INTRODUCTION
Due to the
tremendous growth o transportation, communication and technology particularly
during the last two decades, the world has now become a global village.
The distance between has becomes as shorter as ever and the geographical
barriers between them have virtually missing. As a result, the mutual
dependence among the countries has increased. For example coco cola origins in
the united state, but a workers drinks coke ‘made in Nepal’ to quest his thirst.
Similarly, Netscape coffee is originally produced in Switzerland,
but an American family enjoys ‘Nescafe’ made in ‘USA’
every morning in the Chicago.
There are several other example of products which are originally
manufacture in one country, and are now being manufacture and consume din the
other countries. This has been possibly due to
the Multinational companies.
DEFINITION
Multinational company is a
corporation or company that is registered in more than one country or that has
operation in more than one country. It is large corporation which both produces
and sells goods or services in various countries, it can also be refers to
international corporation, they play important role in globalization.
CATEGORIES OF MULTINATIONAL COMPANIES
There are four categories of multinational corporations:
(1)
A multinational, decentralized corporation with strong home
country presence,
(2)
A global, centralized corporation
that acquires cost advantage through
centralized production wherever cheaper resources are
available,
(3)
An international company that builds on
the parent corporation's
technology
or R&D, or
(4)
A transnational enterprise that combines the previous three
approaches. According to UN data,
some 35,000 companies have direct investment in
foreign countries, and the largest 100 of them control about
40 percent of
world trade.
CHARACTERISTICS
OF MULTINATIONAL COMPANIES:
The following are the
characteristics of the multinational companies:
1. LARGE
SCALE BUSINESS:
The capital
of multinational companies considerably large. Its assets and volume
of sales are also quite large. The sales turnover of some multinational companies
are much more then the annual budget of many developing countries.
2. PRODUCTIVE ORGANIZATION:
Multinational companies
are involved in the production distribution of goods and services at
the international companies and level. They produce goods
and sales them in one brand name of trademark allover the
world.
3. GLOBAL OPERATION:
Multinational companies
operate globally. The parent company manufacture an sells
its products and services through its subsidiaries established
in other countries. Hence, they perform their business scale at the global
scales.
THE
CHALLENGES OF MULTINATIONAL COMPANY
DIFFERENT
CHALLENGES THAT MULTINATIONAL COMPANIES HAVE TO FACE
INTRODUCTION
No doubt, this is the age of globalization and in this era our
world became a very small place. This is now the world of awareness and
technological revolution and the very revolutionary the use of internet gave
boom in the business sector. For global business investment and trade the
course of globalization has created extraordinary opportunities since last few
years. With many entry strategies like joint venture and auxiliary
multinational companies are trying to enlarge their business. In this we will go
through the some different challenges that multinational companies have to face
in Chinese market. Firstly it will show the localized staffing strategy that
foreign multinationals used for human resource management in Chinese market.
After we indicate some difficulties attracting and retaining a qualified
managerial staff in China
for multinational companies operation. Multinational companies suffered some
other challenges in china will be discussed.
About 41000 new companies in 2003 in China had been launched by
investors from other countries. And at the end of 2003 there were 46000
approved foreign companies in China.
However for doing business in China
these multinational companies faced some challenges like cultural differences
and negotiation problems, which have affected foreign business operation and
development.
HUMAN RESOURCE CHALLENGES
In this decade, most popular issue in which businesses has to face
is the Human Resource management. The need of highly qualified staff in
multinational companies has been increased. Multinational companies choose
regularity of human resource management in beginning. which supposed coordinate
practice and consistency in strategy can direct to operational value and
efficiency. People in different places have their own culture and conception on
organization behaviour. For multinational companies this reason of diversity of
cross-nation and cross-culture may cause in strategy conflicts for
multinational companies at the time of international standardization human resource
management (Daft, 2007).
Most of multinational companies began to recruit the people in
those countries to control these difficulties and reduce cost. For example, in
china has a ¾ population of the world and millions of graduate from this part
considered as a large labour market for multinational companies. Many
multinational companies entered in Chinese market on the entry of it in WTO and
are planning to take staff from the same part while during the course of
business in China.
However the progress of HRM system has not replied with the rapid growth of
economic development in China.
It is difficult and different recruiting and keeping qualified managerial staff
is a huge challenge in Chinese market found by most of multinational companies.
CULTURE DIFFERENCES
People from different countries always have different traditions
and attitudes towards business. Some other challenges like culture that
multinational companies have to face during the course of business in other
countries besides of human resource management, For example culture has
influenced strongly the international business operation in Chinese market
experienced by multinational companies. So first of all they should study of
the business culture if they have desire to start business in china.
THE DIFFERENCES OF SOCIAL
ENVIRONMENT
While operating the business in other countries there are lot of
things they may be different from the company's local market like culture
difference, labour market and the system of employment in targeted country this
creates huge challenge for the multinational countries to operate the business
in such country. So in this situation, the efficiency of work would be much
lower than the company's expecting from the employees.
