Midterm Question #1

Midterm Question #1

MNC's are complex organizations however, they dominate the worldwide market. Knowing the background and nature of MNC's, answer the following:

1. Question #1: Identify the benefits and disadvantages of MNC's.
answer:
benefits:
1) A MNC investing in an area may result in a significant injection into the local economy. This may provide jobs directly or through the growth of local ancillary businesses such as banks and insurance. It might initiate a multiplier process generating more income as newly employed workers spend their wages on consumption.

2) MNCs may provide training and education for employees thus creating a higher skilled labour force. These skills may be transferred to other areas of the host country. Often management and entrepreneurial skills learned from MNEs are an important source of human capital.

3) MNCs will contribute tax revenue to the government and other revenues if they purchase existing national assets as in the case in Zambia through the privatisation process.

disadvantages:
If multinational companies provides employment, infrastructure development and growth in economies, then on the other hand, there are various disadvantages of multinational companies. Firstly, multinational companies can severely impact the local industries because it increases the competition in the economy. Secondly, multinational companies can negatively impact the culture of the economy. Thirdly, because of the trade restrictions the multinational companies can face various problems. The availability of resources are limited in an economy and when multinational companies are opened then resources can get scarce. Moreover, though a company can grow because of investments brought by multinational companies but still the economies can grow more if the local investors make these investments.

2.Question #2: Identify one MNC company and describe its operation.
answer:
AMWAY-Amway is a global leader in direct selling, with over three million Independent Business Owners (IBOs) in over 80 countries and territories around the world. No other direct selling company can compare with our longevity, stability, and global reach.

For more than 45 years, Amway Corporation has enabled people to have a business of their own. Originally known for direct selling of our household cleaning products, such as SA8 Laundry Detergent and (L.O.C.)Liquid Organic Concentrate, Amway business opportunity is now supported by an excellent portfolio of hundreds of high-quality products and brands that can only be purchased through our IBOs.

3. Question#3:Describe how the parent control/coordinates with its subsidiaries in other countries or region.
Answer:The parent coordinate by knowledge flow or transfers in transnational corporations, identifying different form of knowledge to be transferred. As multinationals establish subsidiaries in new locations, they will transfer know-how from the parent to the local operation. In established multinationals with a geocentric orientation, knowledge should be freely flowing from one unit to another as the whole organizations benefits from development activity.

4. Question#4:How is IT maximized or used by this MNC?
Answer: IT is being maximized or used by multinational companies by using this for their linkages and effective, cheaper and faster communication to their other branches in other places .IT traits as investment, Traditionally Information Technology (IT) has been perceived as being a means to provide more efficient processes that would lead to lower cost products and services.Information technology continues to progressively penetrate into core business technologies. IT provides management with access to information and a means to make routine decisions without managerial intervention.

5.Question#5: What were the weaknesses/problems encountered by this MNC from its environment and global setup?
Answer:The common problem encountered by multinational company is the economic crisis,culture of different subsidiaries,the different location,capitalization,expenses,communication,and management.