Aspects That Can Impact the Degree of Globalization of Multinational Enterprises - Coursework Example

International Business Strategic Part A Multinational enterprise is a large corporation that has its assets and facilities in one or more country other than its home country. This organization form includes location of a country where firm is established and incorporated in foreign countries. Any group or company can be considered as multinational enterprise when a quarter of its revenue is derived from operations that are outside from the home country. In the era of increasing interdependent world economy, the fresh demands have been placed by globalization on statistical interventions. This positioning of new demands provides required information to inform policy. Furthermore, the globalization has established itself in the rising interdependence on fiscal policy, the augmented dependency on foreign trade, the transfer of technology and growing role of multinational enterprises. The multinational enterprises from emerging and developed countries share common objective to be part of globalized economy. Since the industrial revolution, the multinational enterprises from developed market are considered as the pioneer and forerunner to the globalized economy. On the other hand, the multinational enterprises from emerging economy have just arrived to strive on the global economy. The prime purpose of the report is to assess whether multinational enterprises from emerging economy is less globalized that that of multinational enterprises from developed economy. Additionally, the report identifies and provides vivid explanation on various aspects that can impact the degree of globalization of multinational enterprises. Discussion The advancement in information technology, market liberalization and deregulation worldwide has fuelled the growth of multinational enterprises in developed and emerging countries. In International Business Literature, the trajectory of multinational enterprises from limited coordination and geographical spread to widespread of coordination of operations and geographical range. The multinational enterprises from emergent and developed economies are effectively following the lead of encouraging investment and development of counterparts to surpass past expectations. During last years, the multinational enterprises from emerging industrialized countries has receive greater amount of interests. These have been primarily initiated by unprecedented growth from Eastern European and BRIC countries. According to Root, the multinational enterprises is a parent organization that implements business tactics on staffing, finance, marketing and production and associates positioned in various countries to involve in foreign production (batten, 2011). These are regarded as colossal organizations that are operating globally, crossed the national frontiers and expanded their business operation. These are provided by countries with developed economy. The developed multinational enterprises combine local resources with global processes, hire local talents and acquire local firms to maintain their dominance in first-world countries. The globalization has made skills of older people to become obsolete. The traditional internationalization path has helped local firms to increase their international movement. Moreover, the international involvement is labelled as evolutionary for firms. In the era of globalization, the change of local firms in to globalized firms requires help of international markets, increasing cultural homogeneity, advancement in technology, liberalization of trade, competition and access to the international networks like sellers, buyers, subcontractors and suppliers. The process of globalization has benefited many developing and transition countries through augmented openness and liberalization. The globalization is viewed as much more than that of movements on production, expansion of international trade and economic growth. The degree of globalization for multinational enterprises is dependent more on features of specific segments rather than depending upon specialization of each and every country. In last two decades, it is considered that globalization has been prime reason behind the significant upsurge in foreign investment from developed countries (Lu, 2014). The technological change, change of customer taste, the growth of new market, change on political situation and increased global competition are some factors that can heavily influence the degree of globalization. The degree of globalization for multinational enterprises can be speeded by more powerful internet connection and computers. The efficiency and effectiveness of multinational business operations can be significantly increased by vast improvement on communications technology, transportation and internet. The technological alteration can crate huge impact towards the degree of globalization (Folsom, 2009). The expansion and alteration on technology is constructing huge transformation in the way nations and organizations organizing their processes, investment capital, trade goods, development of new products and production. The introduction of sophisticated information tools has provided opportunity for multinational enterprises to allow instant communication for widespread actions and operations. The dynamics flow of technology and rapid rate of innovation is meant that competitive advantage can be for short period of time. One of the main concerns for multinational enterprises is threat of indirect or direct political expropriation. The