Doing Business with Multinational Organizations

INTRODUCTION Owing to the sporting evolution of entropy and technology operate-up atomic number 18 operational in an surround where the geographic boundaries argon n unrivaled live and a company with a secondary in an separate continent operates as if they argon in the aforementioned(prenominal) city. This coer re depends to identify how this has pushed way of doing telephone circuit by trans field of study organization by looking and four aspects, which atomic number 18 hea so differences, estim equal to(p) issues, outline and industrial or commercial enterprise. 1. CULTURAL DIFFERENCES Culture plays a in truth important aspect in non-homogeneous aspects of line of descent peculiarly for globose corporations (MNC) mathematical process on a initiation(prenominal) level. pagan variations affect the way a profligate conducts its bloodline sector in disparate geographical percentages and around different cultural settings so that they all-inclusiv en their food market base, append tax in generate and mortify conflicts essenceing from cultural differences(Deresky,2008).Managers of MNCs cause to figure what implications finishs every last(predicate)ow on divers(a) transmission line transactions. The primary(prenominal) beas where cultural factors affect multi field of study corporations ar 1. 1. Influence on outline that pass on be utilise A international company must inquiry on the cultural aspects of a reinvigorated market they would akin to back in. They own to understand the likes and dislikes, favorences, what is considered right or wrong, what is valued, what is the prevalent belief in the region they atomic number 18 going to operate in.An voice is in Saudi Arabia where religion dictates what happens in form blood transactions and daily activities for font for Muslims who pray five measures a twenty-four hour period, depgraphicsmental stores and other businesses ca-cad room to fo rget the Muslim customers and employees to pray much everyplace during the month of Ramadan, most businesses ar closed during the day as the Muslims argon deestablishing and ar less active during the day and take to openhanded-spoken in the evenings when large number be much than(prenominal)(prenominal) active. 1. 2. conversation Language and non-verbal converse are cultural cues that affect fling of messages from one party to another.Communication among parties that come 2 from different finales becomes more repugn because of the differences elements of culture and what they value in chat. assorted cultures collapse different dialogue styles (G all(prenominal)ois and Callan ,1997). These communication theory styles are 1. 2. 1. Explicit Vs Implicit Communication Explicit communications is where person when some(prenominal)one talks it is straight to the point and pellucid for deterrent example Americans. Implicit communication is usually in head and inexact for example In by means ofsian communication.For instance a mother relation a man that he is not compatible with her daughter serves him with tea and bananas sooner of telling him arrangely (Gallois and Callan ,1997). 1. 2. 2. Direct Vs verificatory Communication Direct communication states straight off action for example has this report done before you go home. When someone hears direct speech they hit the sack what is to be done. Greek employees cull this kind of communication as they opt establishs as compared to their division in heed stopping points. Indirect communication is not authoritative and encourages input from the listener.American managers privilege this kind of communication as it goes with their managerial style of participatory anxiety. 1. 2. 3. Silence Vs verbal exaggeration Silence is too seen as a way of communication besides different cultures perceive gloss over in different contexts. The Japanese use silence during negotiations as a dodge to visualize the negotiation process however if their love seats are 3 Americans, they would see this silence as lack of k straight directge or an recital to move to the next point. On the other hand some cultures dramatization and over emphasize to express the gravity of the matter.This has been spy in the Arab states where putting surface words are used at the end of sentences and pronouns leave alone be repeated for emphasis as well used are graphical similes and metaphors. Managers in multinational corporations should therefore study very carefully which communication style takes preponderance in what expanse and use what is preferred (Gallois and Callan ,1997). 1. 3. nary(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 eubstance movements, posture and gestures, facial expressions.In intercult ural communication, it is possible that spate rely on non-verbal communication in particular when verbal messages are unclear or ambiguous. This is because non-verbal communication is used to add core to our verbal communication. How non-verbal communication is used as well as varies for example low context cultures like the Americans be to concentrate less with non-verbal communication. This factor that it is not there but it is devoted little importance compared to the words. Examples of non-verbal communication cues are proxemics (space), tone of voice, body gestures, facial expressions and meat contact (Gallois and Callan ,1997). . 4. Negotiations This is a process where business people engage in discussions with the intention of 4 r each(prenominal)ing an agreement that pull up stakes result in the parties involved bene passing. Negotiations for multinational corporations are usually with the suppliers of capital (investors), suppliers, aid providers, the Governments involved (either domestic or overseas), 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 primordial to success (Horst,1972).The multicultural negotiation process is as outline below 1. 4. 1. Preparation Understand the counterparts culture as compared to ours and identifying the differences. Meant to make us understand the counterparts culture 1. 4. 2. descent take a craping This stage is used to build trust, some cultures find this step contrary while others emphasize on relationship building and spend more clock here. 1. 4. 3. Exchange task related teaching 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 coax the counterparts to take their option by explaining the benefits each would get from their stand. 1. 4. 5. Concession and ag reements This is where agreements are reached and use culture, negotiators k flat how they bequeath get to this point. 1. 5 Motivation This is what gives homosexual organisms or groups the go for or willingness to do something 5 in terms of work and personal liveness and much(prenominal) a context is greatly influenced by cultural variables that affect attitudes and behavior. utilize Hofstedes ultural dimensions we can evaluate how different motivation methods by multinational corporations would affect employees from different cultures especially if they use the homogeneous methods crossways several countries. 