

10 years into your investment, the host country (is the Country Kawgod picked to
invest) decides to nationalize the Kawgod.
Now, you need to simulate the following:
• Responses of the MNC
• Response of the home country (Chinese govt)
• Response of international organizations (?) (role to be played by either country 2 or
3 “depends on which country scaled through Country 1 party selection stage”)
Step 2: Nationalization of the company 
MNC: Due to security-related/strategic (related to the importance of your products for the
defence industry) and environmental concerns, the host country decides to nationalize your
company.
What would you do?
Would you bring this case to an international organization/ platform or your government’s
attention?

Home Country: How would the Chinese govt react to the nationalization of one of its top
electronic companies? Would it protect the rights of the MNC? Would it impose retaliation
measures? Imagine that a character like Trump is the president, what do you think his
reaction would be like?

Host Country: How would you respond to such threats and the potential measures of the
international organization?
Step 2: Nationalization of the company 
Host country: 
• Think of arguments to support your nationalization. Look for previous cases of
nationalization (recent cases in Latin America?). 
• What would be your arguments for MNC and home country?
• Also prepare your response in case the MNC or the home country takes this case to an
international organization/ platform.
• Can this have other repercussions beyond hazarding investment related relations?
• Prepare your arguments and acts accordingly.

Home country:
• Would you defend the rights of an Kawgod? Why or why not?
• How would you do that? What kind of instruments can you come up with?

International organizations (Country that was not picked (either Chile or Brazil):
• Who is in charge in such a dispute?
• Look for information about similar cases (Repsol YPF Argentina?).
• Prepare your arguments and actions.