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建立人际资源圈Risks of Multinational Corporation Management---Essay论文范文
2016-08-19 来源: 51Due教员组 类别: Essay范文
Essay代写范文：Risks of Multinational Corporation Management这篇Essay范文讨论了几个必须承认和处理的风险因素。解释的利润机会与风险。最后，以国外公司为例，分析了它们所面临的内在风险和共同的错误。跨国公司正面临着比那些只在一个国家开展业务更多的挑战,如何规避风险，如何充分利用他们在跨国公司财务管理的两个重要主题非常重要。跨国公司在世界各地的激烈竞争中生存是一件不容易的事
Economic globalization has a significant impact on the development of multinational corporations. The communication of technology, information and internet, and the convenience of traffic lead to the integration and standardization of the whole world. Customers all over the world can buyproducts they need from the internet, and have those products delivered in just a few days or weeks. Companies are eager to take full advantage of this tendency to increase their potential customers by millions by attracting foreign buyers. However, multinational operation is definitely not without any risks. The cultural differences and economic links between countries become more and more complicated. Since that, the transnational firms must not ignore various risk factors when going international. How to manage these risks and transfer them to profit chances is a critical issue for transnational enterprises. This essay will firstly discuss several risk factors which have to be recognized and handled. Following this, it will explain the profit opportunities coming with the risks. Finally, taking foreign companies in china for example, it will analyze the inherent risks or common mistakes facing them.
International risks of multinational corporation management 跨国公司管理的国际风险
Although businesses confront different risks in different places, there are some international risks that have to be considered.
Above all, management cross borders is bound to deal with cultural differences and more importantly, cross-cultural conflicts. The language barrier should be a basic problem. Language was shown to have particularly disruptive effects on multinational teams, which rely on the interaction of members from different national backgrounds (Earley& Gibson, 2002). Interpretive and address in a foreign language tend to cause confusions and make it tough to talk things through. If members fail to smooth over all misunderstandings and conflicts, those seemingly trivial things are bound to become the biggest barrier to the development of the multinational corporations, even lead to the collapse of the whole operation(Linell Davis, 2001).Thus, for multinational team members, they must learn to respect and understand each other’s culture truly and then overcome the language problems. Otherwise, there is no chance for a firm to nurture team spirits and maintain healthy growth.
On the other side, companies must develop new products on the basis of local cultural characteristics. Some good meanings of the original product’s name, color and shape may offense these new foreign customers. For example, lotus mean pure, elegant and noble in china so a Chinese company used lotus as trademark and exported its products to Japan. But the products moved slowly. The reason is that Japanese use lotus for memorizing the dead.
Besides, human resources crisis is another common problem. Actually, it greatly relies on cultural differences. For multinational corporations, their staff group covers managers and technicians from headquarters, employees from host country and employees from the third country. Different cultural background, geographical and environment in international operations will give unprecedented challenges to corporations who only implemented HR strategies in a single and unchanged culture before their internationalization (Vasant＆Hilary, 2004).
Then the various rules and regulations in different countries concerning workforce safety and labor are one of the major HR issues that a company faces. Many countries have high safety standards and employees require certain training and other bonus or benefits. In order to retain staff and enhance their loyalty, a multinational corporation may find it hard to balance its budget and costs for employing the talents. In addition, protections for workers’ personal space vary dramatically from country to country. For instance, in America, it is a usual practice for firms to ask their staff to take part in a survey; but it can be illegal in Germany.
Another HR crisis is communication crisis. One main problem is the language barrier. Communication is not just translation. Something interesting and meaningful in one culture may make no sense in another culture so communication is also a process of “localization”. In addition to language barriers, companies must think about cultural differences and how to manage them. It is still relatively uncommon in some countries, such as those in Latin America, for women to hold high offices. If a U.S. firm sends a female executive there, it is definitely necessary to communicate with employees about the fact that in America, discrimination is immoral and even illegal. Otherwise, it will never be an easy task for her to win their trust.