SHORT OF TALENT
There is another problem when multinational companies going to
start business in the other countries on the time of recruiting of qualified
managerial that is shortage of talent due to some reasons, this might be
include the unbalance in the choosing of education field. The talent could be
defined as the people who are progressing, professional and efficient. For
example in the years past china witnessed in every year millions of university
graduates but unfortunately it didn't produce more talent to the country as
should have been. And this is due to most of students major in arts rather than
science Ministry of Education PRC, 2006).
Moreover, we will discuss following with the help of Porter
Diamond how do the determinants of national competitive advantage help explain
how companies can maintain their economic competitiveness.
PORTER'S DIAMOND -
DETERMINING FACTORS OF NATIONAL ADVANTAGE
In a global environment corporate strategies have to be seen
increasingly. Management has to look at international market environment if
organization does not do this. Competitors actions in which sellers, new
entrants, buyers of providers of substitute may manipulate the domestic market.
This trend reinforced by IT. Model of Michael Porter shows and allow analyzing
why some nations are more competitive than others are, same like
competitiveness of industries on others. Factors of national advantage in this
model had been determined. National base of an organization plays key role to
achieve advantage globally it suggests. Necessary factors provided by home base
to support organization to build advantage in global competition.
PORTER DISTINGUISHES FOUR
DETERMINANTS IN ABOVE MODEL.
Factor Conditions
The situation in a country factors like production, skilled labor,
infrastructure, etc.
These factors could be grouped into "labor cost commitment,
human resources qualification level, natural resources, vegetation, space etc.
infrastructure capital resources knowledge resources". "The factors
like quality of research on irregulation of labor markets, liquidity of
national stock markets, universities included as well".
These national factors often provide initial advantages, which are
afterward built upon. A different set of factor conditions in each country.
Industries are therefore according to the best factor conditions in countries.
This explains the existence of so-called low-cost-countries low costs of labor,
agricultural countries large countries with fertile soil.
These factors are nature-made or inherited "Porter
said". They may develop and change. National factors may shape by
Political initiatives, technological progress or socio-cultural changes,
genetic engineering and cloning that will influence knowledge capital in this
field in North America and Europe is a good
example in the discussion.
Home Demand Conditions
Shows demand and services produced in a country. Home demand is
determined by three characteristics Porter said, their mixture the mix of customer’s
needs and wants, their growth rate and scope, and the mechanisms that broadcast
domestic preferences to foreign markets.
on clearance of home demand. National advantage is achievable in
an industry or market segment Porter said. On ability of organization home
markets have a load than foreign markets.
Related supporting
industries
Supporting or related industries can take benefit if one industry
gets success in international market. In later stages Competitive supplying
industries will highlight innovation and internationalization. Shoe and leather
industry in Italy
is a good example. Italy
is not only successful with shoes and leather, but also with related products.
Firm Strategy, Structure,
and Rivalry
This determines the characteristics of national competition how
companies are established, organized and managed. Cultures play an important
role. Factors like management structures, working morale, or interactions
between companies are shaped differently. This will give advantages and
disadvantages for particular industries. Competitive advantage within a nation
helps to give organizations base to get advantage globally Porter said.
Nowadays, business is set in a global
environment. Companies not only regard their locations or primary market bases,
but also consider the rest of the world. In this context, more and more
companies start to run multinational business in various parts of the world. In
this essay, companies which run multinational business are to be characterized
as ‘multinational companies'. By following the globalization campaign,
multinational companies' supply chains can be enriched, high costs work force
can be transformed and potential markets can be expanded. Consequentially,
competitive advantages of companies can be strengthened in a global market.
Otherwise, some problems are met in the changed environments in foreign
countries at the same time. The changed environments can be divided into four
main aspects, namely, cultural environment, legal environment, economic
environment and political system problems. All the changed environments make
problems to multinational companies. In particular, problems which are caused
by changed culture environment are the most serious aspect of running a
multinational business. This essay will discuss these problems and give some
suggestions to solve them.
Tylor（1977）has pointed out that "culture is complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society". According to this definition, it is easy to know that every nation has different cultural preferences, national tastes and value standards. These factors impact on every part of management in multinational companies, especially on marketing management, human resource management and alliances management. Thus, multinational companies have to consider the cross culture issues when they run multinational business.
Tylor（1977）has pointed out that "culture is complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society". According to this definition, it is easy to know that every nation has different cultural preferences, national tastes and value standards. These factors impact on every part of management in multinational companies, especially on marketing management, human resource management and alliances management. Thus, multinational companies have to consider the cross culture issues when they run multinational business.
To conclude, we can say that multinational companies have to face
different challenges when they look a business in other countries markets like
china there is we see above in our essay there are multi challenges which
companies have to face like culture differences, human resource management and
other is government limitations. And hiring of staff seemed to be a huge
challenge that faced in china by multinational companies.
Moreover, as above with the help of Porter Diamond model which
showed us with the different aspects like "factor conditions, home demand
conditions, relative supportive industries, firm strategy structure and
rivalry", all of these things explain about national competitive advantage
and for the maintaining of economic competitiveness.
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