disadvantagesofMNC

Tutor:LuisCoelhoStudentNo:277351Oneofthemaineffectsofglobalizationhasbeenthegrowthoflargemultinationalcorporation.Assesstheadvantagesanddisadvantagesthatthesemultinationalcorporationbringtothecountriesinwhichtheyoperate.Multinationalcompaniesbringpositiveeffectstothehostcountry,butmayalsobringmanynegativeeffectsincludingnegativeeffectsonpolitics,economicsandculture.Inparticularbymeansoftechnicalcontrolofeconomy,therearepotentialstoposeathreatforeconomicsecurityandnationalsecurityofthehostcountry.Thereareseveralriskslikelytohappeninpolitics.Themainargumentisthatitcouldweakenthenationalmacro-control.Someofthecompany'ssubsidiariesacrossvariousindustriesinhostcountryeconomy,andsomeindustriesformoligopoliesandmonopolisticsituation(Schneider&Frey,1985).Forexample,somebusinessdevelopmentstrategiesareoutofthecountry'sindustryregulator.Inthenumberofenterprises,productvarietyandsize,layout,andsoon,departmentsinchargeofindustry,acomprehensivenationaleconomicauthoritieshavenowayofinterventionandcoordination(Ambos&Schlegelmilch,2007).Asaresult,thedomesticmarketmaybecomeconfused.Anotherstrongargumentisthattheparentcompanyusessubsidiariesinthehostcountriestoitsownadvantage,whichcouldunderminethehostcountry'sfinancialpolicies(Dörrenbächer&Gammelgaard,2006).Tobespecific,subsidiariesofMNCscanusehighinputandlowoutput,transferpricing,flightoftheprofitsofthe,makinglong-termprofitorlosstoevadetax,tothedetrimentofnationalfiscalpolicy(Doz&Prahalad,1984).Forexample,theapproachofAmazonevadetaxesintheUKistoreportsalesinEuropethroughabranchinLuxembourg.Thismethodmeantthatin2011thecompanyonlypaid11%inforeigntax,lessthanhalfofitsmainmarketsoftheaveragecorporateincometaxrate(“Amazonatlastcavesinovertaxbill”,2015).Anothercontroversialaspectistheeconomicone.First,MNCscansuppressthehostTutor:LuisCoelhoStudentNo:277352countrynationalenterprisedevelopment.SmallercompaniesinthehostcountrymaybesqueezedbyMNCs,theyusetheirhugeeconomicpowertocorporate,squeezeoreveneradicatethesenationalenterprises(Asheim&Herstad,2005).Forexample,fourinternationalmultinationalgraincompaniescontroltheChinesesoybeanmarket.Tobespecific,ADM,Bunge,CargillandLouisDreyfusenterChinesemarketandharmtheinterestsof46millionfarmersinNortheast,especially30millionfarmersinsoybeanindustry,causingthesefarmersfacebankruptcy(Yan,2007).Second,Itcanleadtodependenceofdomesticenterprisesintheinternationaldivisionoflabor(Hymer,1970).Inthemoderninternationaldivisionoflabor,corporateresearchanddevelopment,managementandsalesskillsareabasisofthedominantcountriesintheinternationaldivisionoflabor.Forexample,Chinesecompaniesgenerallydonothavethisabilityandskills,toalargeextent,ispassivelybytheinvolvementoftransnationalcorporationsininternationaldivisionoflaboractivity,whichcausedthemrelyonmultinationalcorporationsinthetechnicalandmanagement(Bruche,2009).Intermsofculture,thereisanargumentthatpenetrationofMNCscanhaveanegativeeffectonhostcountryculture.Whenmultinationalcompaniesenterthehostcountrywillalsospreadtheirculturehere(Schuler&Rogovsky,1998).Forexample,WesternmultinationalcompaniesusuallytrytopromoteWestern-styledemocracyandunderminestraditionalvaluesofthehostcountry,withtheintroductionofnewvaluesthatmaynotbeappropriateforthehostcountry(Björkman,etal,2007).Forexample,WestHalloweencomparetoChina'sQingMingfestivalismoreentertainment.Theymayhavetheirownnationalcharacter,suchasChinesepeoplemainreflectedrelativelyseriousandalittlesadinQingMingfestival.ButHalloweenistoonoisyandhappy,soitmaybenotappropriatewithourtraditionalculture.Inconclusion,Globalizationhasbroughttheglobalexpansionofmultinationalcorporations.Whenthebenefitsofmultinationalcorporationsareconcerned,alsopayTutor:LuisCoelhoStudentNo:277353attentiontotheirharms.Intermsofpolitic,economicandculture,hostcountriesreceivedagreatimpactontheseaspectsbecauseofmultinationalcorporations.Wordcount:651Tutor:LuisCoelhoStudentNo:277354Amazonatlastcavesinovertaxbill:CompanyagreestoregisterpurchasesfromBritishcustomersasbeingmadeintheUKratherthanLuxembourg.(27May2015).Mailonlinenews.Retrievedfrom:(2007).Innovationandcontrolinthemultinationalfirm:Acomparisonofpoliticalandcontingencyapproaches.StrategicManagementJournal,28(5),473.Asheim,B.T.,&Herstad,S.J.(2005).Regionalinnovationsystems,varietiesofcapitalismandnon-localrelations:challengesfromtheglobalisingeconomy.InLearningfromClusters(pp.169-202).SpringerNetherlands.Björkman,I.,Stahl,G.K.,&Vaara,E.(2007).Culturaldifferencesandcapabilitytransferincross-borderacquisitions:Themediatingrolesofcapabilitycomplementarity,absorptivecapacity,andsocialintegration.JournalofInternationalBusinessStudies,38(4),658-672.Bruche,G.(2009).TheemergenceofChinaandIndiaasnewcompetitorsinMNCs'innovationnetworks.Competition&Change,13(3),267-288.Doz,Y.,&Prahalad,C.K..(1984).PatternsofStrategicControlwithinMultinationalCorporations.JournalofInternationalBusinessStudies,15(2),55–72.R