Moreover, currency exchange fluctuation has a significant influence on transnational firms. When a cash flow in one currency is translated to another currency, the value may decline due to a change in exchange rates; it is called exchange rate risk. The risk increases uncertainty to companies’ performance. There are three main aspects of it: translation exposure, transaction exposure and economic exposure. A firm’s translation exposure refers to its financial reporting loss caused by exchange rate movements. The multinationals need to translate foreign assets and liabilities from foreign to domestic currency. For example, McDonald’s Corporation operates across 119 countries and converts local currencies back into US dollars to prepare a consolidated statement. It is reported that the firm suffered a 4% decrease in its net income in the second quarter of 2012 due to unfavorable changes in exchange rates (AP News, 2012).
Transaction exposure occurs whenever a firm has receivables and payables whose values depend on the unanticipated changes in exchange rates due to a contract being dominated in a foreign currency. In international trade, firms negotiate contracts with set prices and delivery dates but the exchange rate is fluctuating so the firms face a risk of currency loss for exchange between the foreign to domestic currency. There are various factors accounting for economic exposure, such as international transactions explained above, future cash flows from fixed assets, the demand for a good and other activities and investments. Without countermeasures to exchange rate fluctuation in advance, unexpected changes can bring remarkable losses. Economic exposure is difficult to forecast and settle.
Exchange rate risk is one of the most common issues facing the multinationals, which reduces the firms’ profit straightly and dramatically. It is vital for multinationals to study this matter cautiously.
Last but not the least, a multinational firm must deal with different government policies and emergencies that may worsen the operating environment or incur additional costs. Political risk faced by firms can be defined as “the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industry, income, labor, and development), or events related to political instability (terrorism, riots, coups, civil war, and insurrection) (Kennedy, C. 1988).” In order to protect domestic enterprises, government tends to take some measures to restrict the rapid growth of foreign firms.According to an Ernst and Young guide written in 2010, foreign governments are increasing value-added taxes in goods and services, in addition to tightening compliance regulations(Shapiro,2010).Besides, some government increase companies’ income tax and even set up non-tariff barriers to obstruct the import of spare parts and materials. The host country may also impose foreign exchange control and multinationals cannot transfer its profit back to its own country freely. Multinationals need keep up with changes and deal with local government officials properly.
Profit opportunities arising out of the risks 风险带来的利润机会
As the saying goes, the opportunities coexist with challenges. More risk, more reward. When it comes to transnational companies, if some risks are well-managed and taken good advantage of, profit opportunities can follow.
Nowadays, cultural diversity is viewed as a new asset instead of the root of cultural conflicts. First of all, culture plays an important role in customers’ demands and purchasing behaviors. Each country has its own unique culture so is the consumer demand. For example, based on Chinese customers’ characteristics, PepsiCo International developed new package and taste after entering into Chinese market. At the start, PI only had bagged chips but for Chinese market, it created canned chips which is free to pull and seems like a dragon boat. And Chinese love herbs so PI considered adding herbs to its chips’ materials.
Multinationals can explore new viable market and profit opportunities from these special demands. Furthermore,cultural differences and multiculturalism bring about chances and potential superiority.
Multinationals are exposed to problems where they find they are able to consider and understand these issues or decisions with multi-levels and multi-perspectives. As a result, they figure out more alternatives which are crucial in international negotiation. At the same time, conglomerates absorb the ideas, knowledge and skills of people from different cultural backgrounds. These are all roots of innovation and creation, which increase enterprises’ efficiency, adaptabilities, flexibilities and competitiveness.
Also, exchange rate risk management can be improved. Measures taken in advance, loss can be diverted into extra benefits. Companies can take full advantage of hedging, for example forward market hedge, money market operations for currencies, future contracts for interest and the like. Hedging is the practice of taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market or investment (Sangcheol, Seung-Hyun & Mona, 2014). To put it simply, a hedge can be used to offset considerate losses suffered beyond expectations and even can gain some speculating profit.
