Multinational Perspective Essay Example for Free

Multinational Perspective EssayMultinational corporations originated from the need for cheering capital and limited risks for large industrial or commercial consortiums for overseas trade. The modern concept of worldwide corporations came into being during the 17th and 18th centuries and a good example of such a venture is the British east India Company in S give awayh Asia and the Dutch East India Company in South East Asias Indo-Chinese Peninsula.With the received communications and focal point technologies avail equal, more companies atomic number 18 able to make the most out of international trade easiness. Today, international corporations argon expanding themselves to increase their commercializes, increase brand presence and image and gather from inexpensive raw materials and labor (Chang, 2003).Scenario for Multinational CorporationsCurrently, there is an estimated 40,000 transnational corporations world large-minded in and approximately 250,000 overseas coll aborations running cross-continental trading operations. about transnational corporations argon from the join States, Western Europe, and Japan. By 1995, the top 200 multinational corporations alone had collective revenues reaching of $7.1 Trillion which is equivalent to 28.3 percent of the bring in domestic product world(prenominal)ly (Bernal, Kaukab, and Yu, 2005).The operations of multinational corporations are governed by the policies of The innovation Trade make-up (WTO), the International Monetary Fund (IMF), and the World Bank. though the traditional view of multinational corporations is that of big manufacturers, sure trends and developments in technology buzz off also given rise to micro-multinationals1 as well business cultivate outsourcing (BPO) ventures (Ewing, 2005). Among the countries being targeted for multination blowup, China and India are the current top favorites of multinational companies (McKinsey international Institute MGI, 2004).Globalization h as allowed penetration to securities industrys via technology and has reduced distri merelyion, lower internal coordination costs. It has also allowed for networking of specialized services and products in support of incarnate functions through BPOs whether within the companies internal operations or its external activities (Ewing, 2005).Entry to Developing Markets Though the scenario of multinational expansion has changed, the methods of entry remain traditional in most developing countries (Hoos, 2000 Tubbs and Schulz, 2006). Strategies to enter in the altogether markets for multinational corporations are by mergers or direct acquisition, in series(p) market entry and through enunciate venturesMergers Merger or direct acquisition of existing companies is the forthright entry to a market. This is the strategy ordinarily employed by large multinational corporations. It maximizes the economies of scale receipts to overcome prohibitions to entry (Ewing, 2005 Multinational Cor porations, 2006).Considered as foreign direct investments (FDI), they are subject to not only commercial regulation but are also direct affected by fiscal and investment policies by the host country, and relate international trade policies (United Nations conference on Trade and instruction UNCTAD, 2005). Beginning in 2004, it has been identified as a critical in developing countries and studies retain been commissioned to quantify their clash of the economies of developing countries (UNCTAD, 2004).The first graded for FDI is India and was followed closely by China (Kearney, 2004). Though India has been able to outrank China and Mexico, China actually acquires more FDI signifi rafttly either country since 2002 (Department of Industrial Policy and Promotion, 2005 MGI, 2004).Sequential Market EntrySequential market entry involves foreign direct investment and getting hold of a sector if the market related to the parents companies core line of business, usually its key product or competency. It is different from a merger that it that the parent company does not bring in all of products, services or operations into a host country (Multinational Corporations, 2006). This method is the preferred by smaller companies and conservative business to incur their multinational operations (Kearney, 2004).Sony, in its initial expansion to the United States first limited its operations to manufacturing televisions but eventually expanded its operations to the production of magnetic tape and eventually to the production of audio in the 1970s. Today, Sonys operations in the United States include semiconductors and personal communications. Sonys United States operation utilize its expertise and leadership in manufacturing television to establish itself in the industry and its local anaesthetic competition and consequently used this it as leverage to expand its products in the United States (Multinational Corporations, 2006).Another development in multinational operatio ns is that outsourcing of operations or services to other countries. According to both UNCTAD 2004 and 2005 reports, BPO is one of fastest maturation industries globally.Joint Ventures Joint ventures are operational or service partnerships with companies already existing or run in the host country. This method of entry is limits is not as liberal as mergers or sequential market entry but is effective when entering heavily regulated markets. The method has been in incident use in entering the markets of China, the Soviet Union and that of Eastern Europe (Multinational Corporations, 2006).The issue of limited control for parent companies is the usually critique of this method and has raised issues regarding liberalization issues (Bernal, Kaukab, and Yu, 2005). Host countries and venture partners significantly put on from the transfer of technology and management while parent companies are able to enter otherwise constrictive market. The resuscitate for multinational companies h owever is the development of conflicts with joint venture partners who can proceed