Doing Business with Multinational Organizations

INTRODUCTION Owing to the unwavering evolution of study and engineering science constitution atomic number 18 operating(a) in an purlieu where the geographical boundaries be n cardinal vivacious and a company with a foot soldier in a nonher continent operates as if they be in the comparable city. This stem tastes to identify how this has tinted way of doing piece of work by trans study organization by looking and four aspects, which atomic number 18 cultural differences, in effect(p) issues, system and industrial or descent. 1. CULTURAL DIFFERENCES Culture plays a actu anyy important aspect in several(a) aspects of contrast p impostureicularly for trans national corporations (MNC) unconscious process on a ball-shaped level. hea consequently variations affect the way a immobile conducts its seam in un want geographical personas and around different cultural settings so that they wide-eyedn their securities patience base, append tax and pre ss conflicts going from cultural differences(Deresky,2008).Managers of MNCs scram to run crosswise what implications closes prolong on various stock transactions. The principal(prenominal) aras where cultural factors affect international corporations be 1. 1. Influence on outline that impart be utilise A multinational company mustiness inquiry on the cultural aspects of a bran- impertinently commercialize they would like to take a chance in. They bedevil to understand the likes and dislikes, chooseences, what is considered right or wrong, what is valued, what is the vernacular belief in the argona they atomic number 18 going to operate in.An vitrine is in Saudi Arabia where religion dictates what happens in convening argument transactions and daily activities for character for Muslims who pray five dates a twenty-four hour period, departmental stores and separate commercees spend a pennyd room to appropriate the Muslim customers and employees to pray to a greater extent than e realwhere during the month of Ramadan, most businesses argon closed during the day as the Muslims atomic number 18 riotousing and ar less active during the day and choose to return in the evenings when plenty atomic number 18 to a greater extent active. 1. 2. conference Language and non-verbal conversation be cultural cues that affect liberation of messages from one party to another.Communication among parties that deduce 2 from different endings becomes to a greater extent con die hard because of the differences elements of culture and what they value in discourse. antithetic cultures apply different communication styles (G anyois and Callan ,1997). These communications styles are 1. 2. 1. Explicit Vs Implicit Communication Explicit communications is where many a(prenominal) remains when someone talks it is straight to the point and clear for shell Americans. Implicit communication is comm precisely in precede and inexact for example In by dint ofsian communication.For instance a mother recounting a man that he is not compatible with her daughter serves him with tea and bananas or else of telling him at arrange (Gallois and Callan ,1997). 1. 2. 2. Direct Vs substantiative Communication Direct communication states precede action for example has this report done before you go home. When someone hears direct speech they spot what is to be done. Greek employees select this kind of communication as they prefer rambles as compared to their constituent in focussing closings. Indirect communication is not authoritative and encourages input from the listener.American managers prefer this kind of communication as it goes with their managerial style of participatory wariness. 1. 2. 3. Silence Vs communicatory exaggeration Silence is everyplacely seen as a way of communication however different cultures perceive calm down in different contexts. The Japanese use silence during negotiations as a o utline to ascendency the negotiation process however if their loveseats are 3 Americans, they would see this silence as lack of k this instant conductge or an reading material to move to the next point. On the other hand some cultures dramatization and all over emphasize to express the gravity of the matter.This has been notice in the Arab states where harsh words are used at the end of sentences and pronouns leave behindinging be repeated for emphasis to a fault used are graphical similes and metaphors. Managers in multinational corporations should therefore study very carefully which communication style takes preponderance in what sphere of influence and use what is preferent (Gallois and Callan ,1997). 1. 3. no(prenominal)-verbal communication Non-verbal is another way of communication messages and portrays messages with more emphasis than words as they say actions speak louder than words. Non-verbal communication includes body movements, posture and gestures, facial e xpressions.In intercultural communication, it is possible that mountain rely on non-verbal communication especially when verbal messages are unclear or ambiguous. This is because non-verbal communication is used to add centre to our verbal communication. How non-verbal communication is used likewise varies for example low context cultures like the Americans melt down to concentrate less with non-verbal communication. This actor that it is not there but it is presumptuousness little importance compared to the words. Examples of non-verbal communication cues are proxemics (space), tone of voice, body gestures, facial expressions and marrow contact (Gallois and Callan ,1997). . 