Background information, purpose, thesis, outlines and scopes
Global business environment has for many years been dominated by multinational corporations. These are businesses operating in more that one country. Multinational corporations have contributed greatly to the economic growth of the countries they operate in. firstly they have contributed a lot to the employment sector of many countries.
They also boost economic growth by making goods available to the local countries. These corporations used to be given privileges over the local companies. The aim of government in this case was to encourage investments by these multinational companies in to the local sector.
The local companies in many countries can now produce goods that are competitive in the market that those of multinational companies making them less preferable by local consumers. Countries like china experienced the impact of the multinational corporations but currently, the trend has changed. They are no longer accorded the privileges they used to enjoy.
The objective and purpose of this essay is to evaluate the implication multinational corporations in today’s international business. The evaluation is based on the article the “Challenge for Multinational Corporations in China: Think Local, Act Global”
Challenge For Multinational Corporations in China and Today’s international Business
Multinational corporations in china have increased in china since 1970s. Around this period, the economy of china expanded the market for the foreign direct investment. Companies like Volkswagen, Coca Cola and 3M were among the first firms to take advantage of the market. Others like Motorola, Philips and NEC entered the market 10 years later.
To encourage foreign direct investments by these companies, china halved corporate tax and eliminated the import duty for capital goods in favor of these companies. Both the government and the consumers had positive view of these multinational corporations (MNCs) until lately in 2000 and 2001when their perceptions changed (Roth & Morrison, 1992, 716).
This is around time when china enjoyed a per capita GDP of over US$1,000 and incorporates World Trade Organization as an integral part of its economy. The projects manned and owned by the MNCs are under close scrutiny to ensure that they are in keeping with the national interest (China Statistical Yearbook) (Vaupel & Curhan, 1969, 8).
They are no longer enjoying special treatment with regard to the corporate tax, competition standards among others. The consumers rate the products by MNCs as of the same value and quality as for the local companies (Solvell & Zander, 1998, 7).
Despite the current view of the MNCs by both the Chinese government and the consumers, the contribution of MNCs to the economic growth and development of china is notable (UNCTAD, 2003, 2). They have contributed greatly both to the industrial output and the tax revenue. They have also contributed to the transfer of technology and managerial skills to china (Sluyterman, 1998, 4)
The goal of china in opening up its economy to the MNCs was based on the expectation that they will bring in cash, know-how and skills that are necessary for the growth of the economy (Wilkins, 1970, 5). Currently, the expectations have changed with the rapid growth that the economy has recently experienced. The expected level of performance of the MNCs has escalated.
The economy of china ha greatly benefited from the technology and the managerial skills that have been brought in by the MNCs. The country has a lot of cash and no longer expects the MNCs to bring in more cash alone but expectations have changed to be more qualitative and behavioral in order to shape the functioning of the local companies (Xue & Wang, 2001, 1).
MNCs are expected to act as role models to the local companies but they hardly meet these expectations. Such failures were depicted by the adverts that were made by some MNCs like McDonald’s Corp, one of the leading fast food giant in the world Toyota motor corp. (Jones, 2005, 6).
The McDonald’s Corp’s television advert that depicted a Chinese man begging an electronics salesman for a discount and was cancelled after the Chinese people claimed that the advert portrayed china as a poor country. Its interpretation to the viewers from Chinese is a high ranked insult.
Print media also did put the Toyota Motor Corp. in the same scandal in the year 2003. The print media made diagrams for adverts which were offensive for the company. The adverts attracted a lot of comments from all over online which acted as a motivator to the offensive nature of the advert in that people used the web to embargo the vehicles made in Japan (Vaupel & Curhan, 1974, 13).
The boycott was easy to the Chinese due to earlier wars with the Japanese which led them to occupy the nation. This cost Toyota to withdraw the adverts in 30 publications made in China and in place put up apologies in response to the earlier publication which had provoked a lot of emotions.
The above mischief is insignificant though they help the MNC develop rationales for effectiveness and efficiency. Considering the Toshiba 2000 scandal which had framed them for defects they paid a high fine for all the customers who had bought their laptops.
This compensation was for the American which was never implemented for the Chinese buyers but they gave out software for correcting the defect. This contributed to a rapid huge drop in position for the best Chinese laptop supplier after a media condemnation through their media. Over 15% drop is huge drop in lack of confidence from a re-known buyer.
Losing confidence and resentment
New discoveries whether good and bad, so called news, travel rapidly and spreading like bush fire. This is basically costly to the victims either positively or negatively. Mistakes made but different corporate and companies are costly and are key elements that make the news.
The approbation which results from the general performance of the MNCs can be interpreted as high expectations. This hope and expectation may be turned down due to simple mistakes that may arise (Granstrand, 1999, 277)
Having in mind there thousands of people who specialize in filling comments online. These creates a cautious environment for the MNCs to invent new ways of align their roles well in the business world to be able to fight with these misconceptions and allow for China‘s economical stability.
Considering the subsequent investigation by the Chinese government, the MNCs should now be in a position to understand their position in China, their presumed behavior and develop ways of improving their image in China.