competitors (Multinational Corporations, 2006).Another concern for most multinational corporations regarding entering into joint ventures is that local policies, which their joint venture partners are subject to, are easily changeable. The creation of stable industry policies that may affect joint ventures and similar partnerships is one of the study focuses of developing countries trying to attract more investments (Department of Industrial Policy and Promotion, 2005). This move has been supported by the current agenda of the World Trade Organization (WTO), the International Monetary Fund (IMF), the World Bank and the United Nations (UNCTAD, 2004).Multinational Corporations in Developing Countries Entering into s developing market requires the recognition and creation of strategies to throne with poor economic conditions, low educational levels, technological barriers or lack of existing channels and infrastructures for the statistical distribution of the product and service (UNCTAD, 2005).Globalization and Trade Liberalization A major reason for multinational expansion is accessing a wider market. This coincides with the international agenda of globalization and trade liberalization. The Asian Financial Crisis may still be a haunting scenario for many investors (Bernal, Kaukab, and Yu, 2005), but the current trends in Asia, finickyly China and India, is creating renewed refer in expanding to developing countries (MGI, 2004). The efforts of developing countries to liberalize trade and industries hasten also been encouraging. Recent trends have allowed the arrest of Coca-Cola to India (Nayak, 2006), the ranking of Asia as the most attractive FDI region (Kearney, 2006) and the growing success on BPOs in India and the Philippines (UNCTAD, 2005). The operations of multinational corporations have been constructive in the development of markets, the introduction of new product s and the development of industries as a whole. enthronements of these companies have helped stressed local economies space and opportunity to expand. The technology and management companionship that multinational companies bring in has helped local research and development to improve standard practices and policies. Multinational companies have been able to benefit from reduced labor, materials or boilersuit operation costs. A significant benefit of going global is establishing brand and product presence. Many companies have also benefited from the variated market that globalization has provided them increasing product dexterity and marketability.Global Trend and Scenario Though multinational corporations significantly contribute to international trade and development have not enjoyed acclaim. Their presence and nature if operations is said to be more detrimental to local economies than in force(p) (Baitu, 2006 Tubbs and Schulz, 2006, Chang, 2003). Studies have also shown the n egative effects of the operation of multinational corporations prompted some governments to dispatch a protectionist get which ahs deterred not only these corporations but trade liberalization in general (Wysocki, 2006). According to the UNCTAD report regarding multinational corporations in least developed countries (UNCTAD, 2002), the extremely centralized nature of these corporations is the main apprehension against them. Though multinational corporations contribute significantly to local economies in the form of investment, technology and commerce, there is very little barrier to exit from the local industry in case of a national economic downturn (Hoos, 2000). They have been said to have contributed to the aggravation of labor conditions, environmental degradation, and degeneration of social conditions, declined local industries and livelihood, and raised flash levels (Tubbs and Schulz, 2006). Furthermore, the mobility of multinational corporations leaves host countries with less bargaining power and allows them significant leverage over countries that are highly disadvantaged and needy of the jobs and investment they provide (UNCTAD, 2002).Current Issues and Concerns for Multinational Operations In an international environment, a companys concerns will have to consider more external factors. International trade laws, liberalization and globalization are the obvious concerns that emerging multinational have to face. More importantly, companies have to orient themselves to local markets, governments and policies that may they may not be familiar with (Wysocki, 2006). Exploring international markets also increases competition not entirely now with traditional competitors but also for new business developments such as micro-multinationals (Ewing, 2005). The risks and challenges of becoming a multinational company need strategies that consider the companys goals, international market scenarios and effective local selling approaches.RecommendationsIn ge neral, there should be further quantitative and qualitative studies on multinational corporations actual impact to host countries from individual to industry levels especially for the least developed countries that host them (UNCTAD, 2002). Multinational companies nowadays are not just commercial ventures they also serve as highways of liberalization. Some multinational companies have great assets than the poorest of developing countries leaving these nations with limited bargaining power. The need to attract investments by multinational companies must(prenominal) not undermine the focus on welfare, health and social life (Baitu, 2006).The following considerations are framed UNDTADs World Investment Report for 2004 and 2005, the 2002 Report Multinational Corporations in Least Developed Countries and Bernal, Kaukab and Yus The World Development Report 2005 for the WTO Host countries must focus on creating industry competencies that do not just cater to the current needs of multinat ional companies operating in the country. Developing countries must not become dependent on multinational companies and focus on boosting domestic growth. Developing countries