An expatriate, on international business travel
most of the times, arrives on the British Air Way’s flight, rents a Toyota at Hertz, drives down-town to Hilton hotels
and reaches the room, flips on to Sony TV and catches the glimpse of the same flashing signs of ‘Coca-Cola’ and
‘BMW’ etc. Then suddenly while watching the news on BBC a sense of disorientation sets in and they try to remember
where they are Sydney,
Singapore, Stockholm or Seattle? This has become a common experience, thanks to the MNC phenomenon. Multinational
Corporations (MNC) account for 40% of the worlds manufacturing output and almost a quarter of the world trade. About 85% of
the world’s automobiles, 70% of computer, 35% of toothpaste and 65% of soft drinks are produced and marketed by MNCs
(Bartlett et al, 2003, p3).
However, most of the MNCs have come up in recent
times of change and globalisation. It is evident in the changed definition of MNC i.e. till 1973 the United Nations defined
MNC as an enterprise which controls assets, factories, mines, sales offices and the like in two or more countries (Bartlett
et al, 2003). However, the scope of what the term Multinational Corporation covers has changed and required two crucial qualifications
vis-à-vis first qualification requires an MNC to have substantial direct investment in foreign counties and not just an export
business. While the second requisite for a true MNC would be a company engaged in the active management of these offshore
assets rather than simply holding them in a passive financial portfolio (Bartlett et al, 2003).
One of the most important motivations for companies
to expand their operation internationally is the low-cost factors of production in developing countries like China and India
(Papers4you.com, 2006). This has had a tremendous influence on the economies of the developing countries, acting as a catalyst
in their growth process. However, entering a new market in a different nation is not as easy as it sounds, with factors like
local culture and local market knowledge presenting as obstacle initially. There are various ways in which a company can decide
to enter the market, one such model being the Uppsala model,
which suggests a company should make an initial commitment of resources to the foreign market through which it gains the local
market know-how on the basis of which further evaluations can be made (Bartlett et al, 2003). However, there are many companies
who do not follow such models and take a short cut to building the market knowledge by investing in or acquiring a local partner
for instance Wal-Mart entered the UK by buying the supermarket chain Asda (Papers4you.com, 2006).
However, in recent times most companies have recognised
the need to be responsive to local markets and political needs and the management styles followed by multinationals are gradually
shifting towards a trans-national strategy of ‘Think global, act local’.
References
Bartlett, C. et al. (2003). ‘Transnational
Management’. 4th Ed. McGraw-Hill, London.
Papers For You (2006) "C/B/311. Multinational Enterprises
(MNEs) in Developing Countries ", Available from http://www.coursework4you.co.uk/sprtbus35.htm [17/06/2006]
Papers For You (2004) " P/B/220. Is it true to say
that many U.S. multinational enterprises
(MNEs) are more economically and politically powerful than some nation states? Does this scenario best explain America's rise to globalism and the real power behind
the White House today?", Available from http://www.coursework4you.co.uk/sprtbus35.htm [18/06/2006]