In addition, multinationals can develop targeted management and production strategies to avoid or distract currency risks (Hassan& Mahlknecht,2011). For instance, in the long run, importing more materials and spare parts from countries using soft currency is beneficial to multinationals. Because their currency can be exchanged for more soft currency and they can purchase more articles. Companies can also choose leads and lags. If a rise in the exchange rate is expected in the future, the buyer may delay the payment of goods because such a delay can make purchasing the goods less costly; conversely, if a decline in the exchange rate is expected in the future, the buyer may pay ahead of time to minimize the loss(Mehmet Odekon,2015). With this way, multinationals can not only avoid loss on foreign exchange but also gain access to achieving foreign earnings.
Then, if the government sets higher barriers to entry, it means less qualified companies to enter that market, therefore less competition and ultimately more profit chances.At the same time, strict management and supervision of government can in turn urge the firms to guarantee the quality of their products and service.It is helpful to win customers’ trust and enhance companies’ image. For example, in Japan products witness the most stringent inspection system in this world so if a foreign company’s products can be popular there, it would be easier for it to promote in other countries. Besides, companies’ healthy development need good market environment which relies on government regulations to some extent. The government makes regulation of IPR abuse and fight against market monopoly and unfair competition of transnational enterprises, hoping to build a level playing field. Therefore although multinationals’ growth is restricted by the government, it is actually another way for them to grow freely.
Lastly, there may be risks of technology leakage for multinationals. On the other hand, there are spillover effects too. Driven by technology diffusion and technology accumulation, technology level of the whole society keeps rising. Technology leakage is one of the ways of diffusion, illegal though. No matter whichever way the technology is spread, the market competition will be intensified so it can be a way of encouraging and fostering innovation. As for companies,it is reasonable for them to take legal actions or standardize the process of technology transfer. Many companies protect their technology by merely transferring it between the head office and the branches locating in other countries. If a multinational corporation has the strength to establish a branch or subsidiary in another country but others do not, there are chances that it can obtain the technology advantage and to keep the monopoly position.
Risks or common mistakes of conducting business in china 中国经营业务的风险或共同的错误
As one of the fastest growing economies in the world, China has been getting popular for multinational companies due to its vast territory, abundant resources and market potentials and so on. On the other hand, foreign companies must be prepared to deal with more sophisticated conditions.
Firstly, China is a large country with a long history and is typical of its culture’s pluralism and comprehensiveness. Cultural differences are the most important and complicated variable for MNCs in China to handle. Take Chinese and westerners for example.
Above all, Chinese prefer stability rather than changes. They avoid risks while westerners are quite open to risks. When it comes to attitudes towards work, Chinese enjoy a harmonious work environment and worship collectivism. Decisions should be made by group so the pace of work can be slow. Actually, people accept hierarchy in work relationships and they are unwilling to raise their own opinions in public. Challenging the authority’s decisions is not common. However, the westerners stress individualism and are encouraged to express themselves explicitly. Cultural differences of this kind often cause confusion to both parts. Besides, relationships play a critical part in Chinese culture while westerners usually act rationally and objectively. For instance, when appointing a director or manager of the department, Chinese may not only choose by candidates’ capability but also by his or her interpersonal relationship. But the westerners may only evaluate the managerial competence. There is a large gap between different cultures so as for MNCs, it is better to try to eliminate cultural conflicts before in pursuit of profit.
Secondly, wherever and whenever, multinational corporations arefaced withcross-cultural human resources management. It is the same in China. As performance evaluation, Chinese culture emphasizes group harmony, and staffs who have good interpersonal relationship will be well evaluated, thus staffs get uniform performance evaluation for their interpersonal relationship in the group and get averaged reward( Wang Junhua& Liu Gouxin,,2008). However, Western cultures acknowledge individuals’ interests and give priority to achieving personal value. Chinese lay emphasis on self-restrict and advocate collectivism. Western manages and Chinese staff can find it tough to accept each other’s thinking mode.t
Moreover, there is a special word called “mianzi” in Chinese; that is to say, a man gain others’ admiration, appraisal and honor because of something or someone else. For example, when a foreign manageralways says “Well done”, “Excellent”, “Good job” to a Chinese staff, the staff will have “mianzi”, in other words, heviews those words as recognition. But when he is fired unexpectedly, it shall be confusing because the manager seems satisfied with his performance all the time. This misunderstanding indicates that foreign manages do not need praise Chinese staff too much on purpose of maintaining their “mianzi”. Only let staffs realize their true strengths and weaknessescan they fulfill their potential.