transformation of economic and political policies can influence the degree of globalization. Social unrest on certain countries can drive out multinational enterprises on developed and emerging economy. The current notion of showcasing democracy and one government is regarded as ultimate plan for a stable government. This modern concept has created lack of transparency, inefficiency and massive scale of corruption on developed and emerging countries (Yaprak, 2015). The differences on governmental policies and regulations are crucial factors that affect the operations of multinational enterprises. The pressure of amplified global competition has influenced the degree of globalization of multinationals enterprises to expand their business operations internationally. The prime reason behind the expansion of strategic management of the organization globally is to improve overall performance of operative effectiveness and flexibility and increase their access on foreign prospects. The rapid upsurge of global competition has made difficult for MNEs to maintain its dominance in the host area. The cultural differences can have huge influence on multinational enterprises. Moreover, the cultural differences in some countries can lead to alteration on demand conditions of consumers. This can heavily affect the business outcome. A certain commodity, products or services regarded as best seller in local community can be refused or rejected in other community with different demanding conditions. A car design can be popular in home region, but this same product can be rejected by customer in other triad regions. In today’s generation, the consumers are willing to buy new or foreign products for new style and fashion. This resembles the fact that the change of consumer taste can force MNEs to change their business strategy. The degree of globalization can be affected by alteration of consumer preferences and taste. The multinational enterprises have opportunity to enjoy large scale of production to lessen their production costs (Palacios, 2008). The influx of international satellite television has made consumers from all over the world exposed to the universal advertising. This has increased customer awareness on arrival of new products or services. Moreover, the consumers are willing to try or buy foreign products. One of the main factors that influence the degree of globalization is the Foreign Direct Investment. The Foreign Direct Investment is basically originated from industrialized countries with multinational enterprises. It delivered a substantial infusion of managerial expertise, marketing connections, technology and capital. Over the past decades, the Foreign Direct Investment has played pivotal role towards the transformation of economic growth in emerging industrialized and less developed countries. Furthermore, it is believed that the FDI is acting as a form of acquisitions. This provides indication that emerging countries are required to build logical industries (Luo, 2001). These advanced local industries can act as investment targets for multinational enterprises from all over the world. The most significant manifestation of economic development and globalization is regarded as the importance of foreign direct investment. There is little information to reveal the contribution of foreign direct investment towards the development of economy of countries. Additionally, the improvement of native infrastructure is the most primary entity to the global investor. The successful emerging economy multinational enterprises have developed internal market strategy for technology compensating, capital and labour. These internal markets are developed to use foreign ventures and nullify environmental shortcomings. According to Ghoshal and Bartlett, the multinational enterprises has adopted considerable rate of variations in managerial, organization and strategic orientations (Janson, 2007). According to Grosse, the emerging economy multinational enterprises have capacity to deal with government of emerging economy market. Moreover, it provides a distinctive benefit for companies to tap marketplaces that are perceived as risky place. The expansion of technology and innovation has restricted EMNEs to compete in developed, regional and domestic country markets. The developed economy multinational enterprises follow the oligopolistic structure. These enterprises are regarded as giant sized that follows the process of merger and acquisition to upsurge their rate of profit and spread their operations in larger number of countries. The globalization has effectively contributed towards the significant upsurge of foreign investment. The accessibility of more resource enables multinational enterprises from developed economy to maintain their dominance structural and political stability. In perspective to systematic level, the multinational enterprises are considered as force that has effectively integrated economy of world in to their business operations (Nolke, 2014). This enables to reduce international and nationalism tensions. These factors has effectively presented the characteristics of developed multinational enterprises and emerging multinational enterprises. The prime purpose of the report is to examine that emerging multinational enterprises are less globalized that that of developed multinational enterprises. In recent decades, one of the striking features of Foreign Direct Investment is growing investment in emerging economics. The changing map of Foreign Direct Investment can have negative and positive implications towards economic and