As we are living in 21st Century, this is the time of globalisation, in which people can contact each other around the globe from one country to another. They can share and receive information by using Telephones, Internet. The most widely used medium for connecting with each-other is Internet. All MNC's use Internet for their daily requirements. Different nationality people work under one roof through easy communication used by MNC's. But MNC's also face challenges in harmony and organisational culture.
A multinational company is a registered company in more than one country. MNC's are also called International Corporations because these organisations do their operations in more than one country. The First Multinational Company was Dutch East India Company, which was established in March 20, 1602. From that time the concept behind Multinational companies is growing rapidly.
The idea behind the Multinational Company is that the headquarters in one country and the production units are in different countries. This idea allow companies to produce goods/services at lower cost due to setting production units in the area where resources can be easily available and has low cost.
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The first reason that is effective for MNC's in booming is the efficient coordination in multinational countries which is better than the behaviour of the agents which are located in different countries. The effective coordination in Multinational corporations creates efficient and effective social-networking which affects the good position of companies. Another reason by Hymer(1976), Caves(1971) and Kindleberger(1969) is, "the existence of Multinational corporations happens by structural market imperfections for final products". According to Hymer's example, two firms are considered as monopolists in a market but can be isolated from the competition by transportation charges and other tariff and non-tariff barriers/charges. If these costs decreases, then the competition will happen and the cost of the product will decrease which results in decrease of profit. The firms can increase the profit and and minimize the competition by cooperating each-other.
From work of McManus(1972), Brown (1976) Buckley & Casson (1976) and Hennart (1977, 1982), claimed that "market imperfections/ market failure" are inherent conditions in the markets and "multinational corporations" are the institutions which try to bypass these imperfections/failures. In addition to it, the companies can decrease the expenses for raw materials and can bring the cheaper labour costs because the corporations can use the local materials and because most of the workers are local or locally available. Therefore, the corporations can hire the labour at cheaper prices. Interestingly, the corporations does not need to pay many taxes because of the companies located in those different countries, goods/ services can be delivered directly to the local market.
On other hand, the growth of the multinational corporations depend upon the economic development of the countries. Both economics growth and Multinational corporation's growth are in the same direction. For example, if the economic development of a country is not well then there will be hardly growth of Multinational companies in that country. Other is most multinational corporations rely on the rules and needs of the headquarters in origin country or host country. Multinational corporations can not operate independently to adapt to the areas where the companies are located.
The host countries can take many advantages from the existing multinational corporations. The companies claimed that the number of local people involve or work in the corporates and the corporates decrease the level of people who do not have the jobs in the countries, especially the developing countries or the third nations. In addition, multinational corporates bring about positive effect to the development of economic in host countries. For instance, the multinational corporation attract investment from the other countries and cause competition between the local products and products from the multinational corporations. When competition happens, people in the countries will have more choices to choose and people can get the best condition. People will have the cheaper cost for same products.
Nevertheless, it also has the negative influence to the host countries. Multinational corporations help people to have the jobs because many people can work for the companies, while a great deal of people lose jobs because of establishment of multinational corporations, especially the former jobs or some jobs that exist in the past of the countries. This may affect old cultures and it might vanish one day. Furthermore, setting up multinational companies, sometimes it has an impact on environment or natural sources in the countries, especially if multinational companies produce about chemicals or use raw materials from natural sources in production process.
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Apple Incorporation is one of famous multinational companies. It is an American multinational company which designs and manufactures electronics, computer software, and personal computer. The best-known products of this company are Macintosh computers and the "i" family which is the iPod, the iPhone and the iPad. Since 1977 until now, Apple Incorporation has employed over 75,000 people worldwide. Most employees have been stayed in the United States. However, Apple has considerable manufacturing, sales, marketing, and support organisations around the world such as in Paris and Tokyo and its headquarters are located in Silicon Valley, California.
Another sample is Bayerische Motoren Werke AG or BMW, it is a German multinational company which manufactures automobile, motorcycle and engine. It also produces the MINI brand and Rolls-Royce Motor Cars. Performance and luxury vehicle is prominent for BMW. Its headquarters are located in Munich, Germany. Moreover, it has a number of overseas subsidiaries worldwide i.e. South Africa, United States, India, China, Canada, Austria and Egypt. Each subsidiary has different noticeable point and produces various products, for instance, in India, it is a place for manufacturing BMW 3 series and BMW 5 series, while in United States, the X5 is produced and it has a plan to manufacture the X6 in the future.
Challenges Faced due to different cultures
The challenge of multinational company is to blend several employees which have different nationalities and various cultures, also believe to get along with each other. It is not only one nation in a multinational company, there are several people worldwide, therefore, believes, cultures and nationalities of each employee is a big issue of multinational company because if people have difference in believes and cultures, people will have various views and ideas to situations or affairs, especially in a multinational company which has a great deal of people from around the world. It is possible to employees which nationality is different will come in to conflict each other easily. It might be ideas of work or personal matters. We will now discuss the some of the nature of challenges below :-
5) Communication and Cultural Norms
6) Etiquetee and Customs
The multinational corporations face the problem of diversity of culture. The management face the biggest issue is that it is hardly possible to take the view and ideas of different culture people in their perspectives.
Like diversity, it is also a major issue. Every company has its organisational culture or we can say that rules and policies. But multinational corporations are in different countries which have different cultures, so thats why it is difficult to set the work environment rules and policies for employees as company has to make global policies.
Multinational Corporations also face the problem in selecting the employees from different countries of different culture. It is hard for them to judge the right talent for their company due to different cultures. So it makes a huge difference in selecting the people for jobs.
Like we need an Embedded Engineer and he is from Persia. Interviewers are from America then it is hard for them to judge the ability of the person.
One of the biggest issue is in sale of the product. Because MNC's take high risk on the production of the product by targeting the specific cultural market. If that product is not according to the cultural environment then it will be huge loss to the company.
Communication and the Cultural Norms
Another major issue is difference in communication due to international lines, culture and languages. For instance, John Hooker at Carnegie Melon University says , "some forms of the communication have implied and understood meanings that only make sense within a culture's context". This form of " the high context communication" requires the knowledge of the culture and its understood traditions.
Etiquette and Customs
Multinational Corporations also have to represent their representatives / leaders, who know how to ignore and handle the cultural violations. Like in some of the countries, people does not shake hand. Instead of shaking hands they greet in their own cultural way. Culture can have different kind of food and living as well.
Conclusion and Solutions for resolving issues
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The solution about this problem is the employers must learn about believes and cultures in each nationality and campaign every employee join views, share successes and experiences to each other. Furthermore, the employers must put an eye on people who are racists and admonish those people including people who look down on others. In addition, the employers have to campaign and persuade everybody in the company to have the same aim. If both employers and employees have a desire to meet the same purpose, the company will be famous and eventually it will increase a lot of profits. As a result, these directly affect to everyone in a company.
Multinational company is comparable to the big goal of commercial in the present. It seems to be a strength chain for a business and is a sagacious method to connect customers worldwide. Cooperation of multinational company is a key word that attracts other people to invest in that business and is also a big screen of advertisement to customers and people. The more a business has an efficient multinational company, the more a business can make a number of profits. On the other hand, learn differences of each nationality and planned work systems are the way to lead a powerful multinational company.