On the other hand, poverty and inequality emanates from disorganization and injustice among the developed countries in the global market who instead should work at developing the global economy to greater levels.
According to Cohn’s perspective, globalization entails activities that assist countries and societies to broaden and deepen thus increasing their interdependence around the world. Broadening and deepening is the establishment of links and using them to increase the regularity and intensity of the communications, transactions, relationships and general interactions among the involved societies and states. Globalization has led to developments in management and other significant sectors in the corporate world as companies come up with excellent strategies to overcome the competition and as a way of keeping up with the trends1. The vast growth in international market relates with developments in areas such as communication and transportation technologies that are key facilitators of the strategic links between the participating states and Multinational Corporations (MNCs). However, globalization’s impact varies in the different countries and in most cases; it threatens the domestic autonomy causing issues among the local economies. Upon entry into the international market, countries take up new roles and responsibilities, that allow them to make any policy choices. The policy choices are the determinants of states and societies’ experiences of globalization i.e. unity and cooperation or fragmentation and conflict. Multinational Corporations (MNCs) are companies that distribute goods and services across borders with an aim of spreading ideas and controlling assets in more than one state. They play a significant role in globalization and economists argue they make the greater part of it. MNCs mostly practice Foreign Direct Investments (FDI): in order to manage rights and control economic transactions in different states.
Realists link globalization with
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A purported challenge realistic critics overblow is globalization resulting to instability; however, a more significant challenge from a liberalistic critic is it leads to inequality and poverty among Less Developed Countries (LCD) which is contrary to its main objectives. From…
It is treated as in important source of income for different countries. Global foreign direct investment (FDI) is the amount investment made by different Transnational Corporations (TNCs) in different countries of the world. There are generally two different types of investments which are: Inward foreign direct investment (FDI), and Outward foreign direct investment (FDI) This resulting sum of these two types of foreign direct investment is known as ‘net foreign direct investment (FDI) flow’, which can be either negative or positive (Wheeler, & Mody, 1992).
The impact of globalization on the multinational corporations Introduction Reich (1998) defined globalization as a process through which the activities done in one part of the world affects people on other parts of the world (Reich, 1998, p. 5). It is difficult to define globalization in few words because of the complex parameters involved in it.
Nonetheless, the MNEs need not be large firms, and neither must they be operating in the technologically intensive industries (Huang, 2003, p.73). The main conventional objective of an MNE is to maximize the wealth of the shareholders. The decisions of the MNE will be made towards the achievement of this objective (Multinational Enterprise, n.d).
The expansion of these elements, particularly FDI, has surpassed the intensification of production. Consequently, the overall outcome is an ever more mutually dependent international corporation. Only since the past decade did the world witness massive volumes of FDI crossing international borders (Levy-Livermore 1998, 147).
These changes have developed due to the rise of foreign direct investments and increase in the number of multinational corporations. The rise in the number of multinational corporations has gone hand in hand with the increase of foreign direct investments.
The author states that a multinational firm in a developed country may face higher labor costs and higher production costs when locating its subsidiaries in its own home country, while a shift overseas may involve a larger initial investment but is economically beneficial in the long run because the margin of profits are higher.
The main conventional objective of an MNE is to maximize the wealth of the shareholders. The decisions of the MNE will be made towards the achievement of this objective (Multinational Enterprise, n.d). Unlike