Another factor related to HR management closely is the salaries. Chinese are accustomed to owing enterprises’ success to team work and every one play an important role in the team so their salaries should not have distinct differences. On the contrary, the westerners give undue importance to leadership. Thus, in western companies, top managers’ salary can be several times more than ordinary staffs’, which is obviously unacceptable to Chinese. The unfairness of salary inside multinationals is a key factor causing labor turnover in China. How to adjust and redesign an acceptable and proper salary system turns to be critical issue to handle.
Thirdly,many multinational corporations are worried about commercialinformation security problems in China. General Chinese workers have low loyalty and lack responsibilities on organization. Meanwhile, thelegislation and enforcement are far from being satisfactory. As a result, the phenomenon of infringing trade secrets happens occasionally in China. For example, many foreign companies decide to outsource part of their business to Chinese manufacturers. Although they sign confidentially agreement in case of the information leak, the non-standard operation of the manufacturers leads to the leakage of trade secrets inevitably. In particular, if a manufacturer goes bankrupt because of poor management, the lawful interests of the outsourcing businesses will be damaged.
In addition to the information leak, patent infringement is another severe matter in China. In America there are perfect legislation and effective enforcement about patent protection. Any infringement on patent will meet strict punishment. Downloading application software and even a piece of music must pay money. But in China, piracy prevails. Although some enterprises develop products with independent intellectual property, for example, the Chinese electronic pressing system of BeidaFangzheng, most of them mainly focus on imitation(Hongbing,Zhujun&Zhengjuan).Many game companies are hesitant to enter the Chinese market because of the severe software piracy problem in China. It is obviously that there is a long way to go for China government to tackle the problem.
Lastly, compared with other countries, ChineseGovernment has more power to interfere with the market because China is constructing a socialist market economy. Chinese attach great importance on relations so whether the relationship between corporations and local government is good or not can have a direct impact on foreign corporations’ returns. Some multinationals form a quite incomprehensive understanding about the true meaning of this “relationship”. For short-term interests, they attempt to use illegal methods, for example bribing, to obtain preferential policy. With the development of China’s economy and foreign investment pouring in, government’s supervision is getting more and more stringent. That building up this kind of “relationship” can attain sustaining development is definitely of no helpful any more. In condition,in the past, multinationals have a tendency of transferring the high pollution enterprises from their own countries to China, which cause great damage to environment and health. China government has realized this problem and began to take an action. China has adopted the strategy of sustainable development from 2012 and facilitated the growth of the energy-saving, environmental protection industry while punishing the high pollution industry. Development of key competences in the area of addressing social and environmental issues is a prerequisite of achieving and sustaining competitive advantage of MNCs in the modern market (Marija, Tatjana& Maja,2015).
Conclusion 结论
Generally speaking, multinational corporations are faced with more challenges than those conducting businesses just in one country. The risks mainly consist of cross-culture conflicts, HR crisis, exchange rate fluctuation, government regulations and so on. Among them, the exchange rate risk is considered a crucial part in multinational corporations’ management. Because the cash flows within multinationals in the way of various currencies, all financial analysis requires to measuring the consequences of the exchange rate fluctuation and currency value changes. A distinguishing feature of a nation is that it has the sovereignty over its citizens and property so it is its right to restrict the multinationals from transferring its resources and even confiscate their property without any compensation. These political risks vary from country to country, which also needs emphasis of multinationals. Many risks cause losses to multinationals while they can be diverted into profit opportunities. Therefore how to avoid risks and how to get the most out of them are two important subjects in multinational financial management. As the rapid development of China’s economy and the continuously improvement of politics, Chinese market is becoming more and more popular and welcomed by multinational corporations. On the other side, more diverse culture and complicated environment give rise to more risks and challenges. In a word, it is never an easy task for multinationals to survive the fierce competition from all over the world.