industrial development. The growth of emerging economy multinational enterprises has gone drastic and positive alteration. The emerging market includes Singapore, Argentina, Hungary, India, South Africa and China. It is argued that emerging multinational enterprises do not hold same assets organization than that of multinational enterprises from developed countries. The period between 1990 and 2008 is regarded as time for Foreign Direct Investment outflows that effectively contributed towards the expansion of exports of foreign affiliates and total assets of multinational enterprises. There are varieties of factors that have accelerated the application of global activities by multinational enterprises. The process of globalization and promotion of FDI inflows by several states has accelerated varying Foreign Direct Investment policies in emerging and developed economies. Over two decades, the FDI outflows grew at much high rate than developed economies (Molz, 2014). The high growth rate of internationalization of firms from India, China and Russia has increased the role of multinational enterprises from emerging countries. The data from United Nations Conference on Trade and Development reveals that 70 percentages of total FDI outflows are connected to ten largest countries of Foreign Direct Investment outflows on emerging economics. On the other hand, it is revealed that the emerging MNEs are more sensitive towards global crisis than that of developed MNEs. According to United Nations Conference on Trade and Development, the global expansion of emerging MNEs are still geographically oriented and limited. The multinational enterprises from developed countries have great advantage over emerging MNEs. Any new emerging corporation wants to globalize and expand their market base by focusing on global market. Emerging MNEs can opt to choose new market by focusing on lowering their products costs. This can hamper their brand and eventually cause severe impact towards global dominance. This can be verified that emerging MNEs will find more difficult to enhance their market share by focusing on global market. The degree of globalization of emerging MNEs should be less. The cultural difference is one of the primary challenges faced by emerging MNEs. In case of international business, the culture is regarded as critical factor for global economy. The ability of successful profitable relationships is by creating effective connection with separate cultural background from developed countries. According to Geert Hofstede, emerging multinational enterprises has to focus on various ways to understand and analyze people from different cultural background. The uncertainty avoidance, power distance, collectivism vs. individualism and femininity vs. masculinity are various ways of understand other cultures. The cultural differences in workplace can become difficulty for Emerging MNEs to enhance their business operations. The organization must have enough knowledge and information and cultural background of people in emerging countries. It becomes difficult for Emerging MNEs to cope with real life differences between two different cultural. The different expectations, management styles and minds of people create issues for Emerging MNEs. On the other hand, the MNEs from developed countries focus on factors like adaptation to enhance their business performance. The multinationals from emerging countries find it difficult to select right people for right place. In the era of globalization, it has become critical for multinational enterprises to select right people for expanding their business portfolio globally. The shortage of senior leaders to operate in global market can be prime concern for emerging MNCs. The lack of sufficient mindsets and experience to globalize their market share is challenge for the organization. The talent pool of emerging markets is small. Every successful multinational enterprise has best staff members and personnel to carry their business forward. For example, Dell Inc. is a multinational computer technology enterprise that invests their time towards talent management like that of product strategy and business strategy. The Dell Inc. is developed multinational enterprise that promote talent within their enterprise. The company follows leadership Development Curriculum, cross functional projects, job rotations, Organization and Talent Review and key talent development program developed to hire best talent globally. Another challenge is retaining good employees and executive in emerging economy like India, Singapore, China, etc. employees and executive have plenty of options as local firms has become more and more globalized. The matrix structure implemented by multinational firms can become difficulty for local executives. This is primarily because they do not have usual networks of advisers and mentors to help them to navigate on complex metric structure of the organization. Therefore, it can be stated that multinational enterprises from emerging organizations can be short of credible senior stakeholders. The noteworthy challenge for multinational enterprises from emerging countries is successfully compete with multinational enterprises from developed countries. The developed economy MNEs has advantage of effective organization structure, latent innovative technology, high brand image, good infrastructure and high brand reputation. Furthermore, they have access to huge resources such as supplier, distribution networks, contacts and funding. The emerging MNEs do not have these advantages to compete with developed nations. The