Global Business Environment Strategy

The nature of multinational enterprises (MNEs)

Daoud Al Hout

Global Business Environment Strategy

Charisma University

Dr. Pol Lim, Francis

11. September 2022

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Abstract

Multinational enterprises (MNEs) play a crucial role within the development

of the many emerging economies. In consequence, they became the main focus of

scholarly research by economists and policy analysts. In distinction, international

business students are relatively uninterested in analyzing the role of MNEs.

however, they might build necessary contributions to those debates. First, studies

taking the individual corporations as a start line would enhance understanding of

the interaction between MNEs and also the local environment. Second, theories

and analysis methodologies developed in international business research might

provide new insights into the dynamics of MNEs in rising economies. the target of

this paper is to clarify what is multinational enterprises and the benefit that the

company gain by becoming multinational.

Keyword: multinational enterprises, country, global, benefit, growth

Argument

In the early development of the international business field, the main target

of attention moved from the country level to the firm level, and interest in location

problems declined. additional recently, firm-based research has itself become

concerned involved with the study of firm–location interactions. once examining

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two-way information flows or spillovers between multinational enterprises

(MNEs) and different actors in specific locations, the variety or heterogeneity of

companies matters, as will the variety of locational environments. The localization

of information sources depends on MNE group-level strategies for growth and

structure decentralization, on subsidiary-level evolution towards native

competence-creating efforts, and on the development of appropriate business

networks at intervals locations. MNEs currently have a bigger potential to learn

from a synergistic locational portfolio of complementary sources of information.

The locational composition of the international network for information sourcing

of a given MNE depends upon the extent of institutional compatibility between the

locations during which the MNE is active. This compatibility between locations in

turn affects the capability of the MNE to become an insider in native business

systems, and to influence the native institutional environment. during this paper we

will discuss the character of multinational enterprises (MNEs) and what motivates

corporations to become MNEs in additional.

Theoretical Framework

Multinational enterprises (MNEs), outlined as corporations that hold assets

or workers in more than one country, are powerful economic institutions with the

five hundred largest MNEs holding most of the globe’s proprietary technology and
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commanding concerning half-hour of the world value as of 2012. The growth of

MNEs will continue, a minimum of within the foreseeable future, as company

managers are increasingly involved “going global” and widening the geographic

scope of their operations. The impulse to widen firm operations is essentially

supported the popular belief that globalization} a process as a process at intervals

that the free flow of merchandise, services, ideas, people, and capital across

borders are weaving formerly disconnected locations into an integrated

international market. A multinational corporation is believed by various names like

international enterprise, international enterprise, world enterprise, transnational

corporation Etc.

Following are the noticeable features of multinational Corporations:

Huge Assets and Turnover: as a result of operations on a world basis,

MNCs have large physical and financial assets. This additionally results in large

turnover (sales) of MNCs. In fact, in terms of assets and turnover, several MNCs

are larger than the national economies of many countries International Operations

Through a Network of Branches: MNCs have production and selling operations in

many countries; operative through a network of branches, subsidiaries, and

affiliates in host countries.

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Unity of Control: multinational firms are characterized by unity of control.

multinational firm’s management the business activities of their branches in

foreign countries through head offices located within the home country.

Managements of branches operate within the policy framework of the parent

corporation.

Mighty Economic Power: multinational firms are powerful economic

entities. They keep it up adding to their economic power through constant mergers

and acquisitions of corporations, in host countries.

Advanced and complex Technology: generally, a multinational

Corporation has at its command advanced and complex technology. It employs

capital-intensive technology in producing and marketing

Professional Management: A multinational Corporation employs

professionally trained managers to handle large funds, advanced technology, and

international business operations.

Aggressive Advertising and Marketing: multinational firms pay large

sums of money on advertising and marketing to secure international business. This

is, perhaps, the largest strategy for the success of multinational firms. as a result of
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this strategy, they are ready to sell no matter products/services, they

produce/generate.

Advantages and Limitations of transnational Corporations: Advantages

of multinational firms from the point of view of Host Country: we tend to propose

to examine the benefits and limitations of multinational corporations from the point

of view of the host country. In fact, the benefits of multinational corporations work

the case in favor of multinational corporations; whereas limitations of

multinational corporations become the case against multinational

Corporations Employment Generation: multinational corporations

produce large-scale employment opportunities in host countries. this can be an

enormous advantage of multinational corporations for countries; wherever there is

a great deal of unemployment. Automatic flow of Foreign Capital: multinational

corporations usher in much-needed capital for the speedy development of

developing countries. In fact, with the entry of multinational corporations, the flow

of foreign capital is automatic. As a result of the entry of multinational

corporations, India e.g. has attracted foreign investment with many million dollars.