4. Negotiations This is a process where business people engage in discussions with the objective lens of 4 r for to each one oneing an agreement that will result in the parties involved bene adding. Negotiations for multinational corporations are usually with the suppliers of capital (investors), suppli ers, value providers, the Governments involved (either domestic or exotic), customers and the society. Managers should be aware of the sensitivity and complexities of negotiations especially that are caused by cultural differences as these are usually the separate to success (Horst,1972).The multicultural negotiation process is as sketch below 1. 4. 1. Preparation Understand the counterparts culture as compared to ours and identifying the differences. Meant to feed us understand the counterparts culture 1. 4. 2. birth hiting This stage is used to build trust, some cultures find this step conflicting while others emphasize on descent building and spend more metre here. 1. 4. 3. Exchange task related discipline Presentation of details by each the parties and they state their stands. Culture dictates how much information is revealed. . 4. 4. Persuasion Each party tries to entice the counterparts to take their option by explaining the benefits each would get from their stand . 1. 4. 5. Concession and agreements This is where agreements are reached and using culture, negotiators k promptly how they will get to this point. 1. 5 Motivation This is what gives pitying macrocosms or groups the inclination or willingness to do something 5 in terms of work and personal liveliness and much(prenominal)(prenominal)(prenominal) a context is greatly influenced by cultural vari adequates that affect attitudes and behavior. employ Hofstedes ultural dimensions we can evaluate how different motivation methods by multinational corporations would affect employees from different cultures especially if they use the same methods crossways several countries. 1. 4. 6. Individualism/Collectiveness hoi polloi who are aviateow phalluss to a culture that boost individualism such as the American culture would be motivate by opportunities for individual advancement and autonomy nonnegative they would prefer individual rewarding systems than people of a collectivist nature who would prefer rewards of the entire group and would be move with what will advance the entire group. . 4. 7. skepticism/Avoidance People who are members of cultures who prefer to avoid opportunity would prefer handicraft security while the oppowebsite would be motivated with risky opportunities for variety and fast track development. 1. 4. 8. Power distance A low creator distance culture will be motivated by team work, contribution coming from all members while in a steep power distance, motivations comes from the relation ship of the managers and the subordinates. 1. 4. 9.Masculinity/ muliebrity A masculine culture would prefer the traditional division of work and roles by gender and each gender to rub in their positions for example the traditional African culture 6 while in a feminine culture is disperse and will motivate people done flexible roles and equal opportunity . (Harris and Moran ,2000) 2. estimable AND LEGAL ISSUES Globalization has led to the develo pment of globewide and regional governing bodies such as the ground Trade organization (WTO), European Union (EU) and the Common marketplace for Eastern and southerly Africa (COMESA).They are tasked with correct interactions in the midst of economies and preventing conflicts as well as ensuring business ethics and legal measures are taken care of (Farrell et al, 2008) 2. 1Examples of Regional and demesne governing bodies 2. 1. 1. terra firma Trade giving medication The World Trade Organization (WTO) is the only originationwide worldwideist organization relations with the rules of grapple surrounded by nations. At its join are the WTO agreements, negotiated and signed by the bag of the worlds trading nations and validate in their parliaments.The goals of the WTO include among others the administration of pot agreements, facilitation of craftsmanship negotiations, even offment of trade disputes, purvey of legally binding ground rules for international commerce and trade policy. Basically WTO attempts to reduce barriers to trade amid and at bottom nations and settle trade disputes ( Ferrell, Fraedrich & Ferrell, 2008). The WTO can be tell to favour the powerful multi-national corporations, which daily corroborate their grip on the world economic system. This has led to brokener nations being armyd to generate up their trade domain of a functions e. China being forced by US to open up its trade 7 to acknowledge U. S imports. Globalization of multinationals has many uncomely effects on millions of people end-to-end the world. The overriding aim of the WTO, in short, is to create a world eminently fit for the multi-national corporations to live in. 2. 1. 2. European Union The European Union is the economic association of over two dozen European countries, which seek to create a unified, barrier- salvage market for harvest-times and run through and throughout the continent, as well as a common currency with a unified authority o ver that currency.The EU relies on member states to protect embodied labor rights. The EU expects member states to view as thriving trade unions and employees associations to participate in the legislative process at EU level that can help to action directives at the national level. The EU also places considerable importance on upholding benevolent rights standards in its dealings with 3rd world countries (Alston, 2005). 2. 1. 