The Multinational Corporation as an Inter-Organizational Network, Academy of Management - Essay Example

Name: Course: Institution: Date: The multinational corporation as an inter-organizational network, Academy of Management Review The multinational corporation as an inter-organizational network is an Article by Sumantra Ghoshal and Christopher Bartlett. This article was written explaining the set up of different organizations especially the multinationals. A multinational organization is an organization that is geographically dispersed. It has its headquarters and branches scattered in different countries. According to the writers such an entity with subsidiaries in different countries is conceptualized as a strong inter-organizational network. This network according to the article is then embedded in different other systems either within the organizations or outside the organization like the regulators, suppliers, and customers. However, all these units in this structure must relate and interact well for them to form a good organization. The writers of the article propose a theory that will help the correlation of different arms of the organization. They give a hypothesis that relate to some attributes of the multinational organization like the resources configurations, distributing power internally and also to attract some of the external factors into the system. The formation of the multinationals has been viewed as a very fundamental factor that is very important in ensuring better living standards of people in the whole world. It is true to note that the advantages of this factor are far reaching hence the world needs to embrace it without much ado. The existence of multinationals always comprises various economic phenomena that include: technology, markets, and even competition (Bartlett and Sumantra). It is crucial to note that the relationship between different countries through a certain organization has occurred for hundreds of years hence making the world a platform for economic growth for many countries. Multinational corporations have always aimed at ensuring that the world is an open market for all. This has been ensured due to many efforts. For instance, the enactment of General Agreement on Tariffs has led into reduced tariffs among trading countries. The multinational corporations have paved way for the multinational corporations to operate in many countries. It has also made it easy for the multinational organization to operate from one country and have several other branches in other countries. In addition, there are international laws that were enacted to help regulate the performance the multinationals without collision with the authorities. Developing countries have ensured increased multinational corporations in their states through foreign direct investment. The multinational corporations target the developing countries as it has a potential market. Therefore, the corporations benefit from the ready market as the developing countries benefit from the investment through taxes and employment for their people. This makes the mutual relationship beneficial to both parties. This has enabled them to invest easily in the developed countries. Many countries have also reduced trade barriers among them to ensure easy flow of goods and economic resources in and out of those countries. International competition is the key factor in the analysis of the organizations. For the analysis, there are several theories that are adapted to explain the multinationals. The theories include the multipoint competition and the multi-plant production. These are some of the theories that analyze the cost and the benefits of different multinationals. A higher level of competition that is evident in the international market has resulted in reduced prices for the goods. This is because the free market for all allows many companies to compete for the same market. This always results in even lower prices for the goods. It is also fundamental to note that the MNC has an effect of reducing monopoly in the market. In this case, market participants are faced with the same market conditions hence ensuring favorable competition. This effectively improves the living standards of the people in the world. This is because consumers can get high-quality goods and services at very low prices. In the contrast, this article does not address the key issue of multinationals. It is true that for any MNC to survive in a foreign nation, it must have a good relation with the people around. Therefore for any success the multinational must address the issues and the flight of the people in the country through corporate social responsibility. However, this article does not address this important issue. Corporate social responsibility is a factor that most of the multinational corporations should ensure they invest in as the benefits outweigh the cost. Many MNCs have made an effort in ensuring that the society that they are working lives a better life. For instance, most of these multinationals are always engaged in manufacturing. In as much as the manufacturing may seem to be beneficial by creating more products and creation of employment opportunities for the host citizens, manufacturing can result in massive pollution hence gives a negative impact on the lives of the citizens. Most of the multinationals have been trying to make sure that they control the rate of pollution that they cause to the environment by participating in various environmental conservation methods that include tree planting and recycling. In terms of packaging, multinationals are trying to reduce the amount of energy used in packaging. It is salient to note that about 85 percent of the company’s packaging materials are always made from recyclable materials. In this case, the used containers are capable of being recycled to get new containers for packaging (Bartlett and Sumantra). In terms of community development, MNCs have always been active partners in the community. The most common types of participation in the community include community recycling and active, healthy living among others. MNCs are committed to creating sustainable communities through programs that are aimed at improving the quality of life. For instance, developing countries have been able to keep the same pace with technology as their developed counterparts. For instance, many developing and poor countries are now able to access to computers and mobile phones that are manufactured by the developed countries. This has ensured that there is effective communication in those particular countries that embrace the technology. Another major factor that the article fails to address is the free movement of capital. Free movement of capital has also been seen as one of the fundamental factors resulting from multinational corporations. This is because the multinational corporations ensure that the world is one big market where free interaction is very possible. With the free movement of capital, investors can invest in any country that they feel like. This is very important since it has the impact on improving the economies of these particular