Multinational_Corporation

According to Dunning (1992: 3) “A multinational or transnational enterprise is an enterprise that engages in foreign direct investment and owns and controls value adding activities in more than one country”. A more general view from the late 90s assumes that we have now, those who are now global players, “born international organisations” such as Facebook or Apple. The existence of MNCs is reasoned by structural market imperfections for final products (Hymer, Kindleberger and Caves). Market imperfections had been considered as structural and caused by the difference from perfect competition in the final product markets. Further reasons are newly formed from the control of own technology and distribution systems, scale economies, privileged access to inputs and product differentiation. Multinational corporations are important factors in processes of globalization. National and local governments often compete against one another; however it is companies that trade not governments, to attract MNC facilities with the expectation of increased tax revenue, employment and economic activity. To compete, political entities may offer MNCs incentives such as tax breaks, pledges of governmental assistance or subsidized infrastructure, or lax environmental and labor regulations. These ways of attracting foreign investment may be criticized as a “race to the bottom” (which means a race to the bottom is a socio-economic concept that is argued to happen between countries as an outcome of regulatory competition). On the other hand, in countries with comparatively low labor costs and weak environmental and social protection, multinationals actually bring about a “race to the top”. As mentioned before low labour costs give the MNCs a comparatively advantage; for example Shoe-MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high, wherefore Nike and Adidas move their plants to China or Vietnam. Since multinational companies operate in more than one country, they are exposed to many different cultures and environmental factors. The principal of the SLEPT elements (Olden) adjusted by the two Cs, divide the elements in 5 sections: Socio-cultural, legal, economic, political, technological, and the two Cs in currency and competitors. Language as part of the socio-cultural elements was an import fact of the failure of General Motors campaign back in the 90s when they released in South-America a new car named Nova, what literally translated means no va = it won’t go. So if certain executives of a company want to do business with people from different countries, they need to understand how to communicate clearly with them, without mistakenly doing something wrong. Learn to speak the foreign language can show that the executive is truly dedicated to the work, and that he is willing to do anything to complete the deal. For example ‘’In Japan, failure to show respect by exchanging business cards can get negotiations off to a very bad start’’. Companies that adapted to foreign market to guarantee the success , is for example McDonalds. In France McDonald's added tablecloths and candles to improve the ambience at some eateries and introduced waiter service at certain outlets because they found that most Europeans prefer leisurely rather than fast food dining. In fact of the increasing uncertainty and complexity of the international environment, an internationally diversified network would give the firm the opportunity to exploit market conditions. For example, a multinational production network allows shifting of production in response to any large-scale changes in relative prices that can occur internationally. This cost structure flexibility helps reduce the average marginal cost of worldwide production relative to that of purely domestic production and results in higher profit margins or greater market share. Having operations in multiple international locations, the multinational firm creates an additional string of options that it can exercise upon appearance of particular outcomes, such as the location to declare profits, the proper market to concentrate market power, and the low-cost location to raise capital. For example, differences in taxation across countries give rise to the possibility for the firm to transfer some profits and/or losses within the firm to locations where they are tax advantaged, thus reducing the firm’s total tax liability (see, e.g., Hines and Rice (1990)).