Multinational corporations are often based in more than one area other than its home country. They have centralized structures where they manage these assets on a global level. The trends of the global economy tend to play differently depending on the companies involved. However, most of these MNCs such as Unilever and Coca Cola Company have made economic impacts in the countries they are based in, such as providing employment, building infrastructure and community-based programs aimed at developing the company and the community they interact with as well.
Challenges
Despite their impact on the market, these organizations face challenges that affect their impact on an economic scale. These challenges include economic conditions, operations and supply chain management, labor costs, political instability, and conflict of interest. The standard of the economy is affected by factors such as consumer behavior and market trends that tend to affect profit margins in different areas. As such, some of these companies opt to take drastic measures such as retrenchments to manage company expenditure. Labor costs also vary depending on the country’s economic status. As such, they tend to decrease profit margins affecting its economic impact 1 . It is difficult managing efficient supply chain and operations management, especially in developing countries, due to the time factor involved in establishing effective production and distribution factors. Most MNCs tend to have variated conflicts of interest, depending on the different needs, governmental approvals, and the target consumer. This limits MNCs from benefiting from the economic potential within said areas. The political structures of different countries tend to change based on the events occurring within the countries. As such, these changes tend to affect the market performance of MNCs, especially due to their poor economic standards. In light of this, many MNCs shy away from countries prone to political instability.
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Opportunities
Despite the challenges presented as these MNCs venture into the market, there are opportunities that they explore as well. First, MNCs tend to incorporate intellectual and exceptional staff that add value to the company by giving new ideas that play to their advantage in the market margin. MNCs also adopt the use of low sourcing costs in terms of labor, such that they tend to hire people from within the regions they are based rather than deploy someone from their home country 2 . This saves on cost that can be used to expand on marketing the company. Purchasing power in different countries also plays a key factor, as it improves the competitive margin that the company holds in the market. This gives MNCs an idea of what the consumer likes, broadening their perspective on the different goods and services that can be introduced to their loyal consumers. The growing economies, especially in developing countries, play as an advantage as it creates a variated range of people who may be converted into loyal consumers to the MNCs. MNCs take the challenges and opportunities they face as they venture into different markets as a chance to grow and expand into other territories, given the different experiences they encounter.
References
Blazejewski, S., & Hörisch, J. (2017). Challenges and opportunities for multinational corporations in sustainable development. International Journal of Business Environment , 9 (3), 201-209.
Butler, K. C. (2016). Multinational Finance: Evaluating the Opportunities, Costs, and Risks of Multinational Operations . John Wiley & Sons.