Proper Use of Idle Resources: as a result of their advanced technical data,

multinational corporations are in a very position to properly utilize idle physical

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and human resources of the host country. This results in a rise within the value of

the host country. The entry of multinational corporations results in competition

within the host countries. native monopolies of host countries either begin

improving their merchandise or reducing their costs. so multinational corporations

place a finish to the explicatory practices of native monopolists. As a matter of

truth, multinational corporations compel domestic corporations to enhance their

potency and quality.

What motivates companies to become international Corporations:

Market Growth: changing into a multinational helps a business expand its

reach, that enables the corporate to take advantage of new growth markets, such as

the Mexican economy. this chance is particularly beneficial if the domestic

demand for the company's products or services has plateaued. within the article

“Dealing with the New World of multinational Competition” on the

PricewaterhouseCoopers website, Harry G. Broadman and Sunita Saligram write

that multinationals seek opportunities in rising markets particularly because the

common growth rate of gross domestic product in these markets is twice that in

developed countries, like the USA.

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Product Sourcing: operative as a multinational provides a business the

choice of conducting a number of the company's offshore sourcing through

subsidiaries, instead of independent contractors. This flexibility in choosing the

origin of its supplies provides the business a higher chance to control the standard

of its products or its product's components. counting on its own subsidiaries as a

supply of supply additionally provides a business the chance to higher ensure

secure delivery dates of critical product elements.

Avoid Host Country’s protecting Mechanisms: National regulators

generally discriminate against foreign subsidiaries unless the subsidiary is

established enough regionally to be perceived as a domestic firm. Establishing

foreign subsidiaries, therefore, could protect a business from sure governmental

investigations, audits and prosecutions. The multinational subsidiary can also be

some way for a business to expand into foreign countries and bypass the protecting

controls of the commerce country. as an example, a U.S. company may circumvent

Mexican external tariffs by putting in a subsidiary in Jordan.

Limit Transport Costs: High transportation costs will considerably raise the

costs of merchandise offered by a business. Functioning as a international will

reduce such costs by getting production provides from a manufacturer that's close

to the company's plants and therefore the product market. As a result, a little
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business could profit by finance in production plants in foreign countries and

selling the factory-made products on to customers in those countries, instead of

mercantilism the products from the USA.

Reduce Costs: the production costs of a business disagree from one country

to subsequent. For this reason, a business may choose to operate as a multinational

and establish a production facility in an exceedingly foreign country to profit from

a budget labor, land or production resources. However, these and alternative cost

advantages of operative in an exceedingly foreign country should be weighed

against the cost-based benefits of operative a production facility within the U.S. as

an example, a U.S. employee could manufacture a bigger range of error-free units

in a specific amount than a foreign employee will manufacture, and the U.S. plant

could also be more energy efficient than the foreign plant. Such U.S. cost-based

benefits could narrow the gap between the price of operative a far off facility and a

domestic one.

The Advantages of marketing Internationally

International marketing holds several potential advantages for all kind of

business owner. From the growth of Company client base to the image of exsisting

company among the business and among its customers, to the formation of latest
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provider and sales relationships, to its role because the logical first step toward a

lot of ambitious and risky ventures to return, international marketing could be a

gateway to opportunities may otherwise miss out on.

Larger Market: International marketing will facilitate open up a bigger

market than existing would be ready to reach otherwise. With a bigger market

comes the potential for a lot of profit and a bigger client base. International

marketing introduces an entirely new population to company products or services

and has the potential to considerably increase the company's recognition and reach.

whereas the expense associated with international marketing on a large scale is

preventive for several a business, the potential reward will way outweigh the

chance. Businesses will generally confederate or partner with associate existing

marketing company or network to assist reduce the financial and supplying

burdens concerned.

Brand Prestige: The status gained by the use of international marketing and

a presence in additional than one country has several benefits. corporations that

may use international marketing to form an image of themselves as having an

international or even global reach are typically seemed to have reached a distinct

level of success than those that are present only among the domestic market.

International marketing permits the company to create the whole image that would
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like for the business and present it to a completely new audience that brings no

create mentally notions or biases to the table. beginning fresh with a brand-new

audience will generally facilitate a corporation create the jump to a different value

purpose as well.

New Relationships: When a company has an international marketing

presence, the potential for all manner of latest business relationships arises. as an

example, new vendors might even see the advertising and inquire regarding

selling existing product. New suppliers could contact the compnay in hopes of

providing the raw materials, shipping, packaging or alternative essentials. These

new suppliers are also able to save money on bottom line so profit rises and

company margins shift. If the company never ventures into new markets, there is

no telling what opportunities to enhance the business and also the efficiency of the

corporate are undiscovered.

