Defining the enterprise role of MNCs - Free Essay Example

An MNC can be defined as a corporation or enterprise that conducts and controls productive activities in more than one country Todaro (2009). Multinational corporations can be characterised as large in size and operate worldwide and the parent company is the headquarter. As business companies try to increase their market share and maximise profit they tend to go multinational operating on a global scale because different countries vary in government rules and regulation. Companies use PEST analysis to decide which host country will be suitable depending on Political, Economic, Social and Technological factors to operate their activities. It can be argued that developing countries encourage Foreign Direct Investment to improve economic growth, increase employment opportunities and improve infrastructure ( IMF 2006). Also MNCs have the advantage to invest in foreign countries especially in the developing countries due to availability of raw materials which can be produced at a lower cost of production. Companies can be monopolies controlling the market price over their competitors imposing barrier to entries. Local people are willing to work at a low rate of pay therefore cheap labour saves companies cost. On the other hand Todaro (2009) argues that we must recognize that multinational corporations are in the development of business, their objectives is to maximise their return on capital. MNCs search out for the best profit opportunities and are unconcerned with issues such as poverty, inequality, employment conditions and environmental problems. Research released by ( UNCTAD 2009) shows us a considerable value of global corporations and the increase in FDI to the economy. FDI flows steadily grew from 2004 and peaked in 2007 in a record of $1.3 trillion as illustrated in the diagram below. Although global FDI peaked in 2000 and fell a slower growth since then until 2003 due to the aftermath of the 9/11 terrorist attacks. Global FDI inflows 1980-2008 by group of economies ( billion of dollars). Source: UNCTAD, 2008, p.7 Global corporations are critical to business, management and the economy. At the end of these essay the reader will be in a better position to understand major issues relating to management of MNCs, what difficulties management faces depending on cross culture, human rights including gender and equality, ethics and responsibilities, communication barrier and giving case examples of companies. GENDER AND EQUALITY Women in management in the Middle East In the diverse world we live in we all vary in culture. Culture derive from language, attitude, education, social class, value, religion, economy, manners, policies, material. Hofstede (1991). Managers understand the importance of culture and they try to adapt to various culture because it is an important issue in management. Recent research by ( Huthchings 2010) suggest that women account for only 14% of senior executive post from USA and less than 5% from Europe represent in MNCs, women from South America, Eastern Europe, Asia, Middle East and Africa are less represented as international managers regardless of their increase represented as middle and senior managers in their own country. In Adler (1994) research explains three barriers to under representation of women at Macs including foreigner prejudice, company resistance and womens own lack of interest. Foreigner prejudice Companies are unwilling to send women on international duty because of foreign prejudice against women which makes them ineffective managers. Close to three quarter of human resource managers form MNCs surveyed believed that foreigners are so prejudiced against female that women managers would not succeed on their expatriate assignment (Hutchings 2010). Companies are not able to maximise the talent of women managers, ideas and managerial skills, if given the chance on expatriate assignment eliminating foreign prejudice they can be successful. Corporate Resistance Some companies hold assumption about women as managers and their availability, appropriateness and preference for international duty. Research done by (Adler 1994) proved that men believed that women are qualified for a career in domestic position and not international positions also male colleagues perception of women and unsupportive attitude towards female by companies has led to corporate resistance reducing the number of women at senior positions in MNCs. Corporate organisations are not helping and encouraging women to achieve their goals and dreams. Organisations should advice women with career development activities, give chance for promotion to senior management position so that they can mentor and support their fellow female in the organisation. Women managers disinterest Women are disinterested in following up expatriate positions but as Hutching (2010) argues that women are interested and ready for international duty, the only difference is when children are involved then they tend to decline the international duty. Also womens perception in international duty also affects them leading to reduction of women managers representation at MNCs. Further research by Metcalfe (2007) examines barriers of Arab Middle East womens career advance and finds out that lack of diversity and equality frameworks in organisations, work family conflict and limited organisation training support. It can be argued that the Islamic law on gender order on equal rights has different