International Business: Framework Of Multinationals Company Essay

Question:

Discuss about the International Business for Framework of Multinationals Company.

Answer:

1. Identification of a multinational company operating in Australia

The international company that is taken into consideration in this assignment is Wesfarmers Limited that is headquartered in Perth, Western Australia. This organization is associated primarily with the retailing business procedure but also have a predominant interest in providing chemicals, fertilizers, coal mining and industrial and safety products. The concerned organization has a 220,000 number of employee only in Australia including employees from all subsidiaries and has a shareholder base of approximately 500,000. The number of employee in New Zealand exceeds 2000 and in Asian countries like Bangladesh, they have their count of stakeholders more than 5000 ("Wesfarmers Limited", 2016). The annual revenue of Wesfarmers in the year 2014 is $13,842 million and $13,382 million for the year 2015 ("Wesfarmers Limited", 2016).

Figure 1: Annual revenue by Wesfarmers Limited in 2014 and 2015

(Source: "Wesfarmers Limited", 2016)

It is evident from the above figure that the concerned organization attained 56% - 59% of wealth by employees every year. Wesfarmers have many subsidiaries like Coles Express, Coles Supermarket, Vintage Cellars, Bunnings, Kmart, Kmart Tyre & Auto Service and many more operated in India, New Caledonia, United Kingdom, China, Bermuda, Singapore, Hong Kong and Indonesia. The headquarter in New Zealand is in Auckland, New Zealand, while in India they intends to open their apparel retail industry for better opportunity to increase their business revenue.

2. Regulatory frameworks affecting the multinational company

Eberlein et al. (2014) defines that a regulatory framework is necessary infrastructure, which supports the direction and implementation of the course of action, rule, principle or law followed by an organization. El Kharbili (2012) on the other hand affirms that regulatory framework is majorly used by the businesses that are going to established themselves. The regulatory framework governing energy and grocery retailers comprises of rules and legislations concerning marketing practices, offering the retail products to small customers at regulated price. Haidar (2012) also portrays that the concerned organization provides less information regarding the energy bills and expenditure spent on the betterment of their organization. The primary objective for the same is to offer premium services to their valuable customers while not disclosing their major functionalities.

Rugman et al. (2012) mentioned that multinational corporations, like local companies, are subject to 30 percent corporate tax. In a similar way, tax-related legislation is also passed between Australia and New Zealand, which is the double taxation convention. In Australia, it fringes the benefits of tax and withholds tax on income. While on the contrary, Khanna (2013) depicts that the same law benefits in payment of Corporation Tax and Income Tax and Capital Gains Tax. In addition to that, Woellner et al. (2016) illustrates that multinational companies headquartered in different countries face higher tax burdens than nations with exemption systems. An enormous amount of revenue of these organizations is spending on paying tax if they do not know the loopholes with the tax legislations to avoid tax payments ethically. This result in providing employment to the nation’s people that affects their business procedure directly as they are the individuals who are dealing with the customer by serving their best to fulfill their demands. The concerned organization earns a profit of $2440 million after paying tax along with an underlying increase of 8.3% excluding discontinued operations and non-trading items ("Wesfarmers Limited", 2016).

Furthermore, Wild et al. (2014) depicts that Labor Law and International business enterprises come under the regulatory framework adopted by Wesfarmers Limited. This organization follows Conciliation and Arbitration Act 1904 that is enacted by the Federal Parliament for preventing and settling interstate industrial disputes between their subsidiaries and institutes settled in overseas. Workplace Relations Act 1996 is also followed by the organization so that they can provide an equal chance to their employee present in Australia (Kerr, 2016). Townsend et al. (2013) portrays that according to the act a single employee can negotiate their demands with the employer relying on their requirements. Similarly, in New Zealand, the labor law that is followed by the Wesfarmers Limited according to that provision on freedom of association, recognition and operation of unions must be provided to an employee working in their organization. The Labor Framework of Employment Relations Act 2000 fulfills these activities (Kersley et al., 2013). Brauer (2016) also affirms that leading organizations like Wesfarmers values their employees and that can be illustrated by the labor regulatory framework of Equal Pay Act 1972, Health and Safety in Employment Act 1992 and Human Rights Act 1993.

The concerned organization initiates to take more attention towards their organization that is present in developing cities like Bangladesh. Afrin (2014) mentions that labor present there has lack of education and their standard of living does not permit them to fulfill their basic demands. Thus, Wesfarmers implement the strategy to start their business so that they can provide proper training and employment for upgrading the living standards of these people and earn recognition in the market of Bangladesh. Aktar and Abdullah (2013) depicts that unlike every nation’s labor framework, this country also implements Bangladesh Labour Act 2006 that is followed by Wesfarmers Limited. According to this legislation, an appointment letter must be issued for hiring any labor, provident form and yearly festive bonus and other workplace related legislations. As Wesfarmers Limited, have their organization established in UK, the labor regulatory framework is also followed. Employment Rights Act 1996 demonstrates that employees can get right to leave for childcare and to request flexible working patterns. The Trade Union and Labour Relations (Consolidation) Act 1992 is initiated for fair-trading between the overseas organization through the employees who are associated with the trading procedures.