developing market becoming saturated, it has become vital for multinational organization to expand their business globally. This can enable multinational enterprises to lessen their market share due to economic crisis. It is believed that economic crisis can have huge impact on emerging MNEs. It is because these enterprises do not have their business globally expanded. The reduction of obstructions in international trading has increased the rate of global business. The arrival of multinational organization on local market has provided wider choice of options for local consumers. Moreover, this rate of influx and few opportunities restricts growth of emerging MNEs. This resembles the fact that emerging MNEs have less opportunities and choices to expand their business worldwide. Consequently, emerging economy MNEs are less globalized. Part B This part of the essay is based on selecting 5 emerging economy MNEs and 5 developed economy MNEs to evaluate proved hypothesis. The selected 5 emerging MNEs are Hutchison Whampoa Limited, PETRONAS, Vale SA, Hon Hai Precision Industries and China Ocean Shipping Company. The selected 5 developed MNEs are General Electric Co., Toyota Motor Corporation, Royal Dutch Shell Plc., Total SA and Vodafone Group Plc. 5 Emerging MNEs Hutchinson Whampoa Limited It is a Hong Kong based investment holding company. This investment company from emerging country like China is facing problem to globalize their market share. The cultural difference is one of the primary issues faced by multinational enterprises from emerging countries. The Chinese people believe every man is unequal. Therefore, it is vital for all men to follow and obey the decision of hierarchical and authority decisions. On the other hand, people from Western countries believe that all men are equal and have right to act on their won and make independent decisions (Flores & Aguilera, 2007). PETRONAS It is an oil and gas company from Malaysia. The company has grown in to prominence and enhanced their global business benefits in 35 countries. Petroliam National Bhd or PETRONAS is having one-year delay of starting PETRONAS Rapid in South Johor. It is understood that primary reason behind the cause of late expected schedule for start of the project was land acquisition issues. The company is facing opposition from local residents and fisherman to start new business on their firm. This can be proved from this issue cultural issue can be primary issue faced by Petroliam National Bhd Company. Vale SA It is a multinational diversified mining and metal corporation for Brazil. The lack of expansion on global market is creating problematic situation for the company. In modern economics, the business of Vale SA is considered as sensitive towards the macro-level alterations. The volatile effect towards the economic growth can heavily affect the margins and revenue of any company. The company lacked its progress of development and expansion in global market scenario. Hon Hai Precision Industries Hon Hai Precision Industry Limited is a multinational manufacturing company of electronic contracts. The company is headquartered in Taiwan. The Fair Labour Association has investigated that Foxconn Technology Group traded from Hon Hai Precision Industries is working as Apple supplier in China. The investigation revealed that the working conditions of employees are unsafe for workers. The lack of knowledge and effective globalized strategy for controlling issues of safety, health and compensation has created huge problems for the company. China Ocean Shipping Company It is a logistics and shipping services supplier company from China. The company is viewed as largest liner carrier and dry bulk carrier that are located in China. This resembled the fact the company focused on enhancing their local market share rather than focusing on enhancing the global market. 5 Developed MNEs General Electric Company It is a multinational conglomerate enterprise from America. This multinational enterprise is based on developed country like United States of America. The varied products of the company include electrical distribution, lighting, gas, finance, energy, electric motors, aircraft engines, water, weapons, oil and software. This provides vivid explanation that operates through numerous divisions (Dunning, Fujita & Yakova, 2007). This provides opportunity to understand that General Electric Company is helping to build the world by infrastructure, expertise and capital. These developed MNEs are more globalized than that of other emerging MNEs. Toyota Motor Corporation It is a multinational automobile manufacturing company from Japan. This developed multinational enterprise consists of over 338,875 employees from all over the world. The ability of having high adaptability enabled the company to invest heavily on United Stated and become highly profitable. This resembles the power of MNEs from developed countries to create basic principles that should be respected and obeyed in every country. The company respects the customs and culture of every country. Furthermore, the company effectively contributed towards the social and economic development of corporate undertakings. The Toyota Motor Corporation develops innovative and advanced technology with outstanding services and products. Additionally, this developed MNE foster corporate culture that helps to enhance mutual trust, teamwork, respect towards labour and creativity (Rugman & Verbeke, 2007). The company maintained its stature and dominance by following the guiding principles that focus to enhance growth through harmony and