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Advantages and disadvantages of multinational corporation to a nation
Disadvantages of multinational corporations
Key drivers of globalization
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Nam Pham
CWID #: 802 140 244
Finance 370
Part 3 – Short Paper
Topic: Multinational Corporation
Multinational Corporation (MNC) is a corporation that has asset in other country other than its local country. It is sometimes called international corporation, a transnational or stateless corporation. Some companies also have their factories and offices worldwide. Multinational Corporation began to evolve since the nineteen century with American and European countries. According to Hymer, the multinational corporation was based on the perspective of the American. In the nineteen century, American developed many city that called multi-city and used manufacturing strategy plus wide marketing. After that, these companies were considered as multinational
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• The last reason is the efficiency seeking; multinational corporation will seek their overseas to re-organize economic changes.
The fact that multinational corporation offer a lot of job opportunities to the foreign countries is undeniable. Beside that, there are some major issues in the economy that happened because of them. The following will be a list of the advantages and disadvantages of multinational corporations.
First, let’s take a look of the main advantages of multinational corporations that will offer:
• The benefit for consumers: it can be easily notice that the larger the corporation, the better they are to lower the average prices and costs for its consumers. For example: some developed countries like Japan or Korea can offer cheaper car price than developing countries, the same with other technology industry like smart phone, and electronic.
• Corporations will create jobs and wealth: after putting their money to invest to foreign markets; of course they will hire the local people to get the advantage from the low labor cost. Wealthy is likely to come to their resident soon
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For example, we can find Mc Donald in almost every country, and we know of course it is not the best food and the area nor the worst one either.
• Huge profits will consumed for Development and Research: some project and development need a very huge money in order to make it work and doing research. In these case, only large organization have the ability to sponsor.
Now, let’s discuss the main disadvantages that relate to multinational corporations:
• The advantage of multinational corporations: since most multinational corporations are large and very successful in their home country. When it spread their wings oversea, it would becomes a thread to the local small firm to succeed.
• The expenses of the consumers: this is one of the most interesting thing for their corporations. Most multinational corporations have a power of monopoly in order to make the most profit.
• The thread of local firms on the nerve of being push out of business: there is a fact that many local firms have been pushed out of the business because of these giant multinational
• A more competitive, efficient and profitable business with less competition in the domestic markets.
Following the globalization, many companies in developed countries move factories to developing nations. As a multinational company, there is at least one facility in one country other than its home country. Those companies have offices and factories in different countries and usually have a centralized head office in their home country. Advocates of multinationals say they create jobs and wealth. And multinationals can improve technology in developing countries, which are in need of this. On the other hand, critics say multinational companies often barely pay employees enough to live on in developing countries, and it is unethical to pay cheap wages.
The main reason for multinational corporations to start production in underdeveloped, low-income countries is to have their goods manufactured for the lowest price, at the quickest rate possible, resulting in greater profit margins.... ... middle of paper ... ... Any multinational corporation that is operating in a developing country must pay their employee’s not only a living wage, but also provide them with safe working conditions.
Today, many companies enter the global market, and some companies have become extremely successful in the global marketplace and others still struggling. In Theodore Levitt’s article “The Globalization of Markets”, he states that a well managed corporation focuses on selling standardized products with high quality and low priced instead of focuses on selling on customized products with high cost. Levitt defines the differences between multinational corporation and global corporation, and adopts many specific examples to proves his view. He defines the multinational corporation who operates in many countries and adjust its product based on the taste of specific region. This will result in a high cost to produce the product because company have to input more resource into each individual product. However, global corporation sells similar product worldwide at relative low cost. According to Levitt, the cultural differences are becoming more and more “homogenized”; therefore, becoming a global corporation will lead to the successful of the company in the global market.
Globalisation allows individuals, groups, corporations, and countries to reach around the world farther, faster, more deeply, and more cheaply than ever before. Most large local companies regard globalisation as opportunity, thereby exploring overseas markets for maximum market share and optimum business strategies. However, managers would face a series of challenges caused by leadership models, cultural backgrounds, political and economic risks, HR management, etc. To study multinational management skills is very useful for my future career. In this essay, I will set goals for this subject, identify the skills I have honed and need to improve, and explain my strategies for achieving goals.
Multinational enterprises date back to the era of merchant-adventurers, when the Dutch East India Company and the Massachusetts Bay Company traversed the world to extract resources and agricultural products from colonies (Gilpin 278-79). While contemporary multinational corporations (MNCs) do not command the armies and territories their colonial counterparts did, they are nevertheless highly influential actors in today’s increasingly globalized world.