countries. Foreign direct investment will be easily possible if multinational corporations are maintained in the world. It must be noted that foreign direct investment would easily improve the rate of investment in the world. This will in turn improve the standards of economic growth in those countries that invest. The flexibility in transactions is also another factor that is worth noting. Multinational corporations are capable of ensuring that economic transactions are made as fast as possible. This is due to elimination of barriers that can tend to reduce the rate of making such transactions. Multinational corporations have also resulted in the free movement of information. This has improved communication among different countries. In this ideas can move from one country to another hence improving innovation rate. Companies are also capable of receiving feedbacks from different consumer’s worldwide (Matevž, pp 11). Multinational corporations also have the effect of creating employment opportunities in the world. This is because there is always free movement of workers from one country to another. This means that outsourcing and in sourcing for the human resource will be made very possible. In turn, people can get jobs from different parts of the world. The free movement of human resource would ensure easy movement of great ideas from one country to another and hence improving the rate of innovation in the world. It has been noted that export-oriented jobs result in higher pay as compared to import jobs. It is, therefore, fundamental to realize and note that the creation of employment to the jobless people due to free movement of human resources has an effect of improving living standards of those people. Promotion of peace has been always seen one of the outcomes of Multinational corporations. This is because countries that trade together always have good relations which prevent them from the creation of animosity among them. Globalization, therefore, reduces to a great extent the possibilities of the trading countries going to war. Political stability experienced due to multinational corporations has effect in improvement of the economic growth among those particular countries. It is worth noting that trading nations that enjoys the freedom of reduced tariffs would not wish always to go into war due to fear of reduced trading activities among them. Reduction in the rate of warfare and animosity is likely to improve the living standard of the people. It is, therefore, fundamental to note that multinational corporations have a great role in ensuring that people have an improved life in the world. It is also true to highlight that multinational corporations have the possibility of improving the environment. This has always been noted for the developed countries. For instance, the developed countries have always embarked on the conservation of their environment as a result of multinational corporations. For instance, most of the multinational companies are found in the developed countries. These organizations have always tried to ensure conservation of the environment. It is, therefore, clear and vivid that multinational corporations have a great impact in ensuring that people have an improved life. According to the article, the MNCs are formed on the basis of the network that works properly and their resources are distributed on the outcome of the distribution of the previous resource that was allocated and how it was spent. The flow of resources in an MNC is always controlled by the management and especially the distribution of power in the corporations is necessary. Most of the organizations use their power to give a lead in the competition in the country. Due to the larger volumes of their operations, multinational corporations always pay large amounts of tax. The corporations also increase the levels of employment within the host countries. It has been observed that these corporations always employ large number of local labor. Multinational corporations also have very vibrant and attractive remuneration packages that make them more attractive to many employees. It must also be noted that the working conditions within these corporations are always improved so as to attract many employees. MNCs also have a very vibrant observation of their corporate image. The corporations always strive to improve their corporate images so as to improve on the consumer confidence in their products. It is crucial to realize that the multinational corporations have an impact on the government policies of a particular that they operate in. This has been due to the threats by the multinational corporations to withdraw their services hence making the government implement policies that would favor them. Multinational corporations reduce the cost of production by producing more products and supply them to many countries in the world. The large number of customers that the multinational corporations have has made their products to be highly elastic in terms of price. This is the reason they always charge less for their products (Culpan pg 12). The article also does not address a few shortcomings of MNCs. Most of the multinationals have resulted in changing of some of the policies of the governments. Most of these policies have always been implemented to please the multinationals so as to prevent them from withdrawing their investment programs from the host countries. It is sad to note that some of the multinationals have also affected the politics of some countries that they operate in because that they have huge investments in those countries. In this case, the countries especially the developing ones have been always forced to implement some issues not in line with the constitutions of those countries so as to avoid losing the profitable and vibrant multinationals. Another most peculiar negative impact that the multinationals have and that is not addressed in the article is the dominance of the host countries. Most of the MNCs have dominated the markets in the host countries; this dominance has always discouraged the thriving and developing of the smaller participants in the same market. In conclusion, the article addresses most of the crucial issues about the multinational corporations and is well researched. The writers of the article have made a good effort in bringing together the points, and the article can be used as a point of reference by many MNCs. Work cited Culpan, Refik. "Book Review: the Differentiated Network: Organizing Multinational Corporations for Value Creation." Journal of International Business Studies. 29.2 (1998): 429-431. Print. Matevž, Rašković, Makovec B. Maja, and Jaklič Marko. "Antecedents and Evolution of the Bartlett and Ghoshal Transnational Typology." The Multinational Business Review. 21.2 (2013): 148-173. Print. Bartlett, Christopher A, and Sumantra Ghoshal. Transnational Management: Text, Cases, and Readings in Cross-Border Management. Homewood: Irwin, 1992. Print. Bartlett, Christopher A, and Sumatra Ghoshal. Managing Across Borders: The Transnational Solution. Boston, Mass: Harvard Business School Press, n.d.. Print. Read More