The Issues and Challenges Facing by Multinational Companies in the Global Business Environment - Literature review Example

?Issues Faced By Multinational Companies Table of Contents Table of Contents 2 Introduction 3 Critical Evaluation of Issues/Results 3 Comparing and Contrasting Different Theories, Concepts and Research Findings 4 Effects of the Issues on Operations of Multinational Companies: Strengths and Weaknesses of the Theories 8 Conclusion 9 References 11 Bibliography 14 Introduction Business, in this contemporary society is not limited up to dealing with the sales of products or services only. In modern day business context, multi-national organisations or companies need to deal with several issues apart from their usual operational process (Prise & et. al., 2010). An organization might face various issues while performing various operational functions. In this present day context, companies are eager to earn an extraordinary reputation for themselves in the global market, which further encourages them to diversify their respective business operations. The issues that face by the multi-national organisations might impose considerable impact upon the reputation along with the overall performance of their business in an unfavourable way. In recent years, multinational companies are dealing with critical issues while performing their respective operations throughout the globe. This can be owing to the reason of their wider operational network and prevalence of extreme business market competition among others. A few of the challenges that face by multi-national companies include incessant alteration of business environment, changing trends in the preferences of the customers and rising competition among others (Sabir , 2013; Elnaugh, 2008). Contextually, this paper intends to evaluate the present issues and challenges facing by multinational companies in the global business environment. The evaluation will be conducted through reviewing several noteworthy literatures and critically comparing different concepts or theories related to the subject matter. Critical Evaluation of Issues/Results As discussed above, multi-national organisations on the modern day environment often face several issues that impose unfavourable impacts upon their operational performance. With the advent of globalisation, the companies have to deal with stern competition, forcing them to adopt unconventional strategies for the purpose of overcoming the identified issues and attaining sustainability. Apart from this, companies also need to move parallel with the changing demands of the customers. Additionally, constant advancements in technology present another major challenge for companies in this present day context (Slideshare Inc., 2013). The challenges that are currently faced by the multi-national companies have been illustrated hereunder with reference to the relevant theories. Comparing and Contrasting Different Theories, Concepts and Research Findings Multi-national companies are observed to remain continuously under immense pressure in order to perform effectively in an evenly poised competitive global market. According to the study conducted by McDonald & Burton (2013), there are certain major challenges that companies face when they perform their respective operations in several regions of the world, which can be explained with the assistance of the globalization and international theories. Emphasising the same context, Hennart (2000), affirmed that the foremost among them is the changing economic conditions that have been explained as ‘market imperfections’ in Hymer’s international theories. In this regard, the global financial conditions fluctuate quite frequently due to gaining momentum of globalisation and other crucial factors mainly owing to two driving forces, viz. ‘boundedly rational’ and ‘opportunistic’ forces, influencing companies to change their strategies on a constant basis in correspondence to their transaction costs (Hennart, 2000). Moreover, McDonald & Burton (2013) also affirmed that volatility in the political conditions of various nations also forced multi-national companies to change their operational approaches, which can be further considered as a major challenge for them (McDonald & Burton, 2013). Study conducted with a similar concern by Rondinelli (2004) also revealed that multi-nationals operating in various nations of the world had to deal with different lawful regulations along with obligations, which further gives rise to business ethics related challenges. These factors also cause substantial influences in the competitive scenario of the global industry, as elaborated in the industrial organization theories by Hymer (Hennart, 2000). According to Pesalj (2011) and Hennart (2000), MNCs tend to gain competitive advantages through continuous internationalization. At often instances, MNCs internationalize through mergers or acquisitions, which in turn rewards them with monopolistic power in the market context. Considering the current unconventional practices by MNCs from a managerial point of view, it was further affirmed by Pesalj (2011) that MNCs currently are showing a trend to expand in transitional countries, which are supposed to offer better growth opportunities to these organizations. To be precise, focusing on the knowledge-based as well as network-based concepts of modern global management, these MNCs tend to supply or channelize those resources which are either found to abundance in the transitional economy (mostly knowledge that remain majorly unused in the national economic plethora) or outsource resources to contribute to the economic progress of the host nation (mostly in the form of technological advancements and employment generation) (Pesalj, 2011). It can be apparently observed in this similar concern that the policies and the governmental laws fluctuate on a constant basis, forcing companies to adopt and execute effective strategies to overcome the underlying issues. This, in most of the occasions, result in declining business performance, as various resources of companies are wasted at large (Feldstein & et. al., 2007; Olson & et. al., 2005). An example in this regard can be the taxation policies prevailing in the United States. According to Dickson (2012), the tax structure of the US has been designed as a complicated one for mitigating the aspect of double taxation. This particular approach impacts the foreign multi-national investors towards conducting their operational functions in this part of the world. Additionally, it has been noted that the immigration procedure of the US is also quite strict. Multi-national companies often find much hard to obtain US visas for their business purpose, which is also included as one the major issues (Dickson, 2012). Managing people is also duly regarded as amid the major issues for multi-national companies, as explained in International Human Resource Management (IHRM) frameworks. In this regard, the study of Dewhurst & et. al (2012) reveals that finding appropriate human resource in accordance with the changing nature of the global business, is indeed a tough task. It is strongly believed that people are regarded as the