3. COMESA The Common Market for Eastern and Southern Africa, is a preferential trading area with nineteen member states stretching from Libya to Zimbabwe.COMESA form in December 1994, replacing a Preferential Trade Area which had existed since 1981. The main objective of COMESA is to facilitate the removal of all structural and institutional weaknesses of member States, and the progression of peace security and stability so as to enable them attain carry on development individually and collectively as a regional bloc. Among other things, COMESA member Sta tes cast agreed on the call for to create and maintain 8 ? a full let go trade area guaranteeing the innocuous movement of goods and service produced within COMESA and the removal of all taxs and non-tariff barriers a customs Union under which goods and work trade from nonCOMESA countries will attract an agreed maven tariff in all COMESA states ? free movement of capita and investment funds supported by the adoption of common investment practices and policies so as to create a more favorable investment climate for the COMESA region ? a gradual establishment of a payments union ground on the COMESA glade House and the eventual establishment of a common monetary union with a common currency and ?The adoption of common visa arrangements, including the right of establishment wind eventually to the free movement of bona fide persons. 2. 2. set up of World Governing Bodies on globalisation and business World governing bodies deport clear up trade mingled with member count ries and as a result increased globalisation namely through 1. Reducing barriers to international trade through international agreements such as WTO agreements 2. excretory product of tariffs creation of free trade zones with excellent or no tariffs 3.Reduced transportation costs, especially resulting from development of containerization for ocean shipping. 4. Reduction or elimination of capital tallys 5. Reduction, elimination, or harmonisation of subsidies for topical anaesthetic businesses 9 6. Creation of subsidies for global corporations 7. Harmonization of intellectual property laws across the majority of states, with more restrictions 8. Supranational identification of intellectual property restrictions (e. g. patents granted by China would be recognized in the United States) 9.Globalization has brought about the formation of alliances betwixt countries such as the G8, NAFTA, EU, such alliances essential to improve trade and business amongst themselves and companies o perating removed these alliances throw off quite some dis wages e. g. flower companies in Kenya marketing flowers to the EU 10. World governing bodies and trade alliances such as EU, WTO stipulates the basic ethical rules that should be used in their member states. If companies do not comply they would choose campaigns a illuminatest them creating boycotts for their products. 10 3. STRATEGIES During the last half of the ordinal century, many barriers to international trade fell and a wave of firms began pursuing international strategies to gain a competitive advantage. stemma strategies whitethorn include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and vocalize venture. strategic management enables organizations to recognize and adopt to change more readily successfully adapting to change is the key to survival and prosperity. 2. 3. Two types of international schema 2. 3. 1.Global strat egy Treat the world as a single market. It is applied where forces for global integration are strong and force for national responsiveness is weak. For example this is on-key of consumer electronics market. Global scheme is suitable for ? ? ? harvest is the same in all countries. centralise control little decision- qualification authority on the local level Effective when differences between countries are small 2. 3. 2. Multinational Strategy It treats the world as a portfolio of national opportunities. It is applied where forces for global integration are weak and force for national responsiveness is strong.For example this is true of grimeed en skid goods business for 11 example strategy pursued by Unilever. Multi domestic strategy is suitable for ? ? ? Products customized for each market alter control local decision making Effective when there are wide differences between the countries 2. 4. Strategies of investing abroad 2. 4. 1. knock venture Marula (2006) find outs j oint venture as a venture that is jointly own and operated by two or more firms. He further explains that many firms sink in foreign market by prosecute in a joint venture with firms that reside in those markets.Advantages of a spliff venture First these organizations are able to apply their respective comparative advantages in a habituated project and Marula (2006) gives an example of popular submarines Inc which joined in a venture with Nestle SA so as that cereals produced by General Mill could be sold through the overseas sales distribution network by Nestle also bolt tummy and Fuji Co. of Japan engaged in a joint venture that allowed Xerox Corp to penetrate the Japanese market and allowed Fuji to enter the photocopying business. secondly a joint ventures enables organization especially in the move to offer its technological advantages for example General Motors has ongoing joint ventures with automobile manufactures in several different countries. 12 Disadvantages of pronounce Ventures Association of Certified Charted Accountants (2004) asserts that disagreements may develop over profit shares, amount invested, the management of the joint venture , making the strategy and finally one collaborationist may wish to withd stinging from the arrangement. 2. 4. 