In this chapter, the authors examine the functioning of multinational corporations. At first, they introduce a story of the Coca-Cola Company; in particular, they show that initially, this organization was a local business, but it eventually evolved into one of the largest international corporations. Additionally, scholars define the term multinational corporation. This notion is usually applied to a company that does a “part of its business in one or more foreign, or host countries” (Steiner & Steiner, 2012, p. 354). The authors note that there has been a dramatic increase in the number of multinational corporations. These organizations can operate in the majority of advanced and developing countries.
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Researchers also focus on such a notion as a foreign direct investment (Steiner & Steiner, 2012, p. 362). This concept can be defined as the amount of money that a corporation spends to operate in a foreign country. By examining these cash-flows, one can better understand the economic impact of multinational corporations. Local governments can welcome the entry of these organizations because they can create jobs. Yet, at the same time, these institutions can erect barriers that are supposed to protect local producers.
Additionally, much attention is paid to norms of corporate social responsibility, since they shape the operations of multinational companies. In many cases, these organizations proclaim their commitment to the promotion of human rights and the protection of the environment. It is possible to mention the Global Compact Principles that describe the standards that these companies should adhere to (Steiner & Steiner, 2012, p. 376). Furthermore, one should speak about the Alien Tort Claims Act according to which a foreign citizen can sue a multinational corporation in American courts (Steiner & Steiner, 2012, p. 379). These are the main aspects examined by the authors.
Overall, this chapter can give readers valuable insights into the work of multinational corporations. First, these organizations often have to reach compromises with local governments to enter new markets. Very often, they have to encounter such challenges as corruption or protectionism. Thus, they need to learn more about the culture of the country in which they operate. This issue is particularly important nowadays when many businesses intend to operate at an international level.
Additionally, the authors show that these businesses often have to dispel negative stereotypes according to which these organizations control the work of governments or legislators. Yet, the problem is that these organizations are tightly regulated. This issue is important when the reputation of multinational corporations is continuously threatened. So, senior executives of these organizations need to highlight the benefits that corporations create for local communities. This is one of the strategies that they can adopt.
Furthermore, scholars provide several important lessons that multinational corporations should consider. For instance, they should also set high standards for the safety of workers; otherwise, they can incur substantial losses. This argument is particularly relevant if one speaks about Union Carbide which was responsible for the notorious Bhopal catastrophe that took the lives of many people (Steiner & Steiner, 2012, p. 391).
Very often, these costs significantly exceed the benefits that businesses try to achieve by neglecting the norms. This lesson is important for many corporations that want to enter developing countries, hoping that in these states, they will be able to reduce their operational costs. Very often, this policy can lead to disastrous results. So, by examining the lessons discussed in this chapter, entrepreneurs can avoid many pitfalls.
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Steiner, J., & Steiner, G. (2012). Business, Government, and Society. New York, NY: McGraw Hill.