imperative asset for companies in any form of business. A workforce with proper skill and knowledge has the capability to enhance the operation of the business to the next level, where the divergences existing in the forms of cultural beliefs and structural conflicts play a major influencing role according to the notion of IHRM. However, for multi-national companies, it is quite hard to acquire workforce in accordance with the changing nature of the emerging markets (Dewhurst & et. al., 2012). Hence, it can be affirmed that HRM is viewed to be one of the crucial prevailing issues in the operations of multi-national corporate units. The study of Shah (2013) depicts certain other issues that associate with the multi-national corporations. The author argued that as multinational companies are increasingly expanding their business operations, they are often accused of adopting a profit- centric approach, wherein they fail to ensure safety in workplace and also to perform ethical practices. In this regard, Corporate Social Responsibility (CSR) is one of the vital prevailing issues that relates with the ideologies of international business ethics and communal responsibilities (Shah, 2013). Hence, companies are believed to reveal negligent behaviour towards their corporate practices like complying ethics, ensuring environmental sustainability and maintaining proper working environment among others. The issues associated with multinational companies do not end here. The study of Birkinshaw & et. al (2004) argues that there are increasing conflicts between government policies and multi-national corporations (MNC’s), which can also be duly considered as the other critical issue that face by the companies. According to the authors, the conflicts generally arise owing to the reason that the governments of every nation often does not support foreign companies to conduct their respective operational functions in the regions, especially when involving developing countries in the business channel, as described in the global ethics (Yuksel & Murat, 1999). Hence, the governments develop stern policies that falls against the growth of foreign companies and their operations. This eventually develops a situation of conflicts between government and the foreign multi-nationals. Apart from this aspect, the study of Birkinshaw & et. al (2004) also depicted that foreign multi-nationals usually need to spend huge costs in acquiring expert managers for their operations in accordance with the country wherein they operate. This aspect goes in alignment with the study of Dewhurst & et. al. (2012) which depicts the issue of managing people for multi-national organisations (Birkinshaw & et. al., 2004). Effects of the Issues on Operations of Multinational Companies: Strengths and Weaknesses of the Theories In the above analysis, it has been quite apparently viewed that certain issues are associated with the operations of multi-national organisations, wherein various international organizational theories have provided succinct illustrations and justifications to the inferences drawn. A few of the critical issues include dealing with the lawful regulations along with the policies of governments, managing human resource in an effective manner, profit making approaches/attitudes of the companies based on changing business environment and customer’s trend among others. However, these issues have the potentiality to adversely impact the operations of the multinationals in the global business. It can be affirmed that failure to manage the human resource of the organisation, weakens the probability of gaining operational effectiveness in the business for the multi-nationals (Armstrong & Baron, 2002). As per the theory of global ethics, as described by Yuksel & Murat (1999), these issues in-turn, inhibits the sustainability of multi-nationals in the place where they operate their business. However, from a critical point of view, it can be argued that national barriers, as similar to those discussed above, also hinder the smooth functioning of local as well as national organizations. In this regard, it can be affirmed that the global ethics theory and the IHRM concepts explained in Armstrong & Baron (2002) and Yuksel & Murat (1999). The issue of dealing with government policies of various different nations is also a major threat on the sustainability of multi-nationals. In this context, maintaining a proper interrelation with government or legal regulators is important for the growth and welfare of the business (Luo, 2006). Moreover, it can be argued that the aspect of CSR is believed to be quite crucial for growth and most vitally for sustainability of business. In this regard, the multi-nationals deal with certain stiff challenges that impact their business reputation at large. The aspect or the concept of preferring profitability over environmental safety ultimately imposes unfavourable impact upon the multi-nationals to earn greater business reputation and superior competitive position. This will probably result in declining business performance in the global market (Kaufmann & Olaru, 2012). Arguably, these studies make a critical comparison to the global organization’s functioning and that practiced by the local and national companies in the modern context, wherein the inferences drawn can be considered as much critical. Considering the vitality of all these factors and their influences on global business, it can be affirmed that multi-nationals need to build strategies to mitigate these issues and safeguard their business from unwanted threats. Conclusion From the overall analysis, the paper can be summarised as an important discussion with regard to the issues face by multi-national companies while performing global operations. It has been apparently observed that companies in the contemporary business scenario deals with various challenges that obstructs their performance one way or the other. Contextually, the multi-national companies are deemed to be under the influence of these issues. Multi-national companies face problems relating to effective management of human resource in their operations in various diverse regions. They also need to tackle with diverse governmental policies, which in certain occasions hinder their growth and sustainability at large. Apart from these aspects, multi-nationals also face issues in ensuring effective performance concerning the aspect of CSR. This issue is deemed to exist owing to the widespread nature of operations of multinationals wherein they find much hard to balance their operations in accordance with the varying nature of the business environment. Hence, it can be concluded that the multi-nationals need to strategise their move effectively in order to deal with the issues affecting their overall business performance at large. References Armstrong, M. & Baron, A., 2002. Strategic HRM: The Key to Improved Business Performance. CIPD Publishing. Birkinshaw, J. & et. al., 2004. The Future of the Multinational Company. John Wiley & Sons. Dickson, B. C., 2012. Issues Facing Foreign Multinational Corporations Conducting Business in the U.S. Home. 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