Analysis of Multinational Companies
Analysis of Multinational Enterprise
The spread of the globalization across the world facilitates the process of the foundation of new firms and business units in different regions. With that, some companies prefer to have the supply chains approximately in every country regardless the fact that the headquarter of the company is locate din one jurisdiction. Among diversified nature of the business units, today are quite popular the multinational companies due to their competitive advantages in the market. The experts in the business environment define the multinational company as the enterprises that has the production facilities and other relevant assets in one jurisdiction while the main sphere and market is located in the home country. These companies usually have the offices and production centers in huge range of the countries for the maintenance of its presence in the market, while the headquarter manages the activity of the centers (Lloyd, 1986). There are several type of the multinational companies that are realized according to the purposes pursued. They are the following:
Horizontally integrated multinational company: the managers of the company has the objective to expand its presence in different markets by placing the production facilities in different regions;
Vertically integrated multinational companies: the various stages of the production process are located in the different jurisdictions, while the owners of the company have the intention to exercise control over the expenses for the production of the goods and delivery of the services to the direct customers;
Conglomerates: the business unit is able to produce diversified range of the goods and services for the customers in different countries in order to realize the diversified business strategy.
Regardless the existence of the wide range of the types of the multinational companies, there are evident features that are applied to these business units. In particular, the multinational companies are popular for the next features:
Extensive size of the company which provides the managers of the organization with opportunity to be engaged in the business environment approximately in every jurisdiction;
International activity that implies that interests of different cultures and nations may be satisfied by the activity and performance of the multinational companies;
In majority cases the multinational corporations hold significant market shares in the relevant industries as they follow the strategies to merge with the rivals for improvement of the performance and increase of the revenue;
The activity and development of the multinational companies can not be predicted as they depend on the events occurred in the business environment in the jurisdiction where business units exercise economical activity;
Multinational companies have ownership over extensive sum of the resources that allow them to transfer them accordingly regardless state borders (Badinger & Egger, 2010).
Overview of Advantages
Given the fact that amount of the multinational companies in the world is increasing, the advantages of this form of the company are evident. In fact, multinational corporations are regarded as the main subjects of the international business. The existence of these business units at the markets of different countries influences directly the flow of the foreign direct investment and impacts positively the employment level in the country be creation of several working opportunities for local population. The value of the trade operations by the multinational companies constitutes the major portion in comparison with the entire flow of import and export transactions across the world. This statement should be understood in the manner that multinational corporations drive the development of the business environment and maintains the competition with local companies existing in the host countries. Among the most important strengths and advantages of the multinational companies, the experts define the following elements and features:
Effectiveness of the activity: the multinational companies have intention to operate in the global scale across the world. From this perspective, the managers of these business units are searching for the relatively cheap labor force which is available in the developing markets. This business strategy results in the close location of the business units to the production facilities while the managers have the opportunity to exercise deliberate control over the performance of the organization. Due to the fact that production appears to involve less amount of the financial resources, the company is able to meet the expectations of increased amount of the consumers because of the price, quality and other important factors. Furthermore, the multinational companies receive opportunity to promote cheap goods and services in the host country that influences positively its competitiveness in the market (Marshall, 2000).
Business development: several researches confirm that multinational corporations provide the local population to receive higher salaries and better working conditions that may be created by the local companies. In addition, the activity of the multinational companies is usually featured with the application of the technological and innovative developments due to which the employees obtain the opportunity to gain new skills. Therefore, the activity of multinational companies gives rise to the formation of the skilled professionals that have legal standing to request for the relevant salaries. Besides, these organizations facilitate the development of the economy in the emerging markets jointly with the fact that they serve the role of the source for the tax revenues (Gao & Sarraf, 2009).