2.Contract Manufacturing or Licensing Pearce and Robison (2004) define licensing as the transfer of some industrial property right from the licensor to a motivated licensee. They further explain that most tend to be patterns, trademarks, or technical know how that are granted to the licensee for a condition time in return for a royalty and for avoiding tariffs or import quotas. Advantages of Licensing Pearce and Robison (2003) reason out that firms that use licensing will benefit from minatory the risk of admittance into the foreign markets and used best in companies large teeming to assume a ombination of international strategical activities and for firms with standardized products in narrow gross profit margin industries. Disadvantages of Licensing According to Pearce and Robison (2004) is the possibility that the foreign partner will gain the experience and recrudesce into a major competitor afterwards the quail expires as this was a case between U. S electronics firms with Japanese companies. Secondly they argue that another potential task stems from the control that the licensor forfeits on production, marketing and 13 ecumenical distribution of its products.And this loss of control minimizes a companys degrees of exemption as it reevaluates its future options. 2. 4. 3. Franchising Pearce and Robison (2004) define Franchising as form of licensing which allows the franchise to sell a highly publicized product or service, using the parents brand name or trademark, carefully highly- positive procedures, and marketing strategies. In exchange the franchisee pays a fee to the parent company, typically based on the volume of sales of the franchisor in its defi ned market area. The local investor who must adhere to the strict policies of the parent operates the franchise.Examples are Avis, Burger King, CocaCola, Hilton, Kentucky fried chicken, Manpower and Pepsi. ACCA (2004) asserts that the franchiser provides the name, any good will associated with it, systems, business methods, support services such as advertising, training and site decoration while the franchisee provides the capital, personal involvement, local market knowledge, payment to the franchiser for the rights, support services and obligation for day to day cartroad and the ultimate profitability of the franchise.Disadvantages of franchising According to ACCA (2004) chase for competent candidates is both costly and time consuming where the franchiser requires many outlets for example McDonalds in UK. Also the control over franchisees is demanding as they are spread over many locations. 14 2. 4. 4. Transnational Alliances Levi (1996) defines multinational alliances as asso ciations of firms in different countries functional unneurotic to overcome the limitation of working alone. peerless of the motivations to form a ransnational alliance is cooperation over query where cost and risks may be too high for any one firm or where different firms may possess different abilities. He gives an example IBM and Siemens of Germany in Memory break short development or marketing of Geo produced in Korea by GM. He further asserts that multinational alliances are compromise between a firm doing everything itself and dealing with a stranger. Advantages Of transnational alliances As Levi (1996) argues organizations form transnational alliances to gain access to foreign markets, to exploit complementary color technologies and to reduce time taken for innovation. . 4. 5. altogether owned foreign subsidiaries Based on a study done by Richard Vernon of Harvard Business School where 187 United States manufacturing with vi or more foreign subsidiaries outside of Can ada the researcher concluded that these multinational corporations tend to be larger, more profitable more advertising and research oriented and more diversified than firms which hold up not invested abroad. (Horst, 1972) 4. 0 INDUSTRIAL AND BUSINESS Economic reforms/ surroundings affects the business and industry directly.Business plans and programmers are directly influenced by economic factors, 15 such as, interest rates, money contribute, price level, consumers credit etc. Economic conditions leadership to ostentatiousness or deflation affect the business activities. fanfare leads to rise in general price-level, whereas deflation leads to giving up in price level. Higher accelerator prices in the area resulted to a bowel movement in favor of small like Maruti and starlet cars. State of industrial trade and business booms and slumps constitute the economics of market environment, (Lewis, 2006).Recently judicature initiated various economic policies. As such the impact o f these reforms changes on business and industry in the following manner 2. 5. Buyers market In the liberalized policy regime shortages of goods are no more, but there are surplus of goods. These arise collect to competition, decrease in cost, up-gradation of technology, improvement in woodland and customer convenience. Removal of brass restrictions on capacity creation and capacity enjoyment has also helped increase in the supply of goods. constancy has been given total freedom to refine and diversify. Price control has been removed. Investment now takes place in the areas of demand. All these changes have made the buyer, the sovereign of the market. 2. 6. Export is demand for survival Implementation of untested trade policy has linked imports to exports. The enterprises should earn foreign exchange by exports and use the same foreign exchange for importing raw material spares and equipments. For example Reliance Group, Essar World Trade, Ceat, Videocon, Eicher, MRF etc, ar e being benefited by the 16 new policy. 2. 7.Threat from multinational companies due(p) to the present policy of liberalization of our government, massive entry of multinationals in the country has started. The vast resources and the innovative technology of the present multi-national companies have enabled their supplementary companies to boost sales and enjoy strategic advantage over their competitors. The presence of multinational companies has been rendering valuable services to our scrimping. It is proviso superior quality of goods, generating more employment opportunities, promoting modern technology and awakening our business community.Presence of multinational companies has also boosted growth of small industries in the country. 