Factors that have enabled the rise of Multinational Enterprises (MNEs)

Author: Iloka Benneth Chiemelie 

Published: 11/12/12013

1.0 Consider the factors that have enabled the rise of multinational enterprises, from language adoption to technological advances to financial globalization.

Even before the Dutch people sailed down to East Indies or Marco Polo traveled to China, people have always found ways of interacting with others from different cultures with the main reason being linked to economic benefits. However, it can easily be perceived that it must have been difficult in the initial stages for people to do business with others from different cultures as a result of the barrier that language presented to the business process. Imagine typical Japanese who speaks only Japanese language trying to negotiate a crude oil deal with a Russian that speaks only Russian language in the earlier 1980s. Now imagine the same incidence today with Google Translate, and it can easily be seen that the difference is clear. As such, for MNCs to have established themselves in countries other than their home nations a number of factors must have played significant role in the process and these factors include:

1.1 Language factors - Monir (2011) made known that MNCs were quick to take advantage of the increasing level of globalization and establish themselves in international markets by first focusing on countries with similar languages. For instance, English is widely spoken in all continents and American brands such as Coca-Cola started their international expansion by entering into Canada (English and French speaking), then Cuba and Panama (both Spanish) (Coca-Cola, 2013). Thus, it can be seen that the focus was to expand into countries with similar languages first as they have gained experienced with respect to meeting the needs of customers with these languages.

Additionally, the world increasingly became globalized due to numerous institutions established to make such a possibility and this increased the teaching and learning of languages across the world (Monir, 2011). Thus, people from different countries now speak languages of other people. On that ground, it can be seen that language played an integral role into the rise of MNCs by providing them with the basic communication skills needed to present their products to customers in different markets.

1.2 Technological factor – in terms of measuring the factors that have played the most significant role in internationalization of firms, technology is the main factor (Monir, 2011). Information and communication technologies allow companies to enter new markets by bridging the boundaries that exist with conventional methods where the company has to follow numerous complex protocols. By just putting up a website online, customers can order from the company, make payment with Paypal, like the company on FACEBOOK, follow the company on TWITTER, have their order delivered by DHL, track their order online in the process of delivery, and call the company via phone for any update or chat with them via SKYPE for 24/7 customer services. Clearly, internationalization of firms would not have been such a success without technologies.

1.3 Financial globalization – Zuhama (2000), noted that financial globalization has increased the rise of MNCs because it has increased trade without barriers. Irrespective of the markets, currencies such as US dollars, British Pounds and Canadian dollars are accepted for payment of any purpose by just converting the local currency value to the paying currency. Through this means, MNCs have been able to establish their business profoundly in numerous markets and easily undertake business transactions irrespective of the foreign market’s currency.

2.0 Benefit of these factors

2.1 Increased competitiveness and business performance – Thompson (2006) made known that these factors have increased the competitiveness of firms by allowing them to operate businesses without boundaries and have in the process increased their business performance because they can now sale their goods to different customers across the globe.

2.2 Increase in management expertise – by serving customers from different markets, the companies now understand how to manage businesses in these markets based on the way they interact with customers, handle complaints, kind of complaints they get and what the customers’ demands. As such, this experience gives the needed advantage with respect to competing with local brands in these markets (Monir, 2011).

3.0 Issues of these factors

3.1 Increased monopoly and reduce chances of smaller firs to survive – this is probably the most significant issue when it comes to measuring the negative impact of globalization of culture as Schrage (2006) stated that the increased level of internationalization of firms now means that local and smaller firms now have their survival changes reduced because they can’t compete with the larger firms that have well established businesses and big financial backing.

3.2 Loss of local cultures – as the world becoming increasingly global with the availability of numerous free medium of communication and entertainment, people from across the world are increasingly Americanizing in nation, in a process I would term “Americanization of Globalism.” Most people now want a life that looks like what is obtainable in the movies and lived by teen superstars such as: Justin Beiber, Selena Gomez, Miley Cyrus and a host of others. In the process, these teens now see their cultural values and views lost in term as they become more American. American brands such as Coca-Cola and Apple also increases these issues with their Americanized marketing that seems to position American bands as the best, leading to ethnocentrism.

4.0 Managing cultural diversity

It has been noted in research that notwithstanding the fact cross-national and intra-national diversity seem to have a different focus in terms of management, both of these forms of diversity have a similar acculturation process, which is the process by which people from different culture adapt to the culture of other people (Rieger and Wong-Rieger, 1991). As such, the main skills needed for management of cultural diversity revolves around have the culture to understanding acculturation processes adopted by different people (Riegere and Wong-Rieger, 1991; Cox and Beale, 1997):

1.      separation

2.      deculturation

3.      assimilation

4.      integration/pluralism

the skills basically involve understanding that people from different cultures have different values and ways of life (separation), and these values are very distinct in such a way that it is difficult to obtain it from other cultures (decalturation); on that ground, the managers needs to assimilate the cultures of others people and then integrate them with their own cultures in order to develop a plural culture that meets the values of different culture but with the same goal (Cox, 1991, 2001). On that ground, the basic skill involve having the ability to integrate the cultures of different people together in order to gain a uniform cultures that is geared towards obtaining a common goal.

5.0 Conclusion

In any case, management of cultural diversity is not so easy and companies are increasingly becoming very disappointed with the results they get, which is why they are now looking towards other approaches  - that normally come in the form of creating a corporate culture for all employees to follow instead of combining the different cultures of the employees to manage the company -; however, literatures still maintain that the management of cultural diversity revolves around the manager’s integrative abilities (Pless and Maak, 2004).

References

Coca-Cola (2013), “The Coca-Cola Company – Heritage Timeline.” Available at: http://heritage.coca-cola.com/timeline.swf [Accessed on:07/09/2013].

Cox, T. (1991), “The multicultural organization”, The executive, Vol.5, No.2, pp.34-47.

Cox, T. (2001), Creating the Multicultural Organization, Jossey-Bass, San Francisco.

Cox, T., Beale, R.L. (1997), Developing competency to manage diversity, Berrett-Koehler Publisher, Inc., San Francisco.

Monir Tayeb (2011), “Managing People in Global Markets.” Edinburgh Business School, Heriot-Watt University. Available at: http://www.ebsglobal.net/documents/course-tasters/english/pdf/h17gm-bk-taster.pdf [Accessed on: 07/09/2013].

Pless, N.M., Maak, T. (2004), “Building an Inclusive Diversity Culture: Principles, Processes and Practice”, Journal of Business Ethics, Vol.54, No.2, pp.129-147.

Rieger, F. and Wong-Rieger, D. (1991), “The application of acculturation theory to structuring and strategy formulation in the international firm”, Strategic Management Society Annual Meeting, Toronto, Canada, October.

Thompson, C. (2006, April 23). Google’s China problem (and China’s Google problem. The New York Times, pp 64.

Zaharna, R.S. (2000). Intercultural Communication and International Public Relations: Exploring Paralells. Communication Quarterly, 48(1), 85-100.