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Economic globalization has a significant impact on the development of multinational corporations. The communication of technology, information and internet, and the convenience of traffic lead to the integration and standardization of the whole world. Customers all over the world can buyproducts they need from the internet, and have those products delivered in just a few days or weeks. Companies are eager to take full advantage of this tendency to increase their potential customers by millions by attracting foreign buyers. However, multinational operation is definitely not without any risks. The cultural differences and economic links between countries become more and more complicated. Since that, the transnational firms must not ignore various risk factors when going international. How to manage these risks and transfer them to profit chances is a critical issue for transnational enterprises. This essay will firstly discuss several risk factors which have to be recognized and handled. Following this, it will explain the profit opportunities coming with the risks. Finally, taking foreign companies in china for example, it will analyze the inherent risks or common mistakes facing them.
International risks of multinational corporation management 跨国公司管理的国际风险
Although businesses confront different risks in different places, there are some international risks that have to be considered.
Above all, management cross borders is bound to deal with cultural differences and more importantly, cross-cultural conflicts. The language barrier should be a basic problem. Language was shown to have particularly disruptive effects on multinational teams, which rely on the interaction of members from different national backgrounds (Earley& Gibson, 2002). Interpretive and address in a foreign language tend to cause confusions and make it tough to talk things through. If members fail to smooth over all misunderstandings and conflicts, those seemingly trivial things are bound to become the biggest barrier to the development of the multinational corporations, even lead to the collapse of the whole operation(Linell Davis, 2001).Thus, for multinational team members, they must learn to respect and understand each other’s culture truly and then overcome the language problems. Otherwise, there is no chance for a firm to nurture team spirits and maintain healthy growth.
On the other side, companies must develop new products on the basis of local cultural characteristics. Some good meanings of the original product’s name, color and shape may offense these new foreign customers. For example, lotus mean pure, elegant and noble in china so a Chinese company used lotus as trademark and exported its products to Japan. But the products moved slowly. The reason is that Japanese use lotus for memorizing the dead.
Besides, human resources crisis is another common problem. Actually, it greatly relies on cultural differences. For multinational corporations, their staff group covers managers and technicians from headquarters, employees from host country and employees from the third country. Different cultural background, geographical and environment in international operations will give unprecedented challenges to corporations who only implemented HR strategies in a single and unchanged culture before their internationalization (Vasant＆Hilary, 2004).
Then the various rules and regulations in different countries concerning workforce safety and labor are one of the major HR issues that a company faces. Many countries have high safety standards and employees require certain training and other bonus or benefits. In order to retain staff and enhance their loyalty, a multinational corporation may find it hard to balance its budget and costs for employing the talents. In addition, protections for workers’ personal space vary dramatically from country to country. For instance, in America, it is a usual practice for firms to ask their staff to take part in a survey; but it can be illegal in Germany.
Another HR crisis is communication crisis. One main problem is the language barrier. Communication is not just translation. Something interesting and meaningful in one culture may make no sense in another culture so communication is also a process of “localization”. In addition to language barriers, companies must think about cultural differences and how to manage them. It is still relatively uncommon in some countries, such as those in Latin America, for women to hold high offices. If a U.S. firm sends a female executive there, it is definitely necessary to communicate with employees about the fact that in America, discrimination is immoral and even illegal. Otherwise, it will never be an easy task for her to win their trust.
