SOLD BY: INTRODUCTION – MULTINATIONAL COMPANIES
Due to the tremendous growth of transportation, communication and technology particularly during the last two decades, the world has now become a global village. The distance between has becomes as shorter as ever and the geographical barriers between them have virtually missing. As a result, the mutual dependence among the countries has increased. For example coco cola origins in the united state, but a workers drinks coke ‘made in Nepal’ to quest his thirst. Similarly, Netscape coffee is originally produced in Switzerland, but an American family enjoys ‘Nescafe’ made in ‘USA’ every morning in the Chicago. There are several other example of products which are originally manufacture in one country, and are now being manufacture and consume din the other countries. This has been possibly due to the Multinational companies.
DEFINITION – MULTINATIONAL COMPANIES
Multinational company is a corporation or company that is registered in more than one country or that has operation in more than one country. It is large corporation which both produces and sells goods or services in various countries, it can also be refers to international corporation, they play important role in globalization.
CATEGORIES OF MULTINATIONAL COMPANIES
There are four categories of multinational corporations:
(1) A multinational, decentralized corporation with strong home country presence,
(2) A global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available,
(4) A transnational enterprise that combines the previous three approaches. According to UN data, some 35,000 companies have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade.
CHARACTERISTICS OF MULTINATIONAL COMPANIES:
The following are the characteristics of the multinational companies:
1. LARGE SCALE BUSINESS:
The capital of multinational companies considerably large. Its assets and volume of sales are also quite large. The sales turnover of some multinational companies are much more then the annual budget of many developing countries.
2. PRODUCTIVE ORGANIZATION:
Multinational companies are involved in the production distribution of goods and services at the international companies and level. They produce goods and sales them in one brand name of trademark allover the world.
3. GLOBAL OPERATION:
Multinational companies operate globally. The parent company manufacture an sells its products and services through its subsidiaries established in other countries. Hence, they perform their business scale at the global scales.
THE CHALLENGES OF MULTINATIONAL COMPANY
DIFFERENT CHALLENGES THAT MULTINATIONAL COMPANIES HAVE TO FACE
INTRODUCTION
No doubt, this is the age of globalization and in this era our world became a very small place. This is now the world of awareness and technological revolution and the very revolutionary the use of internet gave boom in the business sector. For global business investment and trade the course of globalization has created extraordinary opportunities since last few years. With many entry strategies like joint venture and auxiliary multinational companies are trying to enlarge their business. In this we will go through the some different challenges that multinational companies have to face in Chinese market. Firstly it will show the localized staffing strategy that foreign multinationals used for human resource management in Chinese market. After we indicate some difficulties attracting and retaining a qualified managerial staff in China for multinational companies operation. Multinational companies suffered some other challenges in china will be discussed.
About 41000 new companies in 2003 in China had been launched by investors from other countries. And at the end of 2003 there were 46000 approved foreign companies in China. However for doing business in China these multinational companies faced some challenges like cultural differences and negotiation problems, which have affected foreign business operation and development.
HUMAN RESOURCE CHALLENGES
In this decade, most popular issue in which businesses has to face is the Human Resource management. The need of highly qualified staff in multinational companies has been increased. Multinational companies choose regularity of human resource management in beginning. which supposed coordinate practice and consistency in strategy can direct to operational value and efficiency. People in different places have their own culture and conception on organization behaviour. For multinational companies this reason of diversity of cross-nation and cross-culture may cause in strategy conflicts for multinational companies at the time of international standardization human resource management (Daft, 2007).
Most of multinational companies began to recruit the people in those countries to control these difficulties and reduce cost. For example, in china has a ¾ population of the world and millions of graduate from this part considered as a large labour market for multinational companies. Many multinational companies entered in Chinese market on the entry of it in WTO and are planning to take staff from the same part while during the course of business in China. However the progress of HRM system has not replied with the rapid growth of economic development in China. It is difficult and different recruiting and keeping qualified managerial staff is a huge challenge in Chinese market found by most of multinational companies.
CULTURE DIFFERENCES
People from different countries always have different traditions and attitudes towards business. Some other challenges like culture that multinational companies have to face during the course of business in other countries besides of human resource management, For example culture has influenced strongly the international business operation in Chinese market experienced by multinational companies. So first of all they should study of the business culture if they have desire to start business in china.
THE DIFFERENCES OF SOCIAL ENVIRONMENT
While operating the business in other countries there are lot of things they may be different from the company’s local market like culture difference, labour market and the system of employment in targeted country this creates huge challenge for the multinational countries to operate the business in such country. So in this situation, the efficiency of work would be much lower than the company’s expecting from the employees.