At the same time, the other group of experts stand to the position that all advantages out of the activity of the multinational companies may be structured as follows:
International and incentive pros;
The first group of the benefits implies that multinational companies have access to the intangible assets which may be used accordingly for the achievement of the competitive advantage in the market. Usage of these assets allows to the managers of the multinational companies to follow the development of the innovations in the relevant markets and adjust the production facilities accordingly. Consequently, the existence of the common governmental and organizational structure within the multinational company assists in the exercising control over the distribution of the products, delivery of the items, etc. By virtue of this structure, the managers save time and use flexibility in the activity as competitive advantage in comparison to the activity of the rivals in the industry. In contrast, the incentive advantages should be understood in the manner that multinational corporations may avoid the search and other negotiating costs that are involved in the budget of other business units. This group advantages arise out of the status of the multinational company, while the other business units are much more likely to face the huge risks in their industry. Simultaneously, the local benefits take origin from the fact that companies attempt to divide the production into several stages for the receipt of the relevant benefits out of the labour costs, features of the jurisdictions. The multinational corporations usually remove the cultural and other barriers by provision the working opportunities to different cultures, while only artificial impediments may arise. In addition, the local advantages take place due to the usage of the international transportation and communication costs. However, one should take into account some disadvantages that exist in relation to the activity of the multinational corporations. They are the following:
Possible complexity of the local regulations;
Dependence on the resources and other external factors (Kadish, n.d.).
Any company should act in accordance with local legislation in order to stay within legal framework. In this regard, the managers of the company should be aware of the current legislation and amend the business strategy and its working conditions accordingly. Meanwhile, the company faces the tension from the local population as it can not terminate this activity unexpectedly and on voluntarily basis because of provision of significant amount of the working places. With that, the local population is dependent on the activity and presence of the multinational corporations. This factor is vital for the emerging markets where the government may take all benefits in form of taxes and supplementary revenues from the performance of the corporation. The other negative side of the nature of the multinational companies is that local state authorities create in the artificial manner the conditions suitable for the fruitful performance of business units. This approach may damage the activity of the local companies, while the majority of the authorities follow the policy for the attraction of the foreign direct investment arriving with the creation of the multinational corporation in new market. In addition, one should not underestimate the fact that multinational corporations favour the promotion of the export operations in the local country, while its positive development impacts the business environment and culture in the host country (Clausing, 2000).
Analysis of Article
There are several researchers devoted to the analysis of the nature of the multinational corporations so that it is highly important to find the relevant information for the confirmation of the findings. This particular piece of study dwells on the evaluation of the contribution of the multinational corporations in the technological progress and further usage of the technologies for the benefits of the population. For the purposes of completion this research, the author of the study used the example of Goodyear Tire and Rubber Company as the global manufacturing companies in the tire industry having the presence across the world. Given the existence of the overwhelming information about the business performance of the mentioned companies, the author used the patents and registered trademarks as pillars presenting the evidence about the innovative activity of the company. The author manages to conduct the analysis of the evolution of the innovation process of the companies in tire industry. The main finding of the research is that contribution to the innovation as important dimension of the activity of the company may benefit for the multinational organization and assist it to survive in the market. Accordingly, the innovation trajectory has been considered jointly with such critically important external factors as technological advancements, heated competition in the market, fluctuations in the financial systems, etc. Besides, the author has come to the interesting conclusion that significant amount of the multinational companies fails to launch its offices in all continents. Therefore, the new researches should be devoted to the search of the instruments that should assist to the managers of the companies in the placement of the centres in different regions regardless any internal and eternal factors. The experience and background of such manufacturing giants as Goodyear show that in traditional industries such business units pay attention to the design and marketing resources of the organization. Therefore, the companies should find the proper instruments that will allow them to deter the position in the market. This approach is confirmed by the fact that in current business environment, the companies usually follow the technological advancements as it benefits to the market share of the company and its revenue. From this perspective, the differentiation of the products should not be lined to the innovation and technological developments. The findings of this study are highly useful for the completion the analysis of the nature of business strategies of the multinational companies, while it is possible to presume that it will be outdated in some years because of the flow of the globalization in the business environment. With that, the experts should stay tuned in this dimension for the conduction of the proper analysis of the strengths of the efficient business units (Giada Scalera, 2003).