Multinational enterprise (MNE) is “a company that is headquartered in one country but has operations in one or more other countries” (Rugman and Collinson 2012, p.38) that has at least one office in different countries but centralised home office. These offices coordinate global management in the context of international business. MNEs have increasingly essential influence on the development of the global economy and coordinate with other companies in different business environments. However, there are many issues involved with how MNEs operate well overseas, especially in emerging markets (EMs) (Cavusgil et al., 2013, p.5).
The Effect of the Development of Large Firms on Society Many firms choose to expand in size because of the cost and market share benefits the firms can reap. However, the development of large firms may not always be of benefit to consumers, and the advantages and disadvantages will be discussed in the following essay. Because larger firms such as Shell Petrol Station are able to experience internal economies of scale through lower unit costs, many of the cost savings are then passed on to the consumers through lower prices. Hence consumers are then able to enjoy greater consumer surplus, defined as the difference between the maximum price that a buyer is willing to pay for a good or service and the actual price paid. As seen from the diagram below, the marginal cost curve shifts to the right such that the new marginal cost = marginal revenue equilibrium lowers the price and increases the output level compared with the initial equilibrium.
Nowadays, business is set in a global environment. Companies not only regard their locations or primary market bases, but also consider the rest of the world. In this context, more and more companies start to run multinational business in various parts of the world. In this essay, companies which run multinational business are to be characterized as multinational companies'. By following the globalization campaign, multinational companies' supply chains can be enriched, high costs work force can be transformed and potential markets can be expanded. Consequentially, competitive advantages of companies can be strengthened in a global market. Otherwise, some problems are met in the changed environments in foreign countries at the same time. The changed environments can be divided into four main aspects, namely, cultural environment, legal environment, economic environment and political system problems. All the changed environments make problems to multinational companies. In particular, problems which are caused by changed culture environment are the most serious aspect of running a multinational business. This essay will discuss these problems and give some suggestions to solve them.
Overall, McDonalds are able to reach customers all around the globe and they market their products inexpensively. According to Naim (2001, p. 1) it is acknowledged that, “McDonald 's is a global brand, but we run our business in a fundamentally different way that ought to appeal to some critics of globalization. We are a decentralized entrepreneurial network of locally owned stores that is very flexible and adapts very well to local conditions. We offer an opportunity to entrepreneurs to run a local business with local people supplied by a local infrastructure. Each creates a lot of small businesses around
Wilkins, M. (2005), "Multinational enterprise to 1930: discontinuities and continuities", chapter 2 in A.D. Chandler and B. Mazlich (eds. Leviathans: Multinational Corporations and the New Global History, New York: Cambridge University Press. Jones, G. G. (2005), "Multinationals from the 1930s to the 1980s", chapter 3 in A.D. Chandler and B. Mazlich (eds. Leviathans: Multinational Corporations and the New Global History, New York: Cambridge University Press. Chandler, A.D. (1986), "Technological and organizational underpinnings of modern industrial multinational enterprise: the dynamics of competitive advantage", chapter 2 in A. Teichova, M. Lévy-Leboyer and H. Nussbaum (eds. ), Multinational Enterprise in Historical Perspective, New York: Cambridge University Press.
A multinational enterprise (MNE) is an organization that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets.
Labor laws, wage disparities, intense competition and fluctuating currency values are the challenges that are making organizations worldwide to compete in marketplace with products requiring a great deal of labor, and it is now getting harder for some of these organizations to maintain employees abroad. As Mello (p. 610) mentioned that a greater percentage of United States workforces are moving their operations abroad to developing nations like China and leaving an increasing number of United States domestic workers without employment. The foreign markets for the products and services are not the only things enticing these organizations to enter these global marketplaces. There are other reasons these companies are joining the global market arenas. For example, the foreign labor markets, this has attracted interest in many organizations to expand globally (Gersten, 1991). The labor force growth rates in developing nations alone will continue expanding by approximately 700 million people by the year 2010, while the United States labor force will continue to grow by only 25 million. This shows that United States’ growth rate will drop and the opportunities for productivity growth rate will increase in developing countries.
...ll as private sectors have gone international with new ventures outside the country. These companies are generating revenue, though modest compared to their overall sales revenue, by deputing their expert personnel outside.
Modern society is dominated by multinational corporations. In the past 30 years there has been unprecedented development of transnational corporations (TNC), which is “any corporation that is registered and operates in more than one country at a time” (Transnational). Now, there are more than 63,000 TNCs, while there were only 7,000 in 1970. That is more than 900% growth in TNCs in only a few decades. Even more startling, 70% of all trade, includes at least one of these TNCs (Basic).