should be liberally chary in accepting FDI to the country so as to ensure the survival of its local industries. It should not take a protectionist approach creating false security in its local industries but only to alleviate the pressures of advantage that multinationals have by reasons of economies of scale. Closer coordination with trade associations and international liberalization agencies will allows for developing countries support and knowledge in dealing with multinational corporations. At the same time, multinational corporations can benefit form the normalisation of commerce and industry, decreasing speculation and uncertainty for their ventures. Consideration of social issues can help multinational companies have a better local feel for the host countrys markets. Pubic relations in smaller countr ies become crucial in building brand and product awareness, purchase and loyalty. It also allows for the feasibility of introducing product extensions and even non-related ventures. Involving multinational corporations in the host countrys environment, community, research and development can establish a more meaningful relationship. Multinational corporations can benefit form having greater interlocking in factors that affect its operations. Fears of multinational corporations being insensitive to local concerns can also be alleviated. purpose Multinational expansion is but one of the key indications of globalization. Liberalization signifies a countrys borrowing of globalization. Together, multinational corporations and liberalization act as vehicles for development and cooperation. As in all relationships, work must be put in to make it work. Multinationals grow when local economies grow through the development of labor, resources and market expansion. Host countries benefit fr om the investment, technology transfer and the development of its emerging industries. New multinational companies in particular could prosper and establish themselves well in developing economies where competition may not as nonsensical and industries not as crowded as they would be in developed countries. The key is in purpose a balance between multinational investment and local industry growth and in creating a relationship between multinational corporations and host countries that are based on mutual development.ReferencesBaitu, J. (2006) Globalisation for the parking area Good and Social Justice in Sub-Saharan Africa Online. Available from http//lass.calumet.purdue.edu/cca/jgcg/2006/sp06/jgcg-sp06-baitu.htm Accessed 12 September 2006.Bergsten, C. F. (2000) The Global job System and the Developing Countries in 2000 Online. Working Paper 99-6 Institute for International Economics. Available from http//www.iie.com/publications/wp/wp.cfm?ResearchID=135 Accessed 12 September 200 6.Bernal, L. E., Kaukab, R. S., and Yu, V. P. B. III (2005).The World Development Report 2005 An Unbalanced Message on Investment Liberalization. WTO institutional Governance and Dispute Settlement, of the Trade and Development Programme Geneva, Switzerland.Brown, A. G. and Stern, R. M. (2005) Concepts of Fairness in the Global Trading System. Gerald R. crossroad School of Public Policy, The University of Michigan Michigan, USA.Chang, H. (2003) Foreign Investment Regulation in Historical Perspective Lessons for the Proposed WTO Investment Agreement Online. Available from http//www.globalpolicy.org/socecon/ffd/2003/03historical.htm Accessed 12 September 2006.Department of Industrial Policy and Promotion (2005) Foreign lease Investment-Policy Procedures. New Delhi Government of India. Available from http//dipp.nic.in/manual/manual_03_05.pdf Accessed 12 September 2006.Ewing, R. (2005) The New Multinational Lilliputian, Not Leviathan Online. oratory Freely Asia Times Online. Availa ble from http//www.atimes.com/atimes/Global_Economy/HD05Dj01.html Accessed 12 September 2006.Hoos, J. (2000) Globalization, Multinational Corporations and Economics. Kiado Budapest.Kearney, A.T. (2004) China and India Jockey for the Top Most Attractive Foreign transmit Investment Destination Globally While the U.S. Is Challenged by These Rapidly Evolving Economies Global executives see the best business environment since 2000, yet a return to positive global FDI flows could be complicated by a new mix of operational risks. A.T. Kearney London, United Kingdom.Nayak , A. K. J. R. (2006) Globalization of Foreign Direct Investment in India 1900s2000 online. Available from http//www.bu.edu/historic/06conf_papers/ Nayak.pdf Accessed 12 September 2006.McKinsey Global Institute (2004). China and India The ladder to Growth Online. McKinsey Quarterly . Available from http//www.mckinseyquarterly.com/article_page.aspx. Accessed 12 September 2006.Multinational Corporations (2006) Encyclopedia of Management, Volume Mar-No. Available from http//www.referenceforbusiness.com/management/Mar-No/Multinational-Corporations.html Accessed 12 September 2006.Tubbs, S. L. and Schulz, E. (2006) Exploring a Taxonomy of Global Leadership Competencies and Meta-competencies. The Journal of American Academy of Business, Volume 8, add up 2, March 2006, Dissertation Paper presented at the Eastern MichiganUniversity. Eastern Michigan University Michigan.United Nations Conference on Trade and Development (2002) Multinational Corporations (MNCs) in Least Developed Countries (LDCs).United Nations Conference on Trade and Development (2004) World Investment Report 2004.United Nations Conference on Trade and Development (2005) World Investment Report 2005.Wysocki, B. Jr.(2006) Symbol Over Substance Online. Original Article printed in The seawall Street Journal, September 25, 2000. Available from http//www.enterpriseworks.org/about_news_wsj.asp Accessed 12 September 2006.1 Micro-multinational are companies who have small manpower and overall scale unlike the traditional multinational corporations. An example is Navin Communications who have engineering operations in Mumbai, India and headquarters in Mountain View, California (Multinational Corporations, 2006).