SHORT OF TALENT
There is another problem when multinational companies going to start business in the other countries on the time of recruiting of qualified managerial that is shortage of talent due to some reasons, this might be include the unbalance in the choosing of education field. The talent could be defined as the people who are progressing, professional and efficient. For example in the years past china witnessed in every year millions of university graduates but unfortunately it didn’t produce more talent to the country as should have been. And this is due to most of students major in arts rather than science Ministry of Education PRC, 2006).
Moreover, we will discuss following with the help of Porter Diamond how do the determinants of national competitive advantage help explain how companies can maintain their economic competitiveness.
PORTER’S DIAMOND – DETERMINING FACTORS OF NATIONAL ADVANTAGE
In a global environment corporate strategies have to be seen increasingly. Management has to look at international market environment if organization does not do this. Competitors actions in which sellers, new entrants, buyers of providers of substitute may manipulate the domestic market. This trend reinforced by IT. Model of Michael Porter shows and allow analyzing why some nations are more competitive than others are, same like competitiveness of industries on others. Factors of national advantage in this model had been determined. National base of an organization plays key role to achieve advantage globally it suggests. Necessary factors provided by home base to support organization to build advantage in global competition.
PORTER DISTINGUISHES FOUR DETERMINANTS IN ABOVE MODEL.
Factor Conditions
The situation in a country factors like production, skilled labor, infrastructure, etc.
These factors could be grouped into “labor cost commitment, human resources qualification level, natural resources, vegetation, space etc. infrastructure capital resources knowledge resources”. “The factors like quality of research on irregulation of labor markets, liquidity of national stock markets, universities included as well”.
These national factors often provide initial advantages, which are afterward built upon. A different set of factor conditions in each country. Industries are therefore according to the best factor conditions in countries. This explains the existence of so-called low-cost-countries low costs of labor, agricultural countries large countries with fertile soil.
These factors are nature-made or inherited “Porter said”. They may develop and change. National factors may shape by Political initiatives, technological progress or socio-cultural changes, genetic engineering and cloning that will influence knowledge capital in this field in North America and Europe is a good example in the discussion.
Home Demand Conditions
Shows demand and services produced in a country. Home demand is determined by three characteristics Porter said, their mixture the mix of customer’s needs and wants, their growth rate and scope, and the mechanisms that broadcast domestic preferences to foreign markets.
on clearance of home demand. National advantage is achievable in an industry or market segment Porter said. On ability of organization home markets have a load than foreign markets.
Related supporting industries
Supporting or related industries can take benefit if one industry gets success in international market. In later stages Competitive supplying industries will highlight innovation and internationalization. Shoe and leather industry in Italy is a good example. Italy is not only successful with shoes and leather, but also with related products.
Firm Strategy, Structure, and Rivalry
This determines the characteristics of national competition how companies are established, organized and managed. Cultures play an important role. Factors like management structures, working morale, or interactions between companies are shaped differently. This will give advantages and disadvantages for particular industries. Competitive advantage within a nation helps to give organizations base to get advantage globally Porter said.
Nowadays, business is set in a global environment. Companies not only regard their locations or primary market bases, but also consider the rest of the world. In this context, more and more companies start to run multinational business in various parts of the world. In this essay, companies which run multinational business are to be characterized as ‘multinational companies’. By following the globalization campaign, multinational companies’ supply chains can be enriched, high costs work force can be transformed and potential markets can be expanded. Consequentially, competitive advantages of companies can be strengthened in a global market.Otherwise, some problems are met in the changed environments in foreign countries at the same time. The changed environments can be divided into four main aspects, namely, cultural environment, legal environment, economic environment and political system problems. All the changed environments make problems to multinational companies. In particular, problems which are caused by changed culture environment are the most serious aspect of running a multinational business. This essay will discuss these problems and give some suggestions to solve them.
Tylor（1977）has pointed out that “culture is complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society”. According to this definition, it is easy to know that every nation has different cultural preferences, national tastes and value standards. These factors impact on every part of management in multinational companies, especially on marketing management, human resource management and alliances management. Thus, multinational companies have to consider the cross culture issues when they run multinational business.
To conclude, we can say that multinational companies have to face different challenges when they look a business in other countries markets like china there is we see above in our essay there are multi challenges which companies have to face like culture differences, human resource management and other is government limitations. And hiring of staff seemed to be a huge challenge that faced in china by multinational companies.
Moreover, as above with the help of Porter Diamond model which showed us with the different aspects like “factor conditions, home demand conditions, relative supportive industries, firm strategy structure and rivalry”, all of these things explain about national competitive advantage and for the maintaining of economic competitiveness.
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http://www.the manager.org/models/diamond.htm
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