Problems For Multinational Cooperations In Host Country Economics Essay
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Published: Mon, 5 Dec 2016
The existence and the account of the transnational corporations are established and can be founded far early then globalization, which took place in the nineties, but has opened the doors for more distinguished, liberalized the free trade across the globe (Gray 1993). The transnational corporation plays an essential role that holds the main pillars in shaping the dynamics of world trade and the economy of the host country in this current globalized world (Hesketh 2010). Today a large number of crown organizations are the transnational enterprises. These corporations have a fundamental factor that influences trade, concerns with technology, finance and foreign direct investments in the host as well as the home country. These forces regulate frames and direct the economic growth and development of the states in which they operate. (Gray 1993)
The transnational corporations are many a time described as the organization with dual face. One side where they are respected and cherished as an model of income to enlarge the local economy by the FDI, and on the other side they are blamed as selfish and hungry organization who aims for only the volume of their income rather than the gains to the economy where they operate. The impact of these factors affects the economy and social interests on the government, demographic factors, businesses as well as on the foreign-owned firms. The power and the influence of the transnational corporation on the government and the marketplace, make the monopolist businesses in an economy go behind them or form an alliance with the transnational corporation and leads to their success and progress in competence in the host countries. (Harrison 2000)
Alan. M. (2009) and Andrew. H. (2000) defines transnational corporation or multinational corporation as “an enterprise that has its headquarters in one country or home country, but manages production or operation of its services in one or more other countries or the host countries”.
The transnational corporations are the firm who structures its management, strategy, have ownership, directs geographical diversification and operations globally (John. H. 1993). They influence the economy with potential that are designed with numerous possibilities that are fundamental for developed as well as developing countries. This includes capital, competency or skills, technology or processes, exports, and infrastructure that are deliberate for developing their competitiveness (Worasinchai 2009). For example, Uniliver has its headquarters at Rotterdam in Netherlands the home country and today holds a larger portion of their business of numerous consumer product brands operating throughout the world or in host countries, in foods, beverages and personal care products (Hesketh 2010). They have their brand name also design their products and services according to the market and the trends in that economy.
Scope of the activities of the transnational corporations
Firms those acquire more than quarter of its revenue from their operations generated outside of its home country can be termed as transnational corporation (Makwana 2006). The transnational corporations are habitually dispersing firms. They have a powerful home country presence and a fine management and authority with a broad and centralized facilitate on their parent firms. They attain this by cost benefit throughout central production plant where cheaper resources are easily accessible; have technical expertise to improve the management system and the productivity. (Gray 1993)
The transnational corporations expand and prosper exceptional in an economy with dynamic marketplace that determine the low-priced and superiority of goods with respect to production, price and supply of goods and services in a host country (Karl 2003).
The strategies of the multinational corporation brings along the reality that they hide is they indirectly establish an outlook to the economy by dominating government, economists and domestic industrialists to attain their interests (Markusen 1995).
The transnational corporation is threat to the sovereignty to the host country in many aspects. Following are some barriers that are currently faced by almost every host country.
Transfer of technological or processes-
The transnational corporation may be a threat to an economy, as they can bring along a low-grade or incompatible technology in the host country (Makwana 2006). For instance, the transnational corporations brings along with them technology, equipment, approach and expertise that are not required in that host country. The firms do this in order to get the best possible benefits from a host country even if there is no assistance of their operation to that economy. This is done by introducing production methods along with sophisticated machinery that is not of any interest to the host country and may need skillful labor and auxiliary industries that are not available in that country (Passani 2009).
Further dilemma with the transfer of the technology will make the transnational corporation to dominate the domestic industry by the means of technological advantage or technological dependency, which may bring a fall in research and development if they are outsourced. This can be anticipated by the transnational corporation through introducing modern tools, knowledge and machinery for creating an obstacle to the local businesses that cannot create or purchase these facilities (Kevin 1998). This might result in eradication of some small businesses in the host country thereby leading to monopoly, which is not fruitful for any economy to thrive.
Influence of the trade policy and trade agreements
The multinational corporation plays a vital role in shaping the trade policies and trade agreements of the host country. Trade policies are the set of rules and regulations that are concerned to the entire states involved in international trade (Kumar 2008). Trade policy comprise of import and export taxes, inspection regulations, tariffs, and quotas. These policies are framework for a flexible coordination of trade activities to make trade in smooth flow, set clear principles and standards that can be understand by the businesses as well as its clients (Rugman.M. 2009). Although they are not practically always accomplished. The developed nations will always restrict the trade activities with the developing as well as underdeveloped nations to limit and dominate trade (Kumar 2008).
