The article titled “ The Tortuous Evolution of the Multinational Corporation ” is aimed at decoding how different corporations use changing standards to formalize their claim of being Multinational. Harmonizing to the writer, the executives from four different corporations claim they are the transnational company and have backed up their claims with grounds.
Possibly what is most striking about the conversation is that fact all four executives all have different yardsticks. The lone thing that they seem to hold had in common was that each company has association in other foreign states. Multinational corporations go beyond merely holding association in other states and although it is most hard to specify what precisely an MVC is, it may be easier to suit the description utilizing more specific standards.
There is a deficiency of consensus among research workers refering the theory of MNCs and it is of import to observe that there is no remarkable definition of an MNC nevertheless ; some basic constructs like ownership and control of the corporation, home-country and subordinate relationships are good deciding factors.
The history of Multinational Corporations dates back to the seventeenth century with the constitution of ‘The Dutch East India Company ‘ which traded in spices in many parts of Europe, the Far East, Asia and the Pacific ( Vergne, 2008 ) . Since so many more transnational companies have come to existence.
Background of Multinational Corporations
“ Multinational corporations consist of a group of geographically dispersed and goal-disparate administrations that include its central offices and the different national subordinates ( Ghoshal & A ; Bartlett, 1990 ) . Examples of MNCs are Toyota, ExxonMobil and more late, Tesco etc. Toyota for illustration is a Nipponese company with to the full operative subordinates in the United States, Malaysia, Poland, Egypt, Viet Nam etc. The offices of MNCs are normally located in major international metropoliss of the universe e.g. New York, Tokyo, Paris etc.
In the article “ The Tortuous Evolution of the Multinational Corporation ” the four different companies in inquiry have changing descriptions of the MNC however ; all four companies have elements that qualify them as multinational. It is of import non to confound MNCs with Joint Ventures. JVs are coactions between two foreign companies runing in a 3rd state.
Company A is establishing their claim to MNC on the figure and extent of their distribution channels. Company B is making the same based on the per centum of non-nationals that are in cardinal places in the subordinates. Yet once more Company C ‘s claim to multinationality flexible joints on its merchandise division executives and their net income duty. Last, Company D maintains that they are an MNC as its central office is represented by 18 different nationalities.
The EPG Profile
The full claims on the theory of multinationality by the companies above may be valid nevertheless ; they do non normally operate in isolation. There are three wide profiles which companies fit into ; the EPG Profile i.e. Ethnocentric, Polycentric and Geocentric.
In ethnocentric administrations, maximal control is exercised by the place state over the subsidiary/host state ( Caligiuri and Stroh, 1995 ) . In administrations where ethnocentrism is practiced, criterions for public presentation of the home-country are applied. There is no sensitiveness based on the fortunes in the subordinates which may cut down or wholly back public presentation. Decisions-making is besides from the central offices in a ‘top-down ‘ manner. More significantly nevertheless, is the designation of the company with the home-country and cardinal places in the host-countries are occupied by the parent state subjects ( Banai, 1992 ) .
Polycentrism on the other manus is the antonym of ethnocentrism. In this type of administrations it is more likely to happen host-country subjects make fulling up cardinal direction places with chances for development in the subordinates ( Reiche, 2007 ) . The downside to this is that upward mobility carrier-wise may be restricted.
In polycentric administrations, the criterions of operation and public presentation are determined locally by the several subordinates. The decision-making in the administration is done at the subordinate degree and each subordinate is independent runing more or less like a alliance.
Geocentric administrations operate the most comprehensive attack in MNCs as worldwide concern doctrines as applied both in place and host states ( Reiche, 2007 ) . In such administrations, there is a collaborative attack between central offices and subordinates when determinations are being made and there is a flow of communicating between place and host states every bit good as between subordinates. Very few companies have a genuinely geocentric system of operation. Some reviews will reason that it has non been wholly achieved by any corporation.
The Three Stages of Evolution
There are three chief phases of development for MNCs ; the Export Stage, the Foreign Production Stage and the Multinational Stage.
The Export Stage
At this phase, the company relies foremost on distribution agents as a channel for their merchandises. Later on, gross revenues and after-sales subdivisions are established in the host-country. Some fabricating companies may establish assembly subdivisions in the subordinate as in the instance of Peugeot Automobile in Nigeria.
The Foreign Production Stage
The transit of merchandises or their component parts normally adds to over-head cost therefore some companies decide to get down set up production workss or they may choose for ‘Licensing ‘ as in the instance of KFC in the UK. Some administrations get production installations in the host-countries this is known as Foreign Direct Investment ( Blonigen, 2005 ) . When FDI begins, it is usual for companies to revoke licensing of independent manufacturers and go on with subordinate production.
The Multinational Phase
When companies begin to organize production, selling, funding, research and development etc from its subordinates, they are said to hold reached the transnational phase. At this phase cardinal operational activities are coordinated from the subordinates every bit good as the central office. Careful consideration is taken before cardinal concern units are established in host states e.g. natural stuffs, research and development installations, inexpensive labor, low revenue enhancement rate, low market impregnation etc.
It is evident that the trouble in specifically finding what characteristics a transnational corporation should possess comes from the assorted yardsticks by which companies determine multinationality. Although perceptual experience may be cosmopolitan, there is no distinct definition of what a transnational corporation is. The instance of the four companies in the article “ The Tortuous Evolution of the Multinational Corporation ” is obvious grounds ; all four companies endorsing up their claims of being an MNC utilizing wholly different standards.
However, it is of import to advert that possibly the basic perceptual experience of MNCs comes from set uping presence in more than one foreign state. This is non normally wholly accurate as some companies masquerade as multinationals whereas in world they are either ethnocentric or polycentric. There are certain qualities ascribed to MNCs therefore it is no surprise that big corporations with foreign associations all want to be tagged as MNCs despite what the organizational construction may turn out.
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Blonigen, B. A. , ( 2005 ) , “ Foreign Direct Investment Behaviour of Multinational Corporation ” , National Bureau of Economic Research Reporter ISSN: 0276-119X ( pp: 11-14 )
Caligiuri, P. M. and Stroh, L. K. , ( 1995 ) , “ Multinational Corporation Management Strategies and International Human Resource Practices: Bringing IHRM to the Bottom Line ” , the International Journal of Human Resource Management, Vol. 6 ( 3 )
Ghoshal, S. , ( 1990 ) , “ The Multinational Corporation as an Interorganizational Network ” , Academy of Management Review, Vol. 5 ( 4 )
Reiche, B. S. , ( 2007 ) , “ The Effect of International Staffing Practices on Auxiliary Staff Retention in Multinational Corporations ” , the International Journal of Human Resource Management, Vol. 18 ( 4 )
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