Moreover, currency exchange fluctuation has a significant influence on transnational firms. When a cash flow in one currency is translated to another currency, the value may decline due to a change in exchange rates; it is called exchange rate risk. The risk increases uncertainty to companies’ performance. There are three main aspects of it: translation exposure, transaction exposure and economic exposure. A firm’s translation exposure refers to its financial reporting loss caused by exchange rate movements. The multinationals need to translate foreign assets and liabilities from foreign to domestic currency. For example, McDonald’s Corporation operates across 119 countries and converts local currencies back into US dollars to prepare a consolidated statement. It is reported that the firm suffered a 4% decrease in its net income in the second quarter of 2012 due to unfavorable changes in exchange rates (AP News, 2012).
Transaction exposure occurs whenever a firm has receivables and payables whose values depend on the unanticipated changes in exchange rates due to a contract being dominated in a foreign currency. In international trade, firms negotiate contracts with set prices and delivery dates but the exchange rate is fluctuating so the firms face a risk of currency loss for exchange between the foreign to domestic currency. There are various factors accounting for economic exposure, such as international transactions explained above, future cash flows from fixed assets, the demand for a good and other activities and investments. Without countermeasures to exchange rate fluctuation in advance, unexpected changes can bring remarkable losses. Economic exposure is difficult to forecast and settle.
Exchange rate risk is one of the most common issues facing the multinationals, which reduces the firms’ profit straightly and dramatically. It is vital for multinationals to study this matter cautiously.
Last but not the least, a multinational firm must deal with different government policies and emergencies that may worsen the operating environment or incur additional costs. Political risk faced by firms can be defined as “the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industry, income, labor, and development), or events related to political instability (terrorism, riots, coups, civil war, and insurrection) (Kennedy, C. 1988).” In order to protect domestic enterprises, government tends to take some measures to restrict the rapid growth of foreign firms.According to an Ernst and Young guide written in 2010, foreign governments are increasing value-added taxes in goods and services, in addition to tightening compliance regulations(Shapiro,2010).Besides, some government increase companies’ income tax and even set up non-tariff barriers to obstruct the import of spare parts and materials. The host country may also impose foreign exchange control and multinationals cannot transfer its profit back to its own country freely. Multinationals need keep up with changes and deal with local government officials properly.
Profit opportunities arising out of the risks 风险带来的利润机会
As the saying goes, the opportunities coexist with challenges. More risk, more reward. When it comes to transnational companies, if some risks are well-managed and taken good advantage of, profit opportunities can follow.
Nowadays, cultural diversity is viewed as a new asset instead of the root of cultural conflicts. First of all, culture plays an important role in customers’ demands and purchasing behaviors. Each country has its own unique culture so is the consumer demand. For example, based on Chinese customers’ characteristics, PepsiCo International developed new package and taste after entering into Chinese market. At the start, PI only had bagged chips but for Chinese market, it created canned chips which is free to pull and seems like a dragon boat. And Chinese love herbs so PI considered adding herbs to its chips’ materials.
Multinationals can explore new viable market and profit opportunities from these special demands. Furthermore,cultural differences and multiculturalism bring about chances and potential superiority.
Multinationals are exposed to problems where they find they are able to consider and understand these issues or decisions with multi-levels and multi-perspectives. As a result, they figure out more alternatives which are crucial in international negotiation. At the same time, conglomerates absorb the ideas, knowledge and skills of people from different cultural backgrounds. These are all roots of innovation and creation, which increase enterprises’ efficiency, adaptabilities, flexibilities and competitiveness.
Also, exchange rate risk management can be improved. Measures taken in advance, loss can be diverted into extra benefits. Companies can take full advantage of hedging, for example forward market hedge, money market operations for currencies, future contracts for interest and the like. Hedging is the practice of taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market or investment (Sangcheol, Seung-Hyun & Mona, 2014). To put it simply, a hedge can be used to offset considerate losses suffered beyond expectations and even can gain some speculating profit.
In addition, multinationals can develop targeted management and production strategies to avoid or distract currency risks (Hassan& Mahlknecht,2011). For instance, in the long run, importing more materials and spare parts from countries using soft currency is beneficial to multinationals. Because their currency can be exchanged for more soft currency and they can purchase more articles. Companies can also choose leads and lags. If a rise in the exchange rate is expected in the future, the buyer may delay the payment of goods because such a delay can make purchasing the goods less costly; conversely, if a decline in the exchange rate is expected in the future, the buyer may pay ahead of time to minimize the loss(Mehmet Odekon,2015). With this way, multinationals can not only avoid loss on foreign exchange but also gain access to achieving foreign earnings.