Moral integrity is a key concept of making a good name. Social prestige is also very in determining the face of a corporate (Poynter & Rugman, 1982, 56). The greatest loss for a corporate is losing the face or losing the name. These two element depend mutually on each other in that if the corporate can live up to the expectation accorded to it by others they are build up their social status (Graham, 1978, 96)
The expectations of individuals and nation are high when corporate are ranked high. Therefore China expects a lot of influence in their business environment through to the practices from the MNCs (Wilkins, 2001, 4). Their competitiveness should yield positive influence, they are therefore expected to pursue global standards which should in return give them respect and a good face.
Changing the mind set to bring more economical results
Business achievements call for people who have a world wide view but implementing their ideas locally. They are to fix their business models in their local areas of operations though they may be designed for international operations (Terpstra, 1985, 17). The local implementation should put into consideration the cultures and the norm.
The Chinese government expects the MNCs to make use of the local managerial talents this calls for them to train them to change their view of multi-nationally. The use of local professionals increases the chances of the MNCs doing better for they comprehend better the market. This will place them on rank of being able to deal with the challenges of the market in a more sustainable way (Gerybadze & Reger, 1999, 259)
This does not make them negate the fact that not only their feet and hands should be in china but also their minds and heads too. The MNCs should act globally in order to portray international behavior. Liming one self to a certain cocoons closes out opportunities for expansion (Dyer & Gross, 2001, 4)
Behavioral mistakes that MNCs make and adversely affect them
The standards that govern MNCs locally should be kept on measure not to subdue the international standards. This is evident in The Procter & Gamble Co. and Colgate-Palmolive Co., companies that had to be fired through the Media due to inclusion of a triclosan an element which the USA study proved it can cause cancer in specified conditions (Ferraro, 1994, 6).
Due to lack of specification of how much of the component made the report of the British based newspaper publish a report which led to the Chinese produced toothpaste to remain on the shelves. The application of double standards has often lead to discriminatory purchase of good and services (D’Cruz, 1986, 77).
The operation of the MNCs should be careful to uphold the local authority in their rightful position by putting up with the regulations. The ignorance of the regulations mainly results from the effort of a company to keep up with the competition in the market.
Samsung corp. in the 2004 defiled the laws as they tried to beat the competition from a South Korean electronic company which had been ranked first (Vernon, 1966, 192). As a result the Chinese government has banned the use of No.1 and best in their advertisements. Ignorance about the laws governing the market leads to loss of face and name (Jones, 2003, 27).
Bending of the laws leads to denial or loss of trading licenses and inability to move the market advantage. The Chinese practices in businesses have been referred to as immature. The Chinese businesses have always believed that corruption is not anywhere in their confines. This only dawned to them in when the came into the scene (Florida, 1997, 93).
According to Casson & Pearce (1987, 102), lack of non understanding of the business environment in China and social networks as claimed has lead great and major losses of market in China. These have over the time led to corporate buying their way to the market which causes very adverse results to companies. For example the Giant American international group had to pay dearly for such a behavior.
Failure to follow the set regulation has led to withdrawal of licenses (Jones, 2002, 436). A good example is the withdrawal of licenses for the AIG agencies in Hong Kong and Macau after the implementation of the regulatory investigations by the Chinese insurance regulatory commission (Hall, 1983, 23).
The generally perceived monopolistic behavior has resulted mostly from the symbolic acquisitions which have been subsequently made. The major symbolic acquisition which has promised the companies greatness and offered them bitter ending is the purchase of brands for monopoly.
In many countries, China not been an exception sees this as a deliberate attempts to keep the standards of the local companies (O’Rourke, & Williamson, 1999, 5). Companies merged for the sake of the brand like the Unilever and the Maxam companies in china. After three years the plan failed and Maxan was acquired by Shanghai Business which spent a large sum of to revive it (Amatori, & Jones, 2003, 17).
The MNCs has been highly accused of lacking the right motive of dealing with intellectual disputes. The ways used for solving any crisis emerging are perceived by the Chinese like attempts to kill the development of local businesses. This aggressive behavior acts to discourage the competitor who targets more than a partnership in addition to damaging a company’s image (Dunning, 1983, 3).
The MNCs are known to claim loss of many in many incidences which has been mostly associated with specialized set pricing mechanisms in order to get gain from the nation. This has led to increased scrutiny of the profit recognition practices to put up measures to maintain the proper standards of the business environment.
This has been a hindrance to repatriation of funds and profits to the countries. It beats logic when the manufacturers in a nation are recording more than 10% profit increases and the MNCs are complaining of great losses in the same period of time (Caves, 1996, 18).
Management styles in most of the MNCs in the World China inclusive have been accused of insensitivity. Discrimination has weakened the managerial systems which have led to low work output from some managers.
For example in 2005 Siemens discriminated German and the Chinese managers in terms of salary and was accused for it. This ended up in the streets which made pubic the great weakness which has been underground for a long time (Casson, 1983, 23).
Conclusion
In conclusion even though the managerial teams in most of MNCs are to be blamed for the above mistakes, the customers are over sensitive on the operations of the MNCs. They can be accused of rapid in casting negative impacts even for the slightness mistakes made (Penrose, 1968, 2).
For the issue of comprehending the behavioral standards may call for change of focus from worldwide level hence minimizing the competitive value of locally produced good for the nations. Generally the need to act globally will always conflict with the interest of many due to diversity in culture.
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