Introduction
During its early years, international businesses were done in the form of enterprises, where the ownership was individually or in form of partnership. However, with organizations expansion due to industrialization and companies’ need for capital increased, and thus corporations began to replace privately held firms.
These firms had the discrete advantage of being entities with a separate legal, consequently limiting the liability of the principals or owners1. At the same time, through issuing of shares of stocks these corporations could easily tap enormous pool of available funds held by potential individual investors.
Advancements in modern technology are greatly affecting the multinational organizations2. In particular, digital technology is having its toil in the field of marketing, and in this, the multinational organizational are not left behind. This paper examines the importance of digital marketing to multinational organizations.
Defining what a multinational organization is – controversies in the definition
There is no formal definition of a multinational organization, although various definitions have been proposed using different criteria. A multinational organization can be thought of as a firm that is structured such that business is conducted, or ownership is held across a number of countries, or one that is organized into global product divisions.
Other definitions look at specific ratios of foreign business activities or assets to total firm activities or assets3. Under these criteria, a multinational firm is one in which a certain percentage of the earnings, assets, sales, or personnel of a firm come from or are deployed in foreign locations.
A third definition is based on the perspective of the corporation, that is, its behavior and its thinking. This definition holds that if the management of a corporation has the perception and the attitude that the parameters of its sphere of operations and markets are multinational, and then the firm is indeed a multination organization4.
The existence of different definitions for multinational organizations is not surprising. There are many different types of multinational corporations, and most definitions characterize only a particular type.
Since there are several ways in which a corporation can be organized and can transact business across national borders, it is indeed extremely difficult for any one definition to adequately describe all forms of multinational corporations5 (Ajami, 2006). Another problem in standardizing the definition of a multinational corporation is the gradual evolution of purely domestic companies to multinational status.
In this process, the point can be clearly demarcated when a company becomes a multinational. Such demarcations, if possible, also cannot explain or describe adequately the wide differences that organizations may have in the extent to which they have gone international6.
Advantages and disadvantages of multinational organizations
Given their size, multinational organizations gain a number of advantages and disadvantages. To begin with the advantages, one of the major benefits that MNCs have is superior technical knowhow. Most large MNCs have access to higher or advanced levels of technology, which was either developed or acquired by the corporation.
Such knowledge is patented and held quite closely. It can be in the areas of production, management, services, or processes7. A classic example of the technological advantage enjoyed by MNCs is the Banamex Tricolor card technology developed by Citigroup. Another advantage enjoyed by MNCs is their large sizes and economies of scale.
The high volume of production lowers per-unit fixed costs for the company’s products, which are reflected in lower final costs. Other advantages related to the large size include lower inputs, ability to access raw materials overseas, ability to shift production overseas, as well as financial flexibility8.
Although multinational organizations enjoy the above discussed advantages, they are prone to a number of disadvantages. One of them is business risks, this is because MNCs operates the businesses outside the borders of their countries of origin, and thus they are prone to fluctuations of currencies in these countries.
Violent movements in exchange rates can wipe out the entire profit of a particular business activity. Over the long run, multinational organizations have to live with this risk, as it is extremely difficult to eliminate it 9.
Another disadvantage of MNCs is that they face host-country regulations. The MNC has the difficult task of familiarizing itself with these regulations and modifying its operations to ensure that it does not overstep them. Closely linked to this disadvantage is that of different legal systems10.
MNCs must operate under the different legal systems of different countries. In some countries, the legislative and judicial processes are extremely cumbersome and contain many nuances that are not easily understood by non-natives. Political risks, especially in unstable countries also pose a serious challenge to MNCs. Another disadvantage of MNCs is cultural differences11.
Many multinational organizations find that their expatriate executives are not able to turn in optimal performances because they are not able to adjust to the local culture, both personally as well as professionally. Misunderstanding of local cultures, work ethics, and social norms often leads to problems between MNCs and their local customers, their business associates, government officials, and even their own employees12.
The digital revolution has shaken marketing to its core. Digital technology has unlocked new channels of conducting businesses. This is because customers have been provided with sufficient quantity and quality of information that is easy to access. Consumers can sort products based on any desire attribute such as price, nutritional value, functionality, or combination of attributes.
