Multinational Perspective Essay

multinational corporations originated from the want for substantial capital and particular risks for large industrial or commercial consortiums for overseas calling. The modern invention of multinational corporations came into being during the 17th and 18th centuries and a good example of such a peril is the British East India Company in atomic number 16 Asia and the Dutch East India Company in South East Asias Indo-Chinese Peninsula.With the current communications and management technologies available, more companies ar able to make the most out of international trade liberalization. Today, multinational corporations are expanding themselves to increase their marts, increase brand presence and infix and benefit from inexpensive raw materials and labor (Chang, 2003).Scenario for Multinational CorporationsCurrently, there is an estimated 40,000 multinational corporations realism wide in and approximately 250,000 overseas collaborations running cross-continental trading unconscious processs. Most multinational corporations are from the United States, western sandwich Europe, and Japan. By 1995, the top 200 multinational corporations al wizard had collective revenues reaching of $7.1 Trillion which is equivalent to 28.3 percentage of the gross domestic yield globally (Bernal, Kaukab, and Yu, 2005).The operations of multinational corporations are governed by the policies of The area barter Organization (WTO), the International Monetary Fund (IMF), and the World rim. though the handed-down view of multinational corporations is that of queen-sized manufacturers, current trends and ontogenesiss in technology prepare excessively given rise to micro-multinationals1 as well affair process outsourcing (BPO) ventures (Ewing, 2005). Among the countries being targeted for multination expansion, China and India are the current top favorites of multinational companies (McKinsey ball-shaped Institute MGI, 2004). globalisation has allowed access to mar kets via technology and has reduced distri hardlyion, lower internal coordination costs. It has also allowed for net drubing of specialized services and products in persist of corporate functions through and through BPOs whether within the companies internal operations or its external activities (Ewing, 2005).Entry to evolution 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 new markets for multinational corporations are by mergers or direct acquisition, sequential market entry and through joint venturesMergers Merger or direct acquisition of existing companies is the forthright entry to a market. This is the scheme usually employed by large multinational corporations. It maximizes the economies of scale advantage to overcome barriers to entry (Ewing, 2005 Multinational Corporations, 2006).Considered as foreign direct investments (FDI), they are work to not only commercial regulation but are also direct affected by fiscal and investment policies by the host country, and associate international trade policies (United Nations Conference on Trade and ontogenesis UNCTAD, 2005). Beginning in 2004, it has been identified as a critical in developing countries and studies adjudge been commissioned to quantify their impact of the economies of developing countries (UNCTAD, 2004).The initial ranked for FDI is India and was followed closely by China (Kearney, 2004). Though India has been able to outrank China and Mexico, China real acquires more FDI significantly either country since 2002 (Department of Industrial Policy and Promotion, 2005 MGI, 2004). sequent 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 task, usually its key product or competency. It is variant from a merger that it that the parent compa ny 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 begin 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 speech sound in the 1970s. Today, Sonys operations in the United States include semiconductors and personal communications. Sonys United States operation used its expertise and leadership in manufacturing television to establish itself in the industry and its topical anesthetic arguing and then used this it as leverage to expand its products in the United States (Multinational Corporations, 2006). some other victimization in multinational operations is that outsourcing of operations or services to other countries. Acco rding to both UNCTAD 2004 and 2005 wrap ups, BPO is one of swift growing industries globally.Joint Ventures Joint ventures are operational or service partnerships with companies already existing or operating 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 particular 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 brocaded issues regarding liberalization issues (Bernal, Kaukab, and Yu, 2005). Host countries and venture partners significantly benefit from the transfer of technology and management while parent companies are able to enter differently restrictive market. The concern for multinational companies however is the outgrowth of conflicts with joint venture partners who can become competitors (Multinational Corporations, 2006).Another concern for most multinational corporations regarding entering into joint ventures is that topical anaesthetic policies, which their joint venture partners are subject to, are easily changeable. The inception of stable industry policies that may affect joint ventures and similar partnerships is one of the major focuses of developing countries trying to attract more investments (Department of Industrial Policy and Promotion, 2005). This move has been comported 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 deal with poor economic conditions, low educational levels, technological barriers or lack of existing take and infrastructures for the distribution of the product and servi ce (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 lock in be a haunting scenario for many investors (Bernal, Kaukab, and Yu, 2005), but the current trends in Asia, particularly China and India, is creating renew interest in expanding to developing countries (MGI, 2004). The efforts of developing countries to liberalize trade and industries call for also been encouraging. Recent trends have allowed the return 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 education of markets, the introduction of new products and the development of industries as a whole. investitures of these companies have helped stressed local economies space and opportunity to expand. The technology and management cognition 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 overall operation costs. A significant benefit of release global is establishing brand and product presence. Many companies have also benefited from the variated market that globalization has provided them increasing product efficiency 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 beneficial (Baitu, 2006 Tubbs and Schulz, 2006, Chang, 2003). Studies have also shown the negative effects of the operation of multinational corporations prompted some go vernments to take a protectionist approach 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 highly centralized nature of these corporations is the main apprehension against them. Though multinational corporations contribute significantly to local economies in the stamp of investment, technology and commerce, there is very smaller barrier to exit from the local industry in case of a national economic downswing (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 inflation 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 t hat 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 steer themselves to local markets, governments and policies that may they may not be familiar with (Wysocki, 2006). Exploring international markets also increases competition not just 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 marketing approaches.RecommendationsIn general, there should be further quantitative and qualitative studies on multinational corporations developed impact to host countries from individual to industry levels especially for the least developed countries that host them (UNCTAD, 2002). Multinational companies straight off 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 moldiness not undermine the focus on welfare, health and social life (Baitu, 2006).The following considerations are border UNDTADs World investing hatch 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 multinational companies operating in the country. Developing countries must not become depe ndent on multinational companies and focus on boosting domestic growth. Developing countries should be generously cautious 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 save 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 standardization 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 transaction in smaller countries become crucial in building brand and product awareness, purchase and loyalt y. 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 involvement in factors that affect its operations. Fears of multinational corporations being insensitive to local concerns can also be alleviated.Conclusion Multinational expansion is but one of the key indications of globalization. Liberalization signifies a countrys acceptance 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 from the investment, technology transfer and the development of its emerging indus tries. New multinational companies in particular could prosper and establish themselves well in developing economies where competition may not as stiff and industries not as crowded as they would be in developed countries. The key is in finding 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) globalization for the Common Good and Social Justice in Sub-Saharan Africa Online. forthcoming from Accessed 12 September 2006.Bergsten, C. F. (2000) The Global Trading System and the Developing Countries in 2000 Online. Working writing 99-6 Institute for International Economics. Available from Accessed 12 September 2006.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 Tra de and Development Programme Geneva, Switzerland.Brown, A. G. and Stern, R. M. (2005) Concepts of Fairness in the Global Trading System. Gerald R. crossover 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 Accessed 12 September 2006.Department of Industrial Policy and Promotion (2005) Foreign pack Investment-Policy & Procedures. New Delhi Government of India. Available from Accessed 12 September 2006.Ewing, R. (2005) The New Multinational Lilliputian, Not Leviathan Online. Speaking freely Asia Times Online. Available from Accessed 12 September 2006.Hoos, J. (2000) Globalization, Multinational Corporations and Economics. Kiado Budapest.Kearney, A.T. 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The Journal of American Academy of Business, Volume 8, Number 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 Deve loped 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 Wall Street Journal, September 25, 2000. Available from 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 draw View, California (Multinational Corporations, 2006).