The transnational corporations try to take advantage of the trade policies by industrial domination and using this distinctive rights advantage to frame concessions from the government of the host country. The traffic and duties barriers create a restriction and prohibit the trade activities by slowing the process of import or by establishing standards that will exclude the foreign goods (Rugman.M. 2009). Their pressure on the host government may influence the economic as well as the political policies to shape for the more interest of the multinational corporation. This may neglect the domestic industries and make them further more inflexible (Makwana 2006). The trade policies in support of Multinational Corporation may restrict the host country to produce goods only for domestic market and restrict the exports. These corporations may also
For example- IN 2007, according to the Boston Globe report, South Korea had exported 700,000 cars to the United States. While U.S. carmakers sold around 6,000 crankshafts to South Korea. This resulted a trade deficit to U.S. of around 80 percent of $13 billion with South Korea. The free trade agreement under which the Balance of Trade to U.S. was deficit and made U.S. to restrict import of cars from South Korea in next year (Moor 2007).
Cultural impact on the MNC’S
In the pursuit of the economies of scale and be a competent organization in every aspect, transnational corporation creates a diversity and clashes in different geographical and local cultures in dissimilar as well as same nations (Harrison. A. 2000).
Today transnational corporations have to acknowledge with the reality of cultural diversity in different aspects. The companies bring along with them new technology, work practices and challenging the management beliefs and transmits them in host countries (Gray 1993).
Rugman (2009 p. 47) Cultural dissimilarity often makes the multinational organization for merger and acquisitions. This may enforce the new style of management and operations on the economy or the economy may restrict the sovereignty and the independence of the cultural norms and organizational goals on the corporation with their traditional beliefs. (Rugman.A. 2009)
For example- McDonalds is one of the leading fast food chains with a worldwide presence. They are operating around 118 countries worldwide. Different countries have a different outlook for the services provided by them (McDonalds 2010). In UK, MacDonald is blamed as an unhealthy food chain that is responsible for rise in obesity and employment without prospects. While in Muslim countries like Malaysia, the bacon is not served in McDonald’s burgers as pork is not permitted under Islamic dietary law (McDonald’s 1940). This shows the effect on the organization as well as on economy because of cultural crash. The culture diversity may influence on the face-to-face or on company-to-company operations, dealing in different clusters around the globe (Markusen 1995).
Cost advantage (e.g. Low cost)
North American Free Trade Agreement (NAFTA) agreement designed for liberated trade between the United States and Canada and Mexico made it potential for many U.S. manufacturers to shift their employment to lower-cost countries like Mexico in order to achieve competitive labor-cost advantage (NAFTA. 2010). This restricts the multinational corporation to expand more in their choice of environments where they can make substantial benefits and forcefully invest the resources abroad.
Availability of quality goods and services in the host country
Many- a-times, businesses in a host country may be chiefly designed for export market. Although in some places the organizations make investments in order to increase their access in the host country market in order to decrease the trade barriers (Gray 1993).
For example- Honda, Japanese car manufacturers made investments in UK for their production of cars, has facilitated them to acquire a platform in the EU in order to avoid tariff barriers (Nag 2007).
The availability of resources in foreign market has made access to high quality goods at low-prices and the rivalry created, has made the organization to improvements in working practices, prices and quality in other related industries and forced the industries to make huge investments to attain these resources (Karl 2003).
Influence of Government regulations and bodies
The international business along with it benefits, makes the countries involved to reveal on the rationale for the dreadful effect of the trade activities in their economy. The government does the monitoring of the activities by setting up bodies and agencies that control and monitor the trade activity and the flow of these resources (AFTA).
World Trade Organization (1995) acts as a body to liberalize and encourage the world trade. However, there is no transparency of the decisions made by WTO, which has made it complex for the multinational corporation to operate in the nation, which is not a Most Favored Nation (MFN) (WTO. 2010).
The free trade through negotiations has always forced the MNCs to face in almost every regional and international clash.