Then, if the government sets higher barriers to entry, it means less qualified companies to enter that market, therefore less competition and ultimately more profit chances.At the same time, strict management and supervision of government can in turn urge the firms to guarantee the quality of their products and service.It is helpful to win customers’ trust and enhance companies’ image. For example, in Japan products witness the most stringent inspection system in this world so if a foreign company’s products can be popular there, it would be easier for it to promote in other countries. Besides, companies’ healthy development need good market environment which relies on government regulations to some extent. The government makes regulation of IPR abuse and fight against market monopoly and unfair competition of transnational enterprises, hoping to build a level playing field. Therefore although multinationals’ growth is restricted by the government, it is actually another way for them to grow freely.
Lastly, there may be risks of technology leakage for multinationals. On the other hand, there are spillover effects too. Driven by technology diffusion and technology accumulation, technology level of the whole society keeps rising. Technology leakage is one of the ways of diffusion, illegal though. No matter whichever way the technology is spread, the market competition will be intensified so it can be a way of encouraging and fostering innovation. As for companies,it is reasonable for them to take legal actions or standardize the process of technology transfer. Many companies protect their technology by merely transferring it between the head office and the branches locating in other countries. If a multinational corporation has the strength to establish a branch or subsidiary in another country but others do not, there are chances that it can obtain the technology advantage and to keep the monopoly position.
Risks or common mistakes of conducting business in china 中国经营业务的风险或共同的错误
As one of the fastest growing economies in the world, China has been getting popular for multinational companies due to its vast territory, abundant resources and market potentials and so on. On the other hand, foreign companies must be prepared to deal with more sophisticated conditions.
Firstly, China is a large country with a long history and is typical of its culture’s pluralism and comprehensiveness. Cultural differences are the most important and complicated variable for MNCs in China to handle. Take Chinese and westerners for example.
Above all, Chinese prefer stability rather than changes. They avoid risks while westerners are quite open to risks. When it comes to attitudes towards work, Chinese enjoy a harmonious work environment and worship collectivism. Decisions should be made by group so the pace of work can be slow. Actually, people accept hierarchy in work relationships and they are unwilling to raise their own opinions in public. Challenging the authority’s decisions is not common. However, the westerners stress individualism and are encouraged to express themselves explicitly. Cultural differences of this kind often cause confusion to both parts. Besides, relationships play a critical part in Chinese culture while westerners usually act rationally and objectively. For instance, when appointing a director or manager of the department, Chinese may not only choose by candidates’ capability but also by his or her interpersonal relationship. But the westerners may only evaluate the managerial competence. There is a large gap between different cultures so as for MNCs, it is better to try to eliminate cultural conflicts before in pursuit of profit.
Secondly, wherever and whenever, multinational corporations arefaced withcross-cultural human resources management. It is the same in China. As performance evaluation, Chinese culture emphasizes group harmony, and staffs who have good interpersonal relationship will be well evaluated, thus staffs get uniform performance evaluation for their interpersonal relationship in the group and get averaged reward( Wang Junhua& Liu Gouxin,,2008). However, Western cultures acknowledge individuals’ interests and give priority to achieving personal value. Chinese lay emphasis on self-restrict and advocate collectivism. Western manages and Chinese staff can find it tough to accept each other’s thinking mode.t
Moreover, there is a special word called “mianzi” in Chinese; that is to say, a man gain others’ admiration, appraisal and honor because of something or someone else. For example, when a foreign manageralways says “Well done”, “Excellent”, “Good job” to a Chinese staff, the staff will have “mianzi”, in other words, heviews those words as recognition. But when he is fired unexpectedly, it shall be confusing because the manager seems satisfied with his performance all the time. This misunderstanding indicates that foreign manages do not need praise Chinese staff too much on purpose of maintaining their “mianzi”. Only let staffs realize their true strengths and weaknessescan they fulfill their potential.