innovative management. Royal Dutch Shell Plc. It is a multinational oil and gas enterprise that is incorporated in the United Kingdom and headquartered in the Netherlands. The upstream, corporate and downstream are following segments that Royal Dutch Shell Plc. is operated. The downstream segment of the company includes refining of oil in to petrochemical production, lubricants, rental sales, bio-fuel development, alternative energy business and fuels. On the other hand, the upstream segment of the company includes extraction of natural and oil gas, bitumen, generation of wind energy, conversion of gas in to liquid products and production of oil and gas. The corporate segment of the company includes covering the treasury organization and holdings of Shell. This varied segment of the company signifies the power of the company to contribute in each and every crucial segments of oil and gas extraction (Banalieva & Dhanaraj, 2013). The company insists on fairness, integrity and honesty in each and every department. This multinational enterprise from developed county like United Kingdom is committed towards providing quality service and products to each and every country. The large multinational enterprises has recognized that it is crucial to look for more talented natives, deploy competent staff in a foreign country and manager overseas operations in better way. It is believed that multinational enterprises from emerging countries has introduced new strategies to compete with large firms and push prices of products in to new low-end markets. Vodafone Group Plc. It is a multinational telecommunication public limited company from London. The company has partner telecommunication networks in over 40 countries and operates telecommunication network in 21 countries. The company operates in Europe, Asia-Pacific, the Americas, the Middle East and Africa. This provides clear indication that the company has significant presence all over the world. The company focuses on providing strong infrastructure with high speed data services for customers. The diversified geographical portfolio of the company provides clear explanation that it is helping less developed and emerging countries by increase income per capita and enhancing the rate of employment. The company is dependent on political frameworks and governmental policies to develop in to healthy telecom and globally competitive industry all over the world (Vahlne & Ivarsson, 2014). The Vodafone Group Plc. has created alignment with stakeholders, protecting customer data and unified communication strategy are primary strategies implemented to strengthen their service and network differentiation. Total SA It is a multinational integrated oil and gas enterprise from France. This multinational enterprise covers entire segments of oil and gas chain. Some of the products include oil chemical, oil refining, LNG transportation, natural gas, oil and gas production and extraction. The company seeks on long-term sustainability rather than focusing on short term benefits. These MNEs received help from vertical Foreign Direct Investment to announce their plan of acquiring Petrofina SA from Belgium in the year 1998. The application of effective human resource practices and execution of cultural programs helps to improve corporate culture and cultural norms to be followed in every country. The workplace environment of the company is based on cultural perspectives and government policies (Rugman & Verbeke, 2004). This can be proved and concluded that multinational enterprises from develop countries entered in global market by adapting effective business practices and modern values for the betterment of the organization. The selected developed MNEs such as General Electric Co., Toyota Motor Corporation, Royal Dutch Shell Plc., Total SA and Vodafone Group Plc. proves the fact that emerging MNEs are less globalized. In MNEs, the degree of globalization can be heavily influenced by certain factors. The rapid transfer of technology, the effective flow of capital and free movement of services and goods are certain elements of globalization that enabled MNEs from developed and emerging economies to be strongly integrated. The degree of globalization can be influenced by cultural differences, global competition, political situations and technological advancement and lack of resources and talent. The selected developed MNEs delivers bright clarification the much debated subject on multinational enterprises shows that majority of MNEs from developed countries are tends to be more globalized than that of emerging MNEs (Rugman, 2003). The selected emerging multinational enterprises such as Hutchison Whampoa Limited, PETRONAS, Vale SA, Hon Hai Precision Industries and China Ocean Shipping Company is on back foot due to lack of distribution, supply chain network and infrastructure. In prevailing conditions of globalizations, these rigid obstacles can prevent multinational companies to grow their market share globally. Hon Hai Precision Industry Limited is one of the emerging company discussed on the paper proves that lack of local knowledge and lack of discipline can act as hindrance for becoming successful organization. It is vital for organization to execute extensive knowledge to remove these recognized voids through profound knowledge and relaxed collective mechanisms. Therefore, this can be proved that emerging MNEs are less globalized. References Rugman, A. M., & Verbeke, A. (2004). A perspective on regional and global strategies of multinational enterprises. 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