Lastly, Transfer of Undertakings (Protection of Employment) Regulations 2006 is applicable for the business that has transferred their business to an entirely new business. However, Prassl (2013) depicts that as Wesfarmers is not only associated with retail industry but also regulates the coal and mines and safety product, this TUPE legislation is applicable to them where they maintain their every business by protecting their employees. Khanna (2013) defines that the protection is regarding the zero dismissals of their employees, the contract should not be violated under any organizational changes, and they should consult with a representative in such change situations. Moreover, in countries like India, Mines and Minerals (Development and Regulation) Act, 1957 (MMDRA) is followed by about mining major minerals. Coal Mining Safety and Health Act 1999 is applicable in coal and industry mining field for the safety of labor and is followed under the primary legislation of Corporations Act 2001. Health of the employee is the foremost priority consideration as they are the crucial members carrying a business to success; thus, in New Zealand also Health and Safety in Employment Act 1992 in coal mining sectors of Wesfarmers Limited and is also supported by the regulatory framework of WorkSafe New Zealand Act 2013 ("Rules and regulations | NZ Petroleum & Minerals", 2016). In addition to that, The Mines Regulations 2014 act enforced from April 2015 for people of UK works in coal mines along with the regulatory framework of labor law of Mines and Collieries Act 1842 ("Health and Safety Legislation that applies to mines", 2016).

3. Treaties, conventions or agreements that have affected the products or services of that company

According to the viewpoint of Aust (2013), a treaty is a formally concluded and ratified an agreement between the nations with which an organization is trading. The primary reason for adopting treaty is to support the trade between countries for better economic growth and business revenues. Australian organization has some signed agreement with New Zealand that are ASEAN-Australia / NZ Free Trade Area, Australia and New Zealand Closer Economic Relations ("Australia-New Zealand Trade Agreement", 2016). Moreover, other treaties like those that the New Zealand government initiates Anti-Counterfeiting Trade Agreement where trading of counterfeit goods have to be abandoned. Wesfarmers Limited’s coal and mining business impacted a lot in a positive way as no exploratory and counterfeit goods are traded with stakeholders and no such good is exported to other countries. This results in an ethical business relationship with the concerned organization with the business partners. Nottage (2014) also depicts that as Wesfarmers Limited targets a huge field of their business that covers not only the retail industry but also the mining and energy providing industry which makes them the defeating two of the leading industry in Australia in two of the respective field- Woolworth and BHP Billiton. Moreover, there subsidiaries also signed agreement to formulate a collaborative business for attaining economic growth to the nation. Nottage (2015) demonstrates and example, where Bunnings established 15 new sites with six freehold trading locations, two freehold development sites and seven leasehold trading locations. In 11 out of these 15 sites, they allowed Wesfarmers to locate their store so that their customer can access the store from anywhere in Australia ("Wesfarmers Limited", 2016). However, the initiatives they are planning to initiate in other countries and continents also where they can provide their goods and services to their customers.

In addition to that, Wesfarmers Limited follows the protocol signed between Australia and India in 2011, which demonstrates that the method of double taxation should be avoided along with the fiscal evasion. In this situation, the source country only has to pay the cross-border services tax where the trading is done more than 183 days in 12 months ("Wesfarmers Limited", 2016). The primary advantage of this approach is that the source country can trade their goods and services by attaining profits derived from natural resource exploration or exploitation activities and operation of substantial equipment. These activities between Australia and India are supported by the legislation International Tax Agreements Act 2014 ("International Tax Agreements Act 2014", 2016).

Kuppusamy and Anantharaman (2014) portrays that in the circumstances when some other countries exports some hazardous waste, then they have to take permit from the Ministry of Economic Development present in Australia. In addition to that, there are some inter-state agreements, which the subsidiaries signed with Wesfarmers Limited. Coles signed a long-term supply agreement where they offer greater value through lowering the price. Furthermore, to mitigate the risk of reduced market demand for products, WesCEF manage the risk by establishing long-term contract and established pricing mechanisms supported with short-term spot agreements ("Wesfarmers Limited", 2016). In this way, every associated stakeholder will be satisfied with his or her business procedure and Wesfarmers can continued to be the leading retailers in the market.

In terms of the coal ad mining business, a coal supply agreement is also signed with the Stanwell Corporation Limited. This results in new three-year partnership agreement by increasing their partnership with the indigenous community. Booth and Coveney (2015) demonstrates the benefits of fostering an inclusive culture, flexible work arrangements, paid parental leave, on-site vacation childcare and keep-in-touch programs. Mining lease agreements impose obligations to remediate areas is following by the concerned organization since 20 years. They also have International Swaps and Derivatives Association (ISDA) master netting agreement for supporting their financial instrument.

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