The Challenges Companies Face In Domestic Markets Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Nowadays, this world is called globalisation because human can contact each other around the world from the East to the West and from the North to the South, get information they require from the biggest source of knowledge which is Internet, commercial between people who have never known before and even join to set up or operate several activities together with differences of nationality or believe. Multinational company is a good example for this matter. However, there are many challenges in harmony and organisational culture.

A multinational company (MNC) is a corporation or an enterprise that usually has its management headquarters in one country which is called the home country and has offices and/or factories which uses for operation in other countries which are called the host countries. A multinational company is also known as a transnational or international company.

The idea of a multinational company has been around for centuries. The origin of the concept or the first modern multinational company is thought to be the Dutch East India Company of the 17th century. During the 19th and 20th centuries, the idea of multinational company became increasingly common. In this century, which is 21st century, this business model continues to be highly growth.

The real model for a multinational company may differ slightly. A common model is the headquarters in one nation but production facilities are located in other countries. This model allows the company to be able to produce goods and services in areas where the cost of production is lower.

A second model is to base the parent company in one nation which is the country of origin and operate subsidiaries in other countries around the world. The subsidiaries may more or less function independently.

Last model of multinational company is to setup the headquarters in one nation that oversees a cooperation that extends to other countries and industries. With this model, everything is reported directly to the headquarters.

The reasons that cause multinational companies booming, first is the efficient of coordinating in multinational countries is better than the behaviour of agents located in different countries. Coordination in multinational companies creates efficient social-networking and it affects the good position of companies. Another reason is, according to Hymer (1976), Kindleberger (1969) and Caves (1971), the existence of multinational companies happens by structural market imperfections for final products. In Hymer's example, two firms are considered as monopolists in a market and isolated from competition by transportation costs and other tariff and non-tariff barriers. If these costs decrease, the competition will happen and it will reduce the profits. The firms can maximise the income and diminish the competition by cooperation. This is a case which picture it is easy for multinational companies to enforce price in different countries. Moreover, from the work of McManus (1972), Buckley & Casson (1976) Brown (1976) and Hennart (1977, 1982), claimed that "market imperfections are inherent conditions in markets and multinational companies are institutions which try to bypass these imperfections. The imperfections in markets are natural as the neoclassical assumptions like full knowledge and enforcement don't exist in real markets". In addition, the companies can lower the expense for raw materials and cheaper labour costs because the companies can use local materials and because most workers are local. Therefore, the companies can hire the workers in low prices. Interestingly, the companies are not necessary to pay many taxes because the companies are located in those countries, goods and services can be delivered directly to the locals.

On the other hand, the growth of multinational companies depends on the economics development of countries. Both multinational companies' growth and economics' growth are in the same direction. For example, if a country is not very well in economics development, it can be hardly for the growth of multinational company in that country. Other is most multinational companies rely on rules and needs of the headquarters in origin country or home country. Multinational companies cannot operate independently to adapt to the areas where the companies are located.

The host countries can take many advantages from existence of multinational companies. The companies claimed that a number of local people involve or work in the companies and the companies decrease the level of people who do not have jobs in countries, especially developing countries or the third nations. In addition, multinational companies bring about positive effect to the development of economic in host countries. For instance, multinational companies attract investment from other countries and cause competition between local products and products from multinational companies. When the competition happens, people in countries will have more choice to choose and people can get the best condition.

Nevertheless, it also has negative influence to the host countries. Multinational companies help people to have jobs because many people can work for the companies, while a great deal of people lose jobs because of establishment of multinational companies, especially former jobs or some jobs that exist in the past of 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.

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.

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. 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.