philosophies and creates gendered work hierarchies which can determine mens job and womens job supporting discrimination in work places limiting women to progress with their career in business. Every MNCs want equality in gender and respect diversity in work place but such factors above af fect management, especial Human Resource management when it comes to employee recruitment. It would be fair to say MNCs have less represent women in management in the Middle East due to the barriers of perception, culture and religion. A good example would be the Coca Cola Company. Coca Cola is operating business activities for 124 years and operate in over 200 countries. The company has no senior executive women representing in Middle east. Adler (1994) theory of women perception against international duty and the research by Hutching (2010) of less than 14% senior executive post from USA supports the fact why there are less women representation. If you pay more attention or research into the Coca Cola Company website under leadership, in the Board of Directors out of 14 directors only three are women, under the Operation Group of leadership out of 9 leaders there is only one female. CORPORATE SOCIAL RESPONSIBILITIES ( CSR) AND ETHICS Tesco and Trafigura CSR is the continuing commitment to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of local community and the society at large. CSR report (1999). Tesco is Britains biggest and most profitable supermarket (Corporate watch.org). In recent years the company expanded into the international market dominating the supermarket industry in Europe and Asia. Despite the growth in world market questions are raised over their CSR and ethics global sourcing in the garment industry. Tesco imports its garment and textile from some of the world poorest countries, the company does not label its cloths with the country of origin and its value brand labelled as Tesco product meaning worker are not aware who they are supplying to. It is very often that workers in the developing countries are willing to work at a low wage and poor working conditions therefore Tesco sell clothes at a cheap price, at a low cost of production and maximum saving made from low wages. Today Tesco have gained more ground aware of CSR and ethics, the company is yet to be come first zero carbon business, supports Cancer Research UK race for life and voted as CLIC Sargent charity of the year 2009. The company success is due to the improvement in management. Managers are able to deal with and understand CRS especially when dealing with developing countries because they need to be careful with cross culture and ethics. Due to poverty, people work in poor condition, accept low wages, work over time and the minimum age law is broken and parents send children under the age of fourteen to work. Managers face these task everyday to protect human rights, brand image of the company, keep the loyal customers and attract more customers because if a mistake is done it would be an advantage to the to the competitors. On the other hand Trafigura is a multinational oil trading company with bases in London, New York, Genev a and Netherlands. From 2006 the company faced court charges for the disposal of hazardous waste in Ivory Coast. The waste disposal polluted the most parts of the city Abidjan causing a wave of illness break out and death. The chemical waste damaged vegetation and polluted the environment and still causing environmental problems. Trafiguras turn over is twice the size the economy of Ivory Coast. Trafigura paid compensation but the damage caused is too much. Issued face by the companys management and all other global corporation is corruption and communication difficulties. The reason for Trafigura waste disposal was that the contractor who was supposed to properly discharge the waste safely with no harm caused, realised the cost would be expensive and opted for the cheaper option. Also there was a communication barrier in language and the style of communication used such as email was not clear enough to explain how and to what degree the the waste is discharged. CONCLUSION MNCs play a major role in the economy, research by UNCTAD (2009) revels that investment by multinational corporations in foreign markets from 2004 to 2006 contributed $ 1.3 trillion to the economy. These global corporation are important to the economy, politics and business. Gender and equality can be affected by culture and perception. As Adler (1994) argues that foreign prejudice, corporate resistance and women disinterest has led to under representation of women in work place. Due to these perception women are not able to progress with their career in business. Further research by Metcalfe (2007) indicates barriers to Arab women in the Middle East career advancement and finds out that lack of equality in organisations and Islamic law on gender and equality has different philosophies which can determine men and women job creating discrimination in work place. It would be fair to argue that culture, perception and religion has led to the under representation of women in MNCs . A good example would be Coca Cola Company. Business management abide the codes of equal right and opportunity and diversity but barriers in culture and perception leads to unequality. CSR and ethics is immodest to business and the community. It is the companies obligations to look after the environment and be corporate social responsible. 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