Consumers make use of it by obtaining third-party endorsements and evaluations. In addition, they can tap into the experience of other users. Digital technology has thus put the customer in control, creating a fundamental shift in the dynamics of marketing. Empowered by technology, customers are unforgiving13.
Digital technology and marketing
Digital revolution planning in secure environments calls for carefully developed strategy and optimization, planning in the global digital environment requires flexibility and experimentation14. The new realities of the business environment have led marketers to suggest new rules for the new economy.
These new rules include targeting segments of one and creation of virtual communities; designing for customer-led positioning; redesigning advertising as interactive and integrated marketing, communication, education, and entertainment; and use of adaptive experimentation15.
Advances in technology, and in particular the rise of digital marketing, are challenging all aspects of traditional marketing research. Traditional data collection is augmented with internet surveys and automatic capturing of internet-behavioral data. The results are tremendous amounts of data, reduced cost of obtaining some of the data, and much greater speed in getting the required information.
Digital technology benefits marketing by making tacit knowledge more accessible. With the right information, organizations are able to target their customers appropriately, and design products that they demand16.
Importance of digital marketing to multinational organizations
The success of digital marketing has particularly been felt in multinational corporations. Traditionally, these organizations success depended on the strategy that they got across oceans and establish plants in countries where resources are available and with equal missionary zeal establish depots and network in countries where the demand exists.
These global operations earlier had some in-built handicaps due to the unreliable, difficult, distorting and slow communication17. With the rise of digital technology, and particularly the internet, the MNC operations have benefited tremendously. Digital marketing is becoming a major strategy in these companies. One of the key ways in which MNCs are using digital marketing is with web sites.
Web sites allow consumers to see, consult, and obtain product-related information at anytime, anywhere. Such communications are regarded as a new form of global marketing communications, offering opportunities to strengthen effective relation; marketing in international markets18.
The benefits of digital marketing of MNCs do not stop at being able to create a web site; it also includes other interactive means such as the use of social networks. Social networks such as Facebook and Twitter have become major marketing tools in the new media era.
They help in boosting a brand’s image and reputation. Social networks ensure that the company sends personalized messages to its consumers, who then are able to make decisions among the varied options they have at their disposal19 (Wind, 2001).
In conclusion, this paper has examined multinational corporations with particular emphasis on the controversy surrounding its definition, their advantages, and disadvantages. The paper also looked at the importance of digital marketing in such companies.
In particular, the paper found out that MNCs have to make use of the digital technology at their disposal such as web sites, and social networks to reach their consumers who are based in different parts of the globe. By so doing, multinational organizations will ensure that they maintain a competitive edge in the dynamic business world.
Reference List
Ajami, R. (2006). International business: theory and practice. London: M.E. Sharpe.
Barba, G. (2004). Multinational firms in the world economy. New York: Princeton University Press.
Dunning, J. (2002). Multinational firms: the global-local dilemma. London: Routledge.
Etrella, P. (2004). Technological innovation and Third World multinationals. London: Routledge.
Wind, Y. (2001). Digital marketing: global strategies from the world’s leading experts. London: John Wiley & Sons.
Footnotes
1 Ajami, R. (2006). International business: theory and practice. (London: M.E. Sharpe). p. 34
2 Ibid.
3 Dunning, J. (2002). Multinational firms: the global-local dilemma. (London: Routledge), p. 57.
4Barba, G. (2004). Multinational firms in the world economy. (New York: Princeton University Press), p.48
5 Ajami, R, op cit, p. 35.
6 Ibid.
7 Barba, G, op cit, p. 37.
8 Dunning, J, op cit, p. 60.
9 Ajami, R, op cit. p. 38.
10 Barba, G, op cit, p. 41.
11 Dunning, J, op cit, p. 62.
12 Etrella, P. (2004). Technological innovation and Third World multinationals. (London: Routledge), p. 47
13 Ibid.
14 Wind, Y. (2001). Digital marketing: global strategies from the world’s leading experts. (London: John Wiley & Sons), p. 23.
15 Barba, G, op cit, p. 47.
16 Etrella, P, op cit, 62.
17 Wind, Y. op cit, p. 25.
18 Etrella, P, op cit, 65.
19 Wind, Y, op cit, p. 27.