ADVANTAGES AND DISADVANTAGES FOR MULTINATIONAL BUSINESS

Advantages and Disadvantages for Multi-National Business

Advantages and Disadvantages for Multi-National Business

Introduction

Multinational companies are firms with their home base in one country and operations in many other nations. Most of these very immense firms establish in third word countries or developing countries where they could manufacture the same identical product for very low costs compared to establishing the same firm in the western countries producing that product.

Discussion

There are no clear borders in the business world today; because of the multi-national mergers and international trade, companies' nationalities become indistinct. As the globalization of markets rapidly increases, many companies realize that international expansion is necessary for competition, this movement is causing the world become a global market, and all of those multi-national corporations are finding culture differentiation is a important issue they will face.

The most considerable obstructions to successful international marketing include contrary views and misinterpretations resulting from cultural differences (Mendenhall and Oddou 2000 124-325). A successful multi-national corporation should be aware of these issues and prepared to make the necessary changes, it can save effort, time, and lots of money. In this essay, firstly I will try to find the definition of Multinational Corporation (MNCs) and culture. Then I will talk about why understanding culture is important for MNCs, and how the culture impacts the international business.

A further, crucial aspect of globalization is the nature and power of multinational corporations. Such companies now account for over 33 per cent of world output, and 66 per cent of world trade (Desatnick & Bennett 2008 55). Significantly, something like a quarter of world trade occurs within multinational corporations. This last point is well illustrated by the operations of car manufacturers who typically source their components from plants situated in different countries. International businesses are still largely confined to their home territory in terms of their overall business activity; they remain heavily 'nationally embedded' and continue to be multinational, rather than transnational, corporations.

While full globalization in this organizational sense may not have occurred on a large scale, these large multinational corporations still have considerable economic and cultural power. Multinationals can impact upon communities in very diverse places. First, they look to establish or contract operations (production, service and sales) in countries and regions where they can exploit cheaper labour and resources. While this can mean additional wealth flowing into those communities, this form of 'globalization' entails significant inequalities. It can also mean large scale unemployment in those communities where those industries were previously located. The wages paid in the new settings can be minimal, and worker's rights and conditions poor. For example, a 1998 survey of special economic zones in China showed that manufacturers for companies like Ralph Lauren, Adidas and Nike were paying as little as 13 cents per hour. In the United States workers doing similar jobs might expect US$10 per hour (Hodgetts & Luthans 2003 24).

The reasons why understanding culture is important in doing international business will be discussed by using ...