Preparation for expansion: International marketing is an efficient first

step toward the expansion of the company, its reach and its presence round the

world. marketing needs background research and careful planning however is

relatively simple to place in place inside an international market when put next

with the logistics of an actual overseas expansion. It permits the business to

measure the public reaction to the new product or services and helps firms
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perceive if an expansion into the market would keep business sense. Before setting

up business operations abroad, native vendors can be signed on as authorized

dealers who will then provide existing product as required following its selling

push. If things total, future step toward actual expansion may be taken. If not, you

can pull out with minimal financial consequences.

Factors affecting the business of goods in other Countries for

multinational companies:

Technology and globalization have shaped the globe by helping to see

human preferences and acknowledge economic realities. information of those

factors may be leveraged to effectively sell product in other countries. For

multinational companies (MNCs), success suggests that creating and keeping

customers through product differentiation and price competition. A MNC’s should

have standardized consumer client, low costs and applicable technology for its

promotional activities to be coordinated and integrated across markets.

Some countries utilize a strategy of protectionism, a policy of defending

and cushioning domestic producers from competition led to by globalization. They

use measures as well as tariffs on imported product, restrictive quotas and

government laws. once your MNC faces export limitations due to economic
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policy, margins are adversely affected as a result of your shipping volume may not

sustain the cost of the supply concerned.

Competition: Multinational firms must be ready to face competition, each

locally and abroad, as they request a share of the world market. increased

competition results in lower costs for customers and a wider sort of out there

products. It needs bigger responsiveness to client needs and desires. in addition,

domestic companies within the host nation are forced to enhance product quality

and potency to stay competitive. this means your MNC should have a

comprehensive strategy to keep up bottom-line results before creating forays into

new foreign markets.

Currencies: Differences in currency values will significantly have an effect

on your ability to sell products abroad. the results of currency crises in your target

market or country have an effect on your exports. When the U.S. dollar is robust,

demand could diminish in world markets as a result of your products will become

more expensive for foreign customers. Similarly, exports can suffer if interest

rates in your target nations are higher than those within the U.S. as demand for the

individual foreign currency could rise as individuals pass to invest within the

country’s securities. Generally, a weak dollar is preferable if your company

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depends on exports as a result of you get a lot of dollars back once changing the

stronger foreign currency.

Marketing: Having a good international marketing strategy helps ensure

that your MNC reaches as several consumers as possible. Packaging your

promotional message during a language appropriate to every target country

suggests that aligning yourself with native markets. Your company must develop

a coherent, consistent and integrated international marketing strategy in every

region to hide essential marketing parts in order that your brand becomes a

household name. Such a method, including country-specific websites and social

media, can enhance your international growth.

Multinational firms are responsible for a large slice of global employment,

investment, and research. To some, they are malevolent monopolizes that exploit

labor and avoid taxes. To others, they are engines of innovation and potency,

contributing to international prosperity. In a shot to elevate the sometimes-

contentious public debate over the conduct and operation of international firms

and policy towards them, the new edited volume, “Global Goliaths: multinational

firms within the twenty first Century Economy,” published by Brookings

institution Press, examines key questions about their role within their home

countries and in the rest of the globe wherever they do business. 

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International production will provide the below:

 Expansion, Money for extra investments, like buying new machines

for quicker production

 Multinational Company would possibly bring with them the latest

technology for production.

 Multinational Company additionally obtain some native firms to

expand production, since they need wealth exceeding the whole budgets of a

number of the developing countries

The scale of the many industries suggests that corporations split production

into totally different countries. as an example, Apple styles electronics within the

United States, wherever they need access to skilled labor. However, the planning

is then manufactured in China, wherever labor prices make production rather

more efficient than manufacturing within the relatively high-cost United States.

For industries just like the motorcar, the assembly method is separate into a lot of

stages, with plants dedicated to engines, tires, and bodywork. The multinational

will manufacture different parts in regions that are best suited to manufacturing

that method before assembling them in plants on the point of their marketplace

for sale. as an example, BMW manufacture engines in Germany, import tires

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from Asia, and so have plants collection cars in many various countries, like the

United Kingdom.

Conclusion

the multinational corporation is that the solely organization that has the

resources and scope to assume, plan, and act with worldwide designing of markets

and sources. many international opportunities need capital and technology on a

scale only massive multinational firms will offer, multinational firms need to

evaluate social responsibility, worker devilment, competitors, and customers in

accordance with business ethics. the establishment will operate well if they follow

cultural practices within the countries wherever they operate. additionally, they

should consider regulations and moral frameworks within the countries wherever

they operate. From the discussion, it seems that combining business and ethics is

somewhat difficult. while international businesses have to be compelled to respond

to social issues, their aim is to form profits. Often, the general public good is not

considered or given less priority. As such, multinationals think about profitability

before evaluating the governing ethics. For multinational firms to grow in terms of

sales and profits, it is very important for them to consider business ethics. the

businesses should develop ethics initiatives built on cultural, regulatory, and moral
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frameworks of the countries wherever they operate in. As such, the companies will

establish business ethics that that is acceptable and contribute to their growth

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