Another factor related to HR management closely is the salaries. Chinese are accustomed to owing enterprises’ success to team work and every one play an important role in the team so their salaries should not have distinct differences. On the contrary, the westerners give undue importance to leadership. Thus, in western companies, top managers’ salary can be several times more than ordinary staffs’, which is obviously unacceptable to Chinese. The unfairness of salary inside multinationals is a key factor causing labor turnover in China. How to adjust and redesign an acceptable and proper salary system turns to be critical issue to handle.
Thirdly,many multinational corporations are worried about commercialinformation security problems in China. General Chinese workers have low loyalty and lack responsibilities on organization. Meanwhile, thelegislation and enforcement are far from being satisfactory. As a result, the phenomenon of infringing trade secrets happens occasionally in China. For example, many foreign companies decide to outsource part of their business to Chinese manufacturers. Although they sign confidentially agreement in case of the information leak, the non-standard operation of the manufacturers leads to the leakage of trade secrets inevitably. In particular, if a manufacturer goes bankrupt because of poor management, the lawful interests of the outsourcing businesses will be damaged.
In addition to the information leak, patent infringement is another severe matter in China. In America there are perfect legislation and effective enforcement about patent protection. Any infringement on patent will meet strict punishment. Downloading application software and even a piece of music must pay money. But in China, piracy prevails. Although some enterprises develop products with independent intellectual property, for example, the Chinese electronic pressing system of BeidaFangzheng, most of them mainly focus on imitation(Hongbing,Zhujun&Zhengjuan).Many game companies are hesitant to enter the Chinese market because of the severe software piracy problem in China. It is obviously that there is a long way to go for China government to tackle the problem.
Lastly, compared with other countries, ChineseGovernment has more power to interfere with the market because China is constructing a socialist market economy. Chinese attach great importance on relations so whether the relationship between corporations and local government is good or not can have a direct impact on foreign corporations’ returns. Some multinationals form a quite incomprehensive understanding about the true meaning of this “relationship”. For short-term interests, they attempt to use illegal methods, for example bribing, to obtain preferential policy. With the development of China’s economy and foreign investment pouring in, government’s supervision is getting more and more stringent. That building up this kind of “relationship” can attain sustaining development is definitely of no helpful any more. In condition,in the past, multinationals have a tendency of transferring the high pollution enterprises from their own countries to China, which cause great damage to environment and health. China government has realized this problem and began to take an action. China has adopted the strategy of sustainable development from 2012 and facilitated the growth of the energy-saving, environmental protection industry while punishing the high pollution industry. Development of key competences in the area of addressing social and environmental issues is a prerequisite of achieving and sustaining competitive advantage of MNCs in the modern market (Marija, Tatjana& Maja,2015).
Conclusion 结论
Generally speaking, multinational corporations are faced with more challenges than those conducting businesses just in one country. The risks mainly consist of cross-culture conflicts, HR crisis, exchange rate fluctuation, government regulations and so on. Among them, the exchange rate risk is considered a crucial part in multinational corporations’ management. Because the cash flows within multinationals in the way of various currencies, all financial analysis requires to measuring the consequences of the exchange rate fluctuation and currency value changes. A distinguishing feature of a nation is that it has the sovereignty over its citizens and property so it is its right to restrict the multinationals from transferring its resources and even confiscate their property without any compensation. These political risks vary from country to country, which also needs emphasis of multinationals. Many risks cause losses to multinationals while they can be diverted into profit opportunities. Therefore how to avoid risks and how to get the most out of them are two important subjects in multinational financial management. As the rapid development of China’s economy and the continuously improvement of politics, Chinese market is becoming more and more popular and welcomed by multinational corporations. On the other side, more diverse culture and complicated environment give rise to more risks and challenges. In a word, it is never an easy task for multinationals to survive the fierce competition from all over the world.
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