The problem of exchange rate also has an essential part for the MNCs in the host countries. The exchange rate may affect the import surplus, inflation or deflation of currency rates and risking the organization many a times in debts (IMF, 2010).
Role of Foreign direct investment
The foreign direct investment (FDI) involves a long-term contract between the organization and the government and hence has a huge impact on an economy. The FDI bring about transformation and involvement in management, joint venture, modification of technology with expertise with the foreign assets or foreign investment (Markusen 1995).
FDI are channels of technology spillover. These leaks may occur as; a firm may hire an employee from a rival firm that has acquaintance about the technology that is used and bond in fraudulent practices (Markusen 1995).
For example- Flextronics is world’s leading contract electronics firm, took over C-Mac industries of Canada in order to acquire C-Mac expertise in assembling the components of their new products (WTO. 2010).
Role of freedom and peace plays an dominant role on the organization as well as on the host government. The exploitation of the foreign organization of the government of the host country may influence in terms of trade policies, labor, FDI and exploit the trade activities (Kevin 1998).
Restriction but both by the MNC’S and the host government bounds the circumstances and limitations to the trade operations and infringe the market principles by making the small firms to operate in that market of go for overseas trade (Kumar 2008). The exploitation has also affected the employment, where the new principles positioned for generating high profits have dominated the salary and the opportunities of the lowest to the highest profession in the number of the employees as well as on their wages.
GLOBALIZATION OF UNIVERSITY EDUCATION
What is globalization of education
Globalization of education is to pursue, instruct and build a qualified as well as skilled labor work force, while creating awareness to gain know-how and acquaintance from other education institutions around the globe along with global businesses demands (Hamilton 2009). Today globalization has posed a model pursued by diverse cultures to practice superior education; make awareness and expertise the inhabitants to seek for knowledge from other higher education intuitions (Raby 2009).
Globalization of education is bring about the creation and alliance and interconnections between states education systems that usually understands the process and structure in which barriers separating different regions of the world education establishment are reduced or removed (Daun 2007). Globalization today is a complex issue for many community universities around the world and is at present observed as crucial to every nation’s competitiveness to raise their standard of living.
These days universally, higher education structure, policies and establishment are being transformed by globalization. This is broadening along with growing and speeding up of global interlinks between the higher universities (Daniel 2010).
University education is now more globally open other than most of the sectors because of its transparency and widespread arena immense knowledge along with massive market demand of educated personnel as well as global customers, which now shows significantly more respect between the juridical borders worldwide (Elaine 2010). Evolution of the university education since globalization has transformed and influenced largely on the intuitional schooling techniques as taking into action the challenges with the openings that are primary element of the present global world since they are regularly developing to supply new principle to the rapid changing internationalization and schooling the inhabitants (Hamilton 2009). The
Globalization of the education brings about the changing customs in the university education and is concerned to shifting between universities. This brings the idea of how university education will anticipate the future opportunity and bring together in front a mixture of the finest philosopher and bright brains throughout the globe for one intention (Amaral 2009).
Globalization of the education can be illustrated at present in the diverse world where the higher as well as the small institutions and universities apply to complex university systems to global online university for new opportunities, modernism forces and trends in higher education on the following aspects.
The globalization of market, which was earlier, unnoticed during early 1980s, is the foremost concerned subject of every economy worldwide. This has amplified the commerce of the gross world merchandise nearly double when compared in the 1990 of 15% to nearly 37% in the recent years (Daun 2007). The foreign direct investment funds have also increased significantly in the last 20 years (Knust 2009).
The recent liberalization of the trade and policies has laid a structure for every economy to develop and react vitally to the volume and competitiveness of the businesses and trade from countries worldwide.
In the rapidity globalization of the market, internet has played crucial role in shaping the business worldwide to construct a low cost establishment for communication and businesses activities to draw, persuade and engage the target consumers in a appropriate approach.
Globalization has directed the economies, education and rituals followed by dissimilar states to internationalize and spread of market needs between diverse nations over the globe. This has facilitated the spread of knowledge along with understanding of different practices in the markets and assisted as a principal footstep for the development of the nations (Pamela 2010).