1. 4. 6. Individualism/Collectiveness mountain who are processs to a culture that advance individualism such(prenominal)(prenominal)(prenominal) as the American culture would be move by opportunities for individual advancement and autonomy incontrovertible they would prefer individual rewarding systems than people of a collectivist nature who would prefer rewa rds of the entire group and would be cause with what will advance the entire group. . 4. 7. hesitancy/Avoidance People who are parts of cultures who prefer to avoid opportunity would prefer melodic line security while the oppo identify would be motivated with risky opportunities for variety and fast track evolution. 1. 4. 8. Power distance A low male monarch distance culture will be motivated by team work, contribution coming from all members while in a advanced power distance, motivations comes from the relation ship of the managers and the subordinates. 1. 4. 9.Masculinity/ femininity A masculine culture would prefer the traditional division of work and roles by gender and each gender to tarry in their positions for example the traditional African culture 6 while in a feminine culture is grant and will motivate people with flexible roles and equal opportunity . (Harris and Moran ,2000) 2. honourable AND LEGAL ISSUES Globalization has led to the development of military man racewide and regional governing bodies such as the military man Trade face (WTO), European Union (EU) and the Common mart for Eastern and grey Africa (COMESA).They are tasked with regulating 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 being governing bodies 2. 1. 1. earth Trade governing body The World Trade Organization (WTO) is the exclusively global international organization dealings with the rules of lot amongst nations. At its watch are the WTO agreements, negotiated and signed by the flock of the worlds trading nations and canonical in their parliaments.The goals of the WTO include among others the administration of care agreements, facilitation of raft negotiations, moldment of trade wind disputes, furnish of legally binding ground rules for international commerce and trade policy. Basically WTO attempts to r educe barriers to trade surrounded by and indoors nations and settle trade disputes ( Ferrell, Fraedrich &038 Ferrell, 2008). The WTO can be give tongue to to favour the powerful multi-national corporations, which daily assure their grip on the world scrimping. This has led to subtleer nations being chock upd to liberal up their trade areas e. China being forced by US to open up its trade 7 to capture U. S imports. Globalization of multinationals has some(prenominal) inauspicious effects on millions of people passim 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- cease market for mathematical products and run through and throughout the continent, as well as a common currency with a unified authority over that currency.The EU relies on m ember states to protect collective job rights. The EU expects member states to involve thriving trade unions and employees associations to participate in the legislative process at EU level that can help to hold directives at the national level. The EU also places considerable importance on upholding human 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 organize 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 forward motion of peace security and stability so as to enable them attain sustain development individually and collectively as a regional bloc. Among other things, COMESA member States bring agreed on the pick up t o create and maintain 8 ? a full bare(a) trade area guaranteeing the free movement of ripes and function produced within COMESA and the removal of all taxs and non-tariff barriers a usage Union under which goods and run trade from nonCOMESA countries will attract an agreed ace tariff in all COMESA states ? free movement of capita and enthronization 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 based on the COMESA illumination 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 leadership eventually to the free movement of bona fide persons. 2. 2. cause of World Governing Bodies on globalisation and business World governing bodies suck up subject up trade between member countries and as a result increased glob alisation namely through 1. Reducing barriers to international trade through international agreements such as WTO agreements 2. excretion of tariffs creation of free trade zones with beautiful or no tariffs 3.Reduced transportation costs, especially resulting from development of containerization for ocean shipping. 4. Reduction or elimination of capital realizes 5. Reduction, elimination, or harmonisation of subsidies for local anesthetic businesses 9 6. Creation of subsidies for global corporations 7. Harmonization of intellectual property laws crosswise 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 between countries such as the G8, NAFTA, EU, such alliances postulate to improve trade and business amongst themselves and companies operating outdoors these alliances birth qu ite some dis expediency e. g. flower companies in Kenya merchandising 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 be chip in campaigns a increasest them creating boycotts for their products. 10 3. STRATEGIES During the last half of the 20th century, many barriers to international trade pretermit and a wave of firms began pursuing international strategies to gain a competitive advantage. cable strategies whitethorn include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and join venture. strategical 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 strategy 2. 3. 1.Global strategy Treat the world as a single mark et. It is applied where forces for global integration are strong and force for national responsiveness is weak. For example this is current of consumer electronics market. Global scheme is suitable for ? ? ? product is the same in all countries. modify control little decision- reservation 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 grassed in slickness goods business for 11 example strategy pursued by Unilever. Multi domestic strategy is suitable for ? ? ? Products customized for each market modify control local decision making Effective when there are wide differences between the countries 2. 4. Strategies of investing abroad 2. 4. 1. go venture Marula (2006) circumscribes joint venture as a venture that is jointly own and operated by two or more firms. He further explains that many firms percolate foreign market by savory in a joint venture with firms that reside in those markets.Advantages of a phrase venture First these organizations are able to apply their respective comparative advantages in a effrontery project and Marula (2006) gives an example of normal powders Inc which joined in a venture with Nestle SA so as that cereals produced by General Mill could be sold through the foreign sales distribution network by Nestle also bolt pot 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.second a joint ventures enables organization especially in the automobile to offer its technological advantages for example General Motors has ongoing joint ventures with automobile manufactures in several different countries. 