2. 8. Overall competition The new competitive environment has thrown the economy open. There is tough competition between multinationals and there is also competition between local enterprises and foreign enterprises. Competition has now become global. It is not confined to national boundaries. For instance, Weston Electronics Company, which held about 18% of the television market, has been or so thrown out of the market due to cutthroat competition and technological backwardness. . 9. World class technology Changes in government policy regarding business and industry have provided us with world-class technology. close to companies have also started making investment in research and development. Pharmaceutical industries in countries such as India made 2% investment in R & D. In developed countries investment in 17 research and development is approximately 12%. Multinationals are also bringing world-class technology in the country. This has enabled faster growth of industries. 2. 10. future day not kick the bucketd by outgoing failuresIt is rightly said that future starts afresh for companies. Future now needs new strategies, high technologies, determined efforts, enthusiasm, organization and leadership. cutting app roaches, systems structures and new leadership must turn up to compete with the multinationals. We must forget the past, cloak its failures and start working with new endeavor, approaches and leadership. 2. 11. Wider and assorted markets Due to globalization markets have been opened up and can now be widely accessed by companies from various countries.Countries have lift barriers improving flow of goods between them. This has boosted import and export trade among various countries. Regional trading blocks have been make to improve trade and allow free flow of goods and services among member countries. In the agricultural sector, crop imports are traded at cheaper prices and exchanged for another commodity because of the free trade as entailed among the provisions of bodies such as COMESA or WTO. A country such as Philippines could purchase or import crops from another country at cheaper tariff rates, in case of a shortage.However, on the downside, countries that are more advanc ing agriculturally could just dump their third-rate or low-class products to their third-world trading counterparts. 18 2. 12. remote direct investment inflows Local industries which have invested abroad such as Bidco vegetable oil refinery is reaping huge profits from its foreign direct investments such as from its investment in Uganda palm plantation. Creation of common markets has given countries incentives to invest in those countries thus leading to investment inflows.Lowering of tariffs countries such as India have been reaping from enormous opportunities emerging from globalization such as consequent lowering of tariff barriers. Information Technology has given Indian industries formidable brand equity in the global markets. Indian companies have a unique distinction of providing efficient business solutions with cost and quality as an advantage by using state of art technology. Outsourcing is the act of giving a third-party the responsibility of running hat would otherwise be an internal system or service. Due to globalization, most companies and businesses have sought to contract most of its services or processes to outsiders. Most industries now use outsourcing such as call centers and can outsource its functions such as marketing, pecuniary, training, transport and distribution and so forth. Capitalize on global trade most domestic industries now trespass on global trade by concentrating on the domestic market and then leverage their economies of scale overseas. 2. 13.Devaluation Some countries have had to cope up with the trend of globalization by devaluing their currency such as India. The first step towards globalization was taken with the announcement of the devaluation of Indian currency by 18-19 percent against 19 major currencies in the international foreign exchange market. This was a measure taken in order to resolve the balance of payment crisis. 5. 0 ANALYSIS AND CONCLUSION In evidence my own critique on globalization is that the who le process has increased power that multinational corporations seems to enjoy .This is seen as a particularly worrying phenomenon because it affects the issues that are embossed and witnessed everywhere we have a multinational company. An overriding concern is that globalization increases the rift between the haves and the have-not of the world. Unfair labor practices such as child toil, woeful working conditions and low remuneration packages are some of issues that have been witnessed in the recent past. Although its not clear whether the forces of globalization may produce a general deterioration of working conditions around the world or increase the inequality of working conditions among countries . espite the above ,in rich countries the picture is exclusively different thus self-interested opposition to globalization with fears that cheap imports or immigrants from other countries will lower the relative wages of low-skilled workers, more rapid economic change and chemis e patterns of comparative advantage will increase economic insecurity and international competition. patronage all this countering the claims of globalization skeptics is a century-old economy theory that predicts free trade will reduce a convergence of labour conditions around the world. 20 6. References ACCA (2004) Strategic business planning and development (paper 3. 5). London BPP skipper Education Alston, P. (2005). Labour rights as human rights. upstart York Oxford University Press Inc. Deresky, H. 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