MNCs and Globalization
Overview of the Role of Multinational Companies in Global Business
Globalization has made a tremendous impact throughout the world in past few years. There are various reasons involved in this progression.
Globalization has accelerated in recent years, a development that has significant implications for the regulation and governance of international business, trade and investment. International business implies no fundamental shift in the underlying principles of trading or business functions but simply more cross-border transactions. In simpler terms it includes all commercial transactions – private and governmental – between two or more countries. Private companies undertake such transaction for profit; governments may or may not do the same in their transactions.
Global exchange
The world has seen a tremendous increase in the global transactions and foreign trade in recent years. The main reason behind this is that now more and more countries are getting engaged in trading with each other in order to increase their profit or sales or protecting them from being eroded by competition. The main objectives which are influencing the companies to engage in international business are expansion of sales,acquiring resources, minimizing competitive risk and diversification of sources of sales and supplies (Johnson & Turner, 2003). Besides these there are other few factors like economic factors, cultural factors, technological factors, and social factors which have influence to a greater extent.
The emergence and activities of transnational and multinational enterprises had impacted to a huge extent on the concept of globalization, and multinationals have played an important role. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment and economic activity) within.
Have a break
To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom. Thus we see multinational companies and transnational companies hold strong positions in different channels of globalization: by definition, they account for all foreign direct investment (FDI), they are very active in trade,with one third of world trade taking place within and not between companies, and they transfer the bulk of technology and knowledge across borders via intrafirm transactions.
A current trend in the business world is when large companies move across their home countries borders to conduct business in foreign markets. Competitively, global firms are constantly growing into new markets that show great potential for success. However, these newly entered conglomerates pose an additional threat to local existing businesses, culture and other economic factors. Multinational and transnational companies entering into new markets can have both positive and negative impacts on local economics, therefore a greater understanding of corporate globalization must be achieved by global firms and those in the field of business.
Globalization of the economy and the increasing role of multinational companies and fast networks- including financial market linkages – also raise fears about issues of stabilization, inequality and inefficiency ( Adam,2004).
References :
- Alan M Rugman and Thomas L. Brewer, 2001: Oxford Handbook of International -Business.
- Johnson Debra and Turner Colin, 2003: International Business – Theory & Practice.
- Hibbert Adam, 2004: Globalization.
- Samir DasGupta, 2005: The Changing Face of Globalization.
- en.wikipedia.org
