Multinationals and Globalization

Multinationals are the corporations that manage production of goods or deliver services in two or more countries. Multinationals support globalization owing to various reasons such as market-seeking and efficiency-seeking. Multinationals support globalization through several methods such as advertisements, embracing technology, individual’s decisions, moving closer to their potential customers, strategic alliances, and cooperative arrangements. Globalization is not inevitable in the absence of multinationals. However, the multinationals’ input in the globalization process is overwhelming surpassing any other methods which support globalization.

Undoubtedly, multinationals go global because of market-seeking. They invest in specific countries or regions so that they can supply services or goods in those as well as the adjacent countries. Market-seeking foreign direct involvement implies that a multinational corporation develops subsidiaries to cover the host country markets. For instance, in the Central and Eastern Europe section, rapid economic growth and a large under-served market has prompted a market-seeking foreign direct investment. High demand from both private and public healthcare results in an increase in sales of generic and branded drugs although the generics take the lead as a result of a low purchasing power compared to the West. Furthermore, since most Central and Eastern European economies have become part the European Union, the non-EU investors have been lured by the enormity of the distinct European market (Costa, Duysters & Dolfsma, 2009, p. 45).

Efficiency-seeking is another factor that encourages multinational companies to support globalization. Efficiency-seeking foreign direct investment carries the sole aim of restructuring current production through rationalization as well as discovering some sections of the value chain in locations which offer lower costs. For instance, in the Central and Eastern European nations, efficiency-seeking foreign direct investment is attracted by low labour cost, manufacturing cost and other operational costs (Costa, Duysters, and Dolfsma, 2009, p. 46). This implies that multinationals will decrease their expenditures, while increasing their profits.

Local and national governments habitually compete to attract multinational corporations with the anticipation of improved tax revenue, employment, and economic activity. Some political entities offer multinational corporations an inducement, for instance, tax breaks, subsidized infrastructure, lax environmental or labour regulations. Most multinational corporations will take advantage of the reduced tax burden or subsidized labour costs to participate in the globalization process. Multinationals’ profits are directly linked to the operational efficiency, which comprises a high extent of standardization. Consequently, they adapt to the production processes which conform to the standards of most rigorous jurisdictions they operate in (Haufler and Runkel, 2008).

Multinationals use advertisement to market their products and prop up the globalization process. For instance, most multinational corporations use the Internet and television to advertise their goods and services. Multinationals carefully consider the methods they use to advertise their products since different countries have different traditions and cultures. For instance, in Western nations, sex appeal is often used in advertising of a wide array of products. This captures attention of the consumers and is likely to boost sales. Nonetheless, this approach cannot be effective with the nations which are extremely religious; for instance, Arabic countries. In these countries, most people, in particular girls, are habitually covered and they will not be wearing exceedingly revealing clothes. Consequently, the ads which portray sex symbols, like girls in bikini, cannot be broadcasted in such countries. In other words, companies fine-tune their advertisements to the ethnic group of their clients so that their products can be purchased.

Individual decisions play an essential role in multinationals enhancing globalization. Many a times, when people think about who performs work for multinational corporations, what they do, where they are located, why and how they operate, they pose the key questions to globalization. Individuals seldom cease to think of how various individuals’ decisions are instrumental in multinational trade and investment activities. To a large extent, globalization is steered by the individual actions by political and economic actors. For instance, it can be the personal resolution of a German inhabitant of Indonesian origin to work for a Mexican corporation in the Czech Republic. This resolution reflects one’s willingness and ability to take a career which demands multiple cross-cultural and managerial skills. Without these specialized managerial skills, multinational corporations cannot operate across national borders (Dierks, 2001, p. 118).

Multinationals encourage globalization because they intend to move closer to their customers. Strategic alliances result from large multinational organizations decentralizing as well as networking with the minor firms which contend in the same marketplace. Giant multinational corporations decentralize their large-scale profit centres, promote innovation, and get nearer to their clients. Multinationals adapt their management approach to better suit the host- culture. For instance, the challenge for corporations such as IBM is to encourage employees with various traditions, cultures, and religions, whereas the nimbleness of minor organizations speeds responsiveness to the clients (Dierks, 2001, p. 118).

Most multinationals have embraced advanced technology (e.g. an interactive website) which is indispensable in support for globalization. This can help increase the speed of the customer’s feedback on various issues regarding the corporation. For example, customers can click on the company’s website globally and make suggestions or file complaints. This helps the multinational corporation improve on its products or make the necessary adjustment as required by the client. This contributes to globalization since the multinational will enhance its products and consequently spread to other countries, which would have never happened if not for the newly adopted technology.

Multinational corporations support globalization through strategic alliances, dynamic and flexible cooperative agreements between firms across national boundaries. Presently, this has expanded to comprise various partnerships between customers, suppliers, and competitors. In some cases, these cooperative arrangements are in the form of acquisition or mergers. Sometimes, large organizations merge with or acquire other giant multinational organizations when reacting to growing competitive pressure imposed small entrepreneurial firms. In some cases, cooperative arrangements targeted production, research, distribution, or marketing inter-firm partnerships, encouraging the partners to change their corporate strategies to suit the demands of local and global customers, hasten technical cooperation as well as upgrade capital-intensive industries (Dierks, 2001, p. 125).

Brain drain is a major issue in developing countries; however, multinational corporations support globalization and reduce brain drain and its impacts. This has prompted multinational corporations to establish their business in both more developed and less developed nations. Multinational corporations offer attractive salary packages and good working conditions to managers and other professionals. This eventually results in the reduction of brain drain.

Multinationals help support the globalization process by doing business with the nations that have fewer restrictions and can enhance their business growth. Most multinationals are potentially susceptible to a random state intervention, for instance, an abrupt contract renegotiation, expropriation, arbitrary withdrawal, or the compulsory acquisition of licenses, among others. These are but some of the factors that multinationals take into consideration before finally deciding to do business in a particular country. When the regulations are favourable, the multinational corporation will do business in that country. Consequently, this augments the globalization process. 

To sum up, multinationals’ input in the globalization process is overwhelming, and this is achieved through various methods, such as advertisements of products, embracing technology, moving closer to their potential customers, individual’s decisions, strategic alliances, and cooperative arrangements. Multinationals function in the light of various factors enhancing the globalization process, e.g., market-efficiency and efficiency-seeking.