Presence of multinational companies in UAE
Any multinational organization should adjust to the culture, regulations, traditions of the new jurisdiction. It is impossible to state today that particular country is the most attractive for the location of the multinational enterprises as the interests and needs of the businesses vary from day to day. In this regard, the popularity of the United Arab Emirates, in particular Dubai, is increasing. Dubai represents the example of the city which increases rapidly what is estimated by the multinational corporations. Accordingly, the flow of the foreign direct investment to this region increases as well so that the managers of the multinational corporations may be reassured in the reliability of this jurisdiction. This city is searching for the measures that will allow to conduct the diversification of the economy and decrease the evident dependence of Dubai on oil sector. The status of Dubai for the residency of the multinational corporations is confirmed by the fact that provident institutions as the World Bank and the International Monetary Fund prefer to hold the meetings there. Meanwhile, the authorities of this region make steps for the liberalization of the business environment for the companies in order to attract new multinational companies to launch offices there. Dubai is the centre of globalization, where some multinational corporations have the long lasting history of the presence. These companies should not amend their business strategy in accordance with the regulations of the region due to the fact that Dubai favours liberal approach. This region has all relevant economical opportunities that facilitate the receipt of the foreign direct investment increasing with the location of the multinational corporations. At the same time it is necessary to state that only Dubai is the most attractive zone within entire territory of the United Arab Emirates. Meanwhile, the assertions made by the leaders of Dubai contribute to the reliability of this territory for he investors. In particular, the state authorities having intention to create open society where the international companies as multinational corporations should be a gaged in the formation of the improved infrastructure and maintenance of the business relations. In Dubai the authorities introduce several tax-free shelters which are attractive for the companies operating in the global scale. In addition, Dubai is the centre of the concentration of the innovations and different technologies that should be used by the multinational companies as the internal advantage of this zone. Therefore, it is possible to assume that Dubai has necessary business environment for the introduction of the multinational corporations within its territory.
Overview of Case
This case represents the long fight between the business units in the constructions sphere. This dispute was initiated in 1993 due to the fact that construction of the sewage system was challenged. Upon the completion of the project in 1983, the other company identified in the flaws in the construction facilities that should have been removed. Therefore, the governmental state authorities filed the submission against the company that completed the construction. Upon the consideration of the overwhelming amount of the facts and materials, the courts came to the conclusion that defenses of the jointed appellants should be removed. This case is the longest one that has been considered by the courts in the UAE. Besides, there are three important lessons that should be taken for the future. In particular, the time bar in the construction industry should be taken into account during the submission of the defenses under the current legislation of the UAE. In addition, the Court of Merits is the appropriate forum that should determine the merits of the case judging the statements of the witnesses a d other important evidences. Regardless the fact that this case was considered within plenty of time, the judicial authorities delivered the fair and reasonable judgment.
References
Badinger, H. & Egger, P. (2010). Horizontal vs. Vertical Interdependence in Multinational Activity*. Oxford Bulletin Of Economics And Statistics, 72(6), 744-768. http://dx.doi.org/10.1111/j.1468-0084.2010.00600.x
Clausing, K. (2000). Does multinational activity displace trade?. Economic Inquiry, 38(2), 190-205. http://dx.doi.org/10.1111/j.1465-7295.2000.tb00013.x
Gao, T. & Sarraf, T. (2009). What Causes Multinational Companies to Increase Resource Commitments During Financial Crises in Emerging Markets?. Multinational Business Review, 17(2), 13-36. http://dx.doi.org/10.1108/1525383x200900008
Giada Scalera, V. (2003). A longitudinal study of MNE innovation: the case of Goodyear: Multinational Business Review: Vol 22, No 3. Multinational Business Review. Retrieved from http://www.emeraldinsight.com/doi/full/10.1108/MBR-06-2014-0021
Görg, H., Henry, M., Strobl, E., & Walsh, F. (2009). Multinational companies, backward linkages, and labour demand elasticities. Canadian Journal Of Economics/Revue Canadienne D'économique, 42(1), 332-348. http://dx.doi.org/10.1111/j.1540-5982.2008.01510.x
Kadish, P. Are Large Multinational Companies Undervalued? Emerging Markets Perspective. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1653860
Lloyd, B. (1986). Strategic management in multinational companies. Long Range Planning, 19(4), 123. http://dx.doi.org/10.1016/0024-6301(86)90282-7
Marshall, A. (2000). Foreign exchange risk management in UK, USA and Asia Pacific multinational companies. Journal Of Multinational Financial Management, 10(2), 185-211. http://dx.doi.org/10.1016/s1042-444x(99)00026-2
