Multinational enterprises are defined as a corporate organization that owns and controls the production of goods and services in more than one country, other than their home countries. They are also called the stateless business enterprises since they cannot operate in one nation. Multinational enterprises increase every year this is according to the report presented by the World Trade Organization as well as other organization that work under the jurisdictions of WTO. The increasing adoption of Multinational enterprises is due to the dynamic global economy that keeps own changing every time.
The increasing prominence of multinational enterprises in the global economy does not show the declining importance of national sources of competitiveness, this is because it gives every business sector and every stakeholder plays its role in steering development concepts. The multinational enterprises are looking for countries that can offer cheaper resources; they also look for nations that have low tax rates as well as having less regulation compared to their home countries.
Michael Porters explains concisely about each aspect that relates to the national clusters and geographical location of a business or a country, this is in relation to the concepts of globalization and international capital. Michael Porters present its findings that relate with the competitive advantages of the nation in relation to the international business operations (Porter, 1990)
In the 21st century, globalization has been the topic of the day in every meeting where every nation is talking about how globalization has benefited theme. Developed nations are perceived to be the nations that are mostly promoting the ideas of globalization while they look for better and cheaper resources to increase their development. Today, there is no nation, which can isolate itself from globalization and its impact.
According to Thomas. L. Friedman, 2006, the flattening of the current world is based on the globalized business activities, outsourcing of products and services, supply chaining as well as the political forces that affect countries global development. Globalization has taken a foothold to reduce the poverty rates in many countries, such as China and other parts of Asia, compared with other areas such as sub-Saharan where poverty rates have remained to be stagnant (Friedman, 2006). The ideas of free trade, capitalism, and democracy to other nations are believed to have been generated through the globalization context. The current evidence of globalization is the perception of the developed countries, supporters to globalization see U. S companies working in other nations which are also developed like China. Free trade has also been view as the foothold of globalization. Currently South Korea, NAFTA have agreed on free trade treaties, this have affected the U. S job industry and therefore increasing the trade deficit.
International business corporation starts first as the local organization, regional then finally being a multinational corporation. According to the current research done by Rugman, Europe and Asia are the regions whose firms are considered to play a key role in promoting globalization, in relation to the modern business perspective (Kotabe and Kothari, 2016). The research indicates that 500 world largest firms have most of their sales concentrating on their home region. 380 firms in the world economy are originating from Nafta; and Asia Pacific . The 118 firms are originating from the Europe have the average sales data to be 62.8%, these figures are derived from the home region sales, while the remaining 37.2% are sales outside the region. Out of 380 firms, Asia has 66 corporations with an average of 74.3% home sales date.
Lack of tariffs and regulation are the main caused which leads to business conflicts amongst the nation. Footloose, is caused by one nation entering into another and performs business activities without any commitment or the responsibilities to perform certain business activities. The relevant authorities can control these footloose by developing and implementing on global trade policies such as introducing of trade tariffs, tax rates, and other related measures. However, Transnational Corporation decides to perform specific business activities without any responsibility because of their difference in terms of capital size and their economic development. Foot-loosing is performed by Transnational Corporations, these TNCs tend to look for less skilled and less labour countries.
Many international industries as well as transnational corporation see the importance of operating in specific nations, some nation may have similar factor which attracts business activities for the international business. Many nation have cheaper resources, low tax rates and free trade compared to other nations. Clusters and internationalization is not false because, business activities in some countries are independent, where one business activity cannot operate without other activity (Kotabe and Kothari, 2016) For instance banking industry cannot operate without organizations who need to request for loans and mortgages and vice versa is the same.
In conclusion, multinational corporations operates in more than one country, they perform their activities in certain countries depending on different factors. The increase in multinational corporation does not show the decline of national resources, but rather showing how important those resources can be utilize for economic development. However, globalization is discussed to be the key factor which promoted the predominance of multinational corporation. Many firms from Asia and Europe have their sales to be above average because of the ready and increasing market. Therefore, globalization is has promoted the modern business perspective by increasing the development of Transnational corporations.
As the leading work on comparative business: M.E.Porter, The Competitive Advantage of Nations (London: Macmillan, 1990) 338.6048 POR
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Friedman, T.L., 2006. The world is flat: The globalized world in the twenty-first century (pp. 3-543). London: Penguin.
Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths to building a competitive advantage from emerging markets to developed countries. Journal of World Business, 51(5), pp.729-743.
Rugman, A.M. and Collinson, S., 2005. Multinational Enterprises in the New Europe:: Are They Really Global?. Organizational Dynamics, 34(3), pp.258-272.