The globalization of the market drivers can be categorized under-
Similar customer needs and tastes
Customer desires depend on how the corporation or institutes segment their markets and demands. In the course of selecting among the rival goods and services, consumers choose the preference that can facilitate and fulfill their requirements and are superior to competitor’s products (Raby 2009). In the marketing where the consumers search for distinct product or service that have different needs and segments in the same product chain, the trader tries to split the product according to the customer’s needs by splitting the identical products and requirements into personal preferences. This never-ending demand of dissimilar choices has made the companies to promote and spread their distinctive products worldwide. To capture and establish their presence the companies need trained and skillful workforce (John 2009).
The different market demand and requisite make it obligatory for the universities education to gain more knowledge and awareness in their teaching around the world (Amaral 2009).
Fresh and towering ideas and inclination of the nation’s trade and their close partnership between the education and industries makes the globalization of the higher education compulsory universally (Knust 2009).
7. Global customers
Today every professor and superior administrators is awake and remain acknowledged about the movement of commerce and advertising into education as the trade activities and the reach of the global consumers is shaping the economy growth (Daniel 2010). The reach of the global teaching hence plays a crucial role in fulfilling the diverse customers needs and more over recognize the different aspiration in different states. The Multinational companies who play a key role in the globalization of trade, for their elastic operation globally involve managing their interactions with international customers in a worldwide-incorporated model where the different preferences in design, taste, color, shape and other dimensions to the product are designed to dissimilar target customers (Daun 2007).
Nowadays the infinite market demand in terms of product or services or in the field of education is immense. To fulfill the market demand the trader and intuitions tries to be flexible and make it flexible to relocate from one market into other in order to sustain the market share and meet the rising competition (Daniel 2010).
The activities of the 2002 where the enclosure of staff and students in decision-making, the governance deliberated the change toward concern of effectiveness and responsibility emphasized the introduction of New Public Management (NPM). This altered the structure and policy processes of public bodies in an effort to make them more efficient and effective to serve the high market requirements that aided the graduates and the business to interact directly for employment (Grant 1997).
Dell recognized as devoted brand for its distinctive market share to supply technology at inexpensive and handy to its customers and intuitions around the world to take advantage of the vast economic and social benefits by, managing the customers demand by using customer direct model and bring low-price in the markets, expand the global employment to meet the diverse ideas and expertise and bring desirable employment worldwide economies. (Dell 2004)
8. Globalization of competition
Globalization of the competition plays an important role in the modern education system that is depended on the interdependence between countries, Competitors global strategies, high import exports.
Globalization has ultimately led to further Competition within the developed as well as the middle-income countries. This is chiefly in Asia, that has lead to growth and collaboration of the businesses as well as the educations institutes from the OECD countries has led to ease of policy formulation, seeking solutions to the most common problems, recognizing good practices with co-coordinating with domestic and international strategies (Elaine 2010).
One evidence for the development of higher education institutions and the increasing competition can be found in the large range of institutional structures where dissimilar small as well as giant universities of applied science to multifaceted university systems to private colleges use internet to spread the prospect now use online and abroad teaching pattern.
This has aided the universities to speedily react to the challenging and take advantage of the modern opportunities (Raby 2009).
Higher education has now become central to the changes sweeping through the OECD and emerging nations, in which worldwide networking and exchange are reshaping social, economic and cultural life. But has also increased the level of competition (Pamela 2010).
9. Globalization of government policies
In global acquainted economies, higher University education has a major significance than ever before as standards of wide range of cross-border relationships and continuous global flows of people, information, knowledge, technologies, products and financial capital is vastly depended on the government policies and regulations that govern the participants of the market (Daniel 2010).
The government policies are framed and structured under trade policies, technical standards, host government policies.
In practice, the principal objective of such reforms is to begin a process of privatizing education by starving public-sector schools in the name of forcing them to compete. The Civil Society Network for Public Education in the Americas, a group that brings together South, Central and North American workers in education, notes that in developing countries that apply austerity measures, this system has generally led to the reduction of educational resources for the poorest regions (Knust 2009).
The MNCs has to face many tribulations in the host countries in the present era of globalised world trade. There are many causes and reasons for the failure of the many global economic programs and the corporations. In focal cause of this failure is the competition or rivalry, profit driven intends, self- interests, and the domination by economic powers.
The multinational corporations are the modles of these traits, and they play a key role in sustaining their position through their economic and political influence. The role of MNC plays a significant on the economic formulation of policies and the overall development of the country.
The development of the economies and the expansion of the trade has lead to globalization of the university education grow and develop over tall over the globe.
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