Reference no: EM133458779

At the corporate level, there are at least five strate-gic rationales. First, a leading symbolic value is an unam-biguous statement to various stakeholders that the firm is a global player. News Corporation's new corporate HQ in New York is indicative of its global status, as opposed to being a relatively parochial firm from "down under." Lenovo's coming of age is undoubtedly underpinned by the establishment of its second HQ in the United States.

Second, there may be significant efficiency gains. If the new corporate HQ is in a major financial center, such as New York or London, the MNE can have more effi-cient and more frequent communication with institutional shareholders, financial analysts, and investment banks. The MNE also increases its visibility in a financial mar-ket, resulting in a broader shareholder base and greater market capitalization. Three leading (former) South African firms, Anglo American, Old Mutual, and SABMiller (more recently acquired by Anheuser-Busch InBev), have joined the FTSE 100-the top 100 UK firms by capitalization.

Third, firms may benefit from their visible commit-ment to the laws of the new host country. They can also benefit from the higher-quality legal and regulatory regime under which they now operate. These benefits are espe-cially crucial for firms from emerging economies where local rules are not world class. A lack of confidence about South Africa's political stability drove Anglo American, Old Mutual, and SABMiller to London. By moving to London in 1992, HSBC likewise deviated from its Hong Kong roots at a time when the political future of Hong Kong was uncertain

Fourth, moving corporate HQ to a new country clearly indicates a commitment to that country. In addition to political motivation, HSBC's move to London signaled its determination to become a more global player, instead of being a regional player centered on Asia. HSBC indeed carried out this more global strategy since the 1990s. However, in an interesting twist of events, HSBC's CEO relocated back to Hong Kong in 2010. Technically, HSBC's corporate HQ is still in London, and its chairman remains in London. But the symbolism of the CEO's return to Hong Kong is clear. As China becomes more economically powerful, HSBC is interested in demonstrating its com-mitment to that important part of the world, which was where HSBC started. (HSBC was set up in Hong Kong in 1865 as Hongkong and Shanghai Banking Corporation).

Finally, by moving (or threatening to move) HQ, firms enhance their bargaining power vis-à-vis that of their (orig-inal) home-country governments. Tetra Pak's move of its HQ to Switzerland was driven primarily by the owners' tax disputes with the Swedish government. Likewise, as three of Britain's large banks-Barclays, HSBC, and Standard Chartered, the three best-run ones that did not need bailouts during the Great Recession of 2008-2009-now face higher taxes and more government intervention, they, too, have threatened to move their HQ out of London. The message is clear: If the home-country government treats us harshly, we will pack our bags.

Question: Which of the five strategic rationales outlined in the Closing Case can you identify Pfizer might be considering for its relocation?