The paper "Characteristics of Multinational Enterprises and Their Future" is an outstanding example of business coursework. Multinational enterprises (MNES) refer to firms that extend their. productive capacity from the home country to other countries. Due to increased deregulation of local markets in the entire world, the liberalized firms in foreign countries strategize on the extension of their production activities into other countries with the aim of benefiting from high-cost advantages. They extend to international countries in search for raw materials, cheap labor, preferential government regulations and the market for their products. This paper will tackle MNEs strategic planning as well as the steps involved in strategic planning since it is very important to strategize before beginning any form of business so as to discover maximum profits.
The characteristics of MNEs will be discussed to create awareness on the nature of MNES. Reasons for globalization will be discussed to give a briefing on the factors that force companies to become internationalized. It goes without saying the impacts will be included so that it can be clear on the positive and negative impacts on MNEs.
Finally, the theories of MNEs will be discussed since they explain the origin and existence of MNEs. The paper will exclude the future of MNEs since it is clear that it is the desire of every corporation to be internationalized. Characteristics of multinational enterprises The multinational enterprises have greater responsiveness to the different environmental business forces such as the differing governments, financial institutions, suppliers, customers and competitors. They draw a common pool of resources such as human resources, information, trademarks, patents and assets with local businesses and have affiliates with common strategic visions (Robin, 1997).
These enterprises also differ from those companies confined to domestic operations by making decisions that are considered to be the best for the organization even if circumstances force them to transfer their job or funds to the other country of operation. High risks exposed to these businesses force the companies expanding abroad to do so with caution. A wholly-owned subsidiary should be set up at the last stages of operation. Internationalization process for any enterprise trading in standardized products mostly begins with obtaining a licensing agreement (Raza, 2009).
This is a contractual agreement that enables a firm to have access to its trademarks, patents or technology in a firm operating in the host country in exchange for a fee. The firm can also decide to export their goods and services via a distributor or an agent. This is followed by establishing a foreign sales subsidiary or hiring a domestic representative. If the business gives hope for a successful operation, the organization can then consider having a foreign direct investment by setting up a wholly-owned subsidiary in a foreign country. Companies become multinational due to a strong desire of protecting the firm from uncertainties and risks exposed to it by the domestic business cycle, to respond the high increase in foreign competition, a high desire of reducing operation costs, need of overcoming tariff barriers and taking advantage of foreign technological expertise (Raza, 2009). Strategic planning process A successful result-based accountability system in multinational enterprises requires a proper strategic planning process and the resources that make implementation, monitoring and evaluation of these plans possible.
Before any strategic planning takes place, the organization management has to address a variety of questions which will act as the guidelines to the way forward.
These questions are; where the organization is at the moment, what they have to work with, where they want to be and how to get there (Schilder, 1997). To determine their current position, the enterprise has to examine its recent history and the changing contexts, both internal and external, of their state of operation, programs, sub-programs and the organization at large. The question of what to work with is answered thorough evaluation of the organization’ s strengths and weaknesses (SWOT analysis) thus enabling them to determine the strengths that they should capitalize on.
Where they want to be is well looked at by articulation of their vision and mission. The question of how to reach their goals requires a thorough process of articulating the strategies to be used in achieving their goals.
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