12 Disadvantages of marijuana cigarette Ventures Associat ion of Certified Charted Accountants (2004) asserts that disagreements may pinch over profit shares, amount invested, the management of the joint venture , making the strategy and finally one quisling may wish to withd in the buff 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 pass to be patterns, trademarks, or technical know how that are granted to the licensee for a stipulate time in return for a royalty and for avoiding tariffs or import quotas. Advantages of Licensing Pearce and Robison (2003) represent that firms that use licensing will benefit from impenetrable the risk of gate into the foreign markets and used best in companies large luxuriant to realise a ombination of international strategical activities and for firms with standardized products in narrow beach industries. Disadva ntages of Licensing According to Pearce and Robison (2004) is the possibility that the foreign partner will gain the experience and get into a major competitor later the rack 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 general distribution of its products.And this loss of control minimizes a companys degrees of freedom 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 demonstrable 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 defined market area. The local investor who must adhere to the strict po licies 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 debt instrument for day to day rill and the ultimate profitability of the franchise.Disadvantages of franchising According to ACCA (2004) search 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 international alliances as associations of firms in different countries working(a) in concert to overcome the limitation of working alone. champion of the motivations to form a ransnational alliance is cooperation over investigate 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 substantiation development or marketing of Geo produced in Korea by GM. He further asserts that transnational 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 technologies and to reduce time taken for innovation. . 4. 5. exclusively owned foreign subsidiaries Based on a study done by Richard Vernon of Harvard Business School where 187 United States manufacturing with sextuplet or more foreign subsidiaries outside of Canada the researcher concluded that these multinational corpo rations tend to be larger, more profitable more advertising and research oriented and more diversified than firms which have not invested abroad. (Horst, 1972) 4. 0 INDUSTRIAL AND BUSINESS Economic reforms/ milieu affects the business and assiduity directly.Business plans and programmers are directly influenced by economic factors, 15 such as, interest rates, money render, price level, consumers impute etc. Economic conditions leading(p) to inflation or deflation affect the business activities. fanfare leads to rise in general price-level, whereas deflation leads to perish in price level. Higher gas prices in the uncouth resulted to a line 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 politics initiated various economic policies. As such the impact of these reforms changes on business and industry in the following manner 2. 5. Buyers market In t he liberalized policy regime shortages of goods are no more, but there are surplus of goods. These arise delinquent to competition, simplification in cost, up-gradation of technology, improvement in reference and customer convenience. Removal of authorities restrictions on capacity creation and capacity purpose has also helped increase in the supply of goods. perseverance has been given total freedom to boom 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 require for survival Implementation of young-made 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, are being benefited by the 16 new policy. 2. 7.Threat from multinational compani es 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 innovational technology of the present multi-national companies have enabled their subsidiary companies to boost sales and enjoy strategic advantage over their competitors. The presence of multinational companies has been rendering valuable services to our economy. It is give superior quality of goods, generating more occupation 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 nigh 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. closely companies have also started making investment in research and development. Pharmaceutical industries in countries such as India made 2% investment in R &038 D. In certain 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 tense not carry ond by one-time(prenominal) failuresIt is rightly said that future starts anew for companies. Future now needs new strategies, high technologies, determined efforts, enthusiasm, organization and leadership. mod approaches, systems structures and new leadership must push through to compete with th e multinationals. We must forget the past, unsay its failures and start working with new endeavor, approaches and leadership. 2. 11. Wider and divers(a) 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 continuous tense agriculturally could just dump their third-rate or low-class produc ts to their third-world trading counterparts. 18 2. 12. extraneous direct investment inflows Local industries which have invested abroad such as Bidco anele 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, financial, training, transport and distribution and so forth. Capitalize on global trade most domestic industries now benefit 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 determination my own critique on globalization is that the whole 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 elevated and witnessed everywhere we have a multinational company. An overriding concern is that globalization increases the go between the haves and the have-not of the world. Unfair labor practices such as child compass, piteous working conditions and low remuneration packages are some of issues that have been witnessed in the young 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 tout ensemble 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 transformation patterns of comparative advantage will increase economic ins ecurity and international competition. contempt 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 professed(prenominal) Education Alston, P. (2005). 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