MIdterm Quetion # 3

1. Identify the benefits and disadvantages of MNC's.

Answer:

Benefits of Multinational Corporation

1. Cost of factory lease, space and land use.
2. Skilled workers available, educated and capable, and lower paid compared with other locations.
3. Infrastructure, such as roads, transportation, and communication.
4. Supporting industries, sub-contractors, components and raw material suppliers available.
5. Productivity of workforce.
6. Security and safety.
7. Political stability and strong Law enforcements.
8. Tax incentives, rebates and stable currencies.
9. Reliable supply of raw material, available and at reasonable price.
10. Reliable Power supply, as little downtime as possible, and ideal running time
11. Little or no restrictions on foreign investments.
12. Nearer to the source of material, resources and sales outlets.

The adverse effects of MNCs

A.On the home country:

1.Loss of jobs.
2.Loss of tax revenue.
3.Flexibility of operation is reduced in a foreign political system and thus causes instability.
4.Competitive advantage of multinationals over domestic firms.

B.On the host country:

1.Remittance of dividends and profits that can result in a net outflow of capital
2.MNCs engage in anticompetitive activities such as formation of cartels and dumping..
3.MNCs offer higher wages to its employees in the host countries,which is much more than any other domestic firm.
4.Obsolete technology may be used in the host country.


2. Identify one MNC company and describe its operation.

Answer:

Corporation that has production facilities or other fixed assets in at least one foreign country and makes its major management decisions in a global context. In marketing, production, research and development, and labor relations, its decisions must be made in terms of host-country customs and traditions. In finance, many of its problems have no domestic counterpart-the payment of dividends in another currency, for example, or the need to shelter working capital from the risk of devaluation, or the choices between owning and licensing. Economic and legal questions must be dealt with in drastically different ways. In addition to foreign exchange risks and the special business risks of operating in unfamiliar environments, there is the specter of political risk-the risk that sovereign governments may interfere with operations or terminate them altogether.

A multinational corporation (MNC) or transnational corporation (TNC), also called multinational enterprise (MNE)[1], is a corporation or enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation.

The first modern MNC is generally thought to be the Dutch East India Company, established in 1602. Very large multinationals have budgets that exceed some national GDPs. Multinational corporations can have a powerful influence in local economies as well as the world economy and play an important role in international relations and globalization.


3. Describe how the parent control/coordinates with its subsidiaries in other countries or region.

Answer:

"The whole is more than the sum of its parts." This famous Aristotle quote serves as a strategic imperative for multinational corporations (MNCs) because the corporate headquarters must ensure that its business units are collectively more successful than if they were acting individually. To create additional value through parenting advantage, a corporate headquarters must clearly define its role and strategic priorities to optimize the competitive advantage that lies within its global network of business units and people.

An MNC realizes parenting advantage by global scale and scope efficiencies, regional differences (e.g., raw material prices, customer/market requirements, labor costs, local knowledge), global risk diversification, or leveraging global learning and innovation within its international organization. If an MNC pursues all these objectives simultaneously, we talk about a transnational strategy.

Transnational strategies seldom fail for lack of ideas or strategic content but because of an unstructured or completely inflexible strategy process that doesn't:

* Consolidate strategic ideas,

* Synchronize or align strategies of different organizational units, and

* Give proper consideration to consensus and commitment among key decision makers.

Finally, strategy refinement and execution represents a balance between creativity and analysis. Analytical studies and evaluations should support the creative process. If the entire process is too unstructured, then the MNC runs the risk of missing essential considerations. But if the process is overly structured, then truly creative ideas are suppressed, thus compromising the core of successful strategies.

Today, the combination of the strategy map, balanced scorecard (BSC), and strategic action program (strap) has become a standard within the strategy process. Yet it's hard to find much information on applying these integrated concepts to the strategic alignment processes among strategic business units (SBUs), global functions or services, and regions within the MNC's often complex organizational structure. Henkel Corporation is a $13 billion German group in home care, cosmetics, and consumer/craftsman/industrial adhesives whose product portfolio includes Dial[R] soaps, Purex[R] laundry detergents, Loctite[R] super glues, Duck[R] tapes, and L.A. LOOKS hair gels. The group's adhesives division has successfully implemented and synchronized strategy maps, BSCs, and straps across the corporate level, three SBUs, supply chain, operations, R&D, international sales, and nearly 30 regions. Whereas strategy maps helped clarify, describe, and--most importantly--align strategic objectives of these different units, BSCs and straps ensured strategic control and execution. Henkel's annual employee survey clearly shows the degree of buy-in from the individual employee level. After the strategy map and BSC implementation, Henkel's adhesives division improved on the already excellent results of previous years with top marks in "organizational learning," "vision," "strategic direction and intent," and "agreement."


4. How is IT maximized or used by this MNC?

Answer:

Information TEchnology used by Multinational COrporation by easily connected to the customers and know directly their needs and wants.


5. WHat were the weaknesses/problems encountered by this MNC from its environment and global setup?

Answer:

Problems

Control is divided. The venture serves "two masters"

Welfare Effects

The new venture increases production, lowers price to consumers.
The new business is able to enter the market that neither parent could have entered singly.
Cost reductions (otherwise, no joint ventures will be formed) increased market power not necessarily good.


References:

1. http://www.ask.com/bar?q=benefits+of+multinational+corporation&page=1&qsrc=0&ab=1&u=http%3A%2F%2Fresources.alibaba.com%2Ftopic%2F39260%2FThe_Benefits_of_Multinational_Corporations.htm
2. http://www.ask.com/bar?q=Definition+of+Multinational+Corporation&page=1&qsrc=6&ab=2&u=http%3A%2F%2Fen.mimi.hu%2Fbusiness%2Fmultinational_corporation.html
3.http://www.allbusiness.com/management/benchmarking-strategic-planning/852560-1.html
5. http://www.ask.com/bar?q=what+is+the+main+problems+of+multinational+corporation&page=1&qsrc=2417&ab=2&u=http%3A%2F%2Fwww.econ.iastate.edu%2Fclasses%2Fecon355%2Fchoi%2Fmnc.htm


DIPAY, IVY MAE J.