The effects of globalization, technology, increased competition and the desire by companies to remain afloat in their operations, has in the recent past compelled them to expand their operations across the world. A multinational company is therefore defined as a business entity that is structured so that its business is conducted or ownership is held across multiple countries located in different geographical regions. A multinational company may also be defined as an entity whose assets, sales or total operations are apportioned and deployed in various foreign locations. (Martineau, 2000, P.6)
Examples of multinational companies include Diageo Plc, which is a global leader in the manufacture and sale iconic alcoholic and nonalcoholic brands. In their global diversification strategy, the company has adopted a unique 21 market model to pacify its competitiveness in the global operating environment. The company operates in 21 global markets present in over 180 countries. Out of the global markets, 43% of the company's business is in the emerging markets situated in Eastern Europe, Asia, Africa, Turkey and Latin America. The company also has operations in North America. (Diageo, 2016, P.3)
Apple Inc. is another significant multinational company whose main business is in the technology sector. It specializes in the manufacture of such products as mobile phones, computer hardware, software and accessories. It is an American company founded in 1976 and currently operates 475 retail stores located in 17 different countries world over.
Nestle is another example of a 150-year-old multinational company which is a global leader in nutrition, health, and wellness. The company's businesses are present in various continents such as Africa, Americas, Asia, and Europe. The presence in these continents is presented in at least 189 countries in which the company offers over 2000 brands. (Nestle.com, 2016)
Advantages of multinational companies in the host country
The non-financial performance of any multinational company is a significant metric in the success of the business in any host country. Such non-financial performances include legal and social compliance in the country of operation. The presence of these companies is beneficial to the host country in the promotion of the respect for human rights, and environmental laws. These companies set the pace for the local entities by spearheading such policies as employee health and safety, and environmental conservation.
Fair competition and good governance: When these multinational companies operate and engage in fair competition in the host countries, they challenge the existing systems to initiate proper public governance, human rights, and environmental protection. Some multinational companies operate under strict codes of compliance like Diageo Plc whose global operations are clearly stated in their business code of conduct. Such a guideline acts as a guideline for the business operations in any host country to ensure they promote fair competition and good business practices. For example, the Diageo code of business conduct clearly indicates that the business does not condone bribery, corruption, and improper payments. Despite the existence and persistence of capitalism and unfair trade practices from some competitors, some multinational companies strive to display exemplary conduct in the host countries. (Mayer and Jebe, 2010,P.161)
Disadvantages of multinational companies in the host country
Abuse of human rights: Despite the numerous economic, social and legal benefits derived from the presence of multinational companies' operations in any country, there exist several disadvantages for the same. For instance, when a multinational company launches its new activities in a host country where there may exist no formal laws to regulate the business, it may turn exploitative on the host country's economy and workforce. This case is so common upon the entry of these MNC's to developing countries whose legal and regulatory systems are weak, such companies fail to follow the global laws guiding labor standards, human rights, and environmental conservation.
Environmental degradation: This is usually founded on the premise that there exist very few binding international treaties on environmental conservation. This results in varied environmental standards, rules and regulations from one country to another. Multinational companies therefore often opt to exploit the weak regulatory standards that in many host countries lack a functional enforcement mechanism. The absence of strong environmental oversight authorities encourages the multinational entities to engage in destructive and exploitative activities in a bid to maximize profits. The negative externalities caused by these multinational companies in the host countries also serve to the detriment of the countries people and environment.
Another demerit that is usually associated with multinational companies is the practice and persistence of corruption and bribery in the host countries. A good example is the case of W.S Kirkpatrick, a company that won a business contract in Nigeria by bribing a public officer. Bribery usually creates value for the multinational companies but in the long run, it manifests itself by massive distortion of the market. Bribery also distorts the custom of innovation and performance based business success at the expense of substandard goods and services.
The multinational companies are usually focused on maximizing their revenues in the host countries at all costs. They thus engage in dirty business practices such as tax evasion. Tax evasion has the effect of suffocating the host country governments by denying them revenue that could be used to establish and enforce laws to curb bribery, control banking and provide public goods. (Mayer and Jebe, 2010,P.162)
Value lawsuit case
The value lawsuit case presented here is SBI International Holdings Ag (Kenya) Vs Amos Hadar.
Facts and findings
SBI International Holdings AG (Kenya) is a multinational road construction company with some of its operations in Kenya. Amos Hadar is an Israeli, who worked for the company in Kenya as the head of finance. The employer on 12th December 2012 sought court orders to restrain Amos from disclosing the company's trade secrets among other information considered confidential. Amos in the response filed a counterclaim.
The court finally ruled the following:
SBI international to pay Amos Hadar a total of Ksh. 1,700,000 being salary and living expenses for August and September 2012.
The company to pay the respondent Ksh. 340,000 being 12 days leaves pay, Ksh. 42,500 being repatriation allowance.
The company to release the respondents certificate of service.
The commissioner for domestic taxes to investigate all the payroll expenses for the company to ascertain if there were any tax evasion schemes. (Kenyalaw.org, 2016)
References
Martineau, H. (2000). Retrospect of western travel. Armonk, N.Y.: M.E. Sharpe.
Kenyalaw.org. (2016). Cause 2435 of 2012 - Kenya Law. [online] Available at: http://kenyalaw.org/caselaw/cases/view/109656/ [Accessed 8 May 2016].
Nestle.com. (2016). [online] Available at: http://www.nestle.com/ [Accessed 8 May 2016].
Diageo, (2016). [online] Available at: https://www.diageo.com//Diageo%20Interactive%20AR2015 [Accessed 8 May 2016].
Mayer, D. and Jebe, R. (2010). The Legal and Ethical Environment for Multinational Corporations. [online] Available at: http://www.enterpriseethics.org [Accessed 8 May 2016].
