2FE867 Managing the Multinational Corporation - Free Samples to Studen
1. Your task is to take a current theory of international business, and apply it to an industry and its key corporations.
2. and to also explain the institutional structure and recent history of that industry, in terms of key firms, industry structure, global production and marketing orientation, ownership and financing as well as government and other civil society groups regulation, monitor or contest those industries.
3. Once you have undertaken the industry profile you are then challenged to assess the ways that theories of international business helps us to understand the industry, its history and trends, and where it doesn't.
4. The written report should blend analytical writing, weighing of historical and contemporary data, and set them against the theoretical framework you have chosen.
Answer:
Introduction
A multinational corporation controls and owns production of services and goods in other countries other than its home country. A company can only be termed as a multinational corporation when it derives twenty five percent of the revenues from out of the home country. The automotive company comprises of huge range of organizations and companies which involves development, manufacturing, marketing, selling and designing of motor vehicles who can also be termed as automakers. Automotive industry is one of the world’s most important economic sectors in terms of revenue. Multinational corporations comprise of those organizations which are geographically dispersed and goal disparate which also includes headquarters and various kinds of national subsidiaries. This kind of an entity can be termed as an inter-organizational network which is embedded in a network which is external and consists of all other organizations such as suppliers, regulators and customers with which all various parts of the multinational should interact (Sun 2016). The link present between the hierarchical power and the ownership in an organization is quite weaker than it is assumed. The automotive industry began in the year of 1860. The importance of automotive industry is huge in European Union. The automotive industry has an oligopolistic structure which will strengthen the power of the company management in production networks as there is a presence of huge number of suppliers for a single vehicle. Most of the European outward and inward foreign direct investment are intra-regional in nature (Pavlínek 2015). The most important producers of the automotive companies comprise of the United States, Japan, Western Europe and South Korea. Car producers of China such as Greely, Chana, Dongfed and Tata from India often represents the largest multinational companies in the world. Network is the term used for any pattern of relationships among organizations or people where everything is related or linked to every organization or the person in the pattern directly or indirectly.
Multinational companies usually have their headquarters in their home countries and they also have their operational division spread all over the foreign countries in order to reduce their costs. The maximum portion of the capital assets of the main company is usually owned by the citizens of the host company. They are usually a large sized organization who exercises a huge degree of economic dominance. There is presence of several advantages and disadvantages of the multinational corporations. One of the primary advantages of the MNCs is access to the customers all throughout the world. With the increase in access to wide geographical regions will attract potential consumers and, in this way, they can expand and grow at a faster rate. Access to cheap labour is also one of the biggest advantages that MNCs can have. Countries such as China, India and Pakistan provide cheap labour to the MNCs. The multinational corporations also help in research and development of economy. The operations also help in the improvement of the balance of payments which can be achieved by increasing and decreasing exports and imports (Conlon and Perkins 2018). Although the automotive industry is very much technologically advanced, the rise in integration of low-income countries has put huge pressure on the automobile producing countries. New producers have emerged from Latin America, Asia and from Southern Europe. The low skilled workers of the automotive industry therefore suffered from deteriorating wages and worse employment prospects in the process of globalization. The emergence of exporters of automobiles have increased a lot and is quite frequent due to the foreign direct investment in developing countries.
Emergence of MNCs has changed the phase of business all over the world. The record of employment and the world market performance of the automobile producers of the United States turned out to be worse when compared to their Japanese and German counterparts. The automotive industry is usually considered to be the forefront of the globalization (Moreno and Terwiesch 2015). The external organizations which are related to the research and development department of a company is more interconnected across the national borders. Intra organizational means occurring in the organization. The automotive industry is one of the most important industry where firms tend to open new branches and invest huge sum of money. The automotive industry had also undergone dramatic change which is dependent with other sectors like those of plastics, chemicals, electronics and textile industries.
The theory described here is about multinational corporations as both intra and inter organizational networks. Due to the huge growth in number and scale of multinational enterprise, there is a rise in recognition of the international scale of business. The industries in which there was a growth of the multinational companies, was uniform (Pavlínek 2015). The forms in which the multinational corporations operated is also seen to be growing which comprises of strategic alliances, franchising, outsourcing and joint ventures. The MNC as a network of organization help to capture any development which is significant and made the boundaries of the firm much more porous.
Recent history of automotive industry
Automotive industry are those industries and companies which are involved in the manufacture of motor vehicles. The United States was the largest producer of automobiles for many decades. The automotive industry manufactures most of the components of automobiles mostly engines and bodies. The automobile industry originated in Europe in the late nineteenth century. However, the United States dominated the world industry of automobiles with the invention of mass production technique. After the world war, Ford started to dominate the automobile industry. In the United Kingdom British Ford was the largest producer. The period between the year 1919 and 1939 had a significant growth in automobile manufacturing in Europe (Conlon and Perkins 2018).. The automotive industry of South Korea changed from government controlled parochial industry to a huge place in the world market. Companies such as Hyundai, Kia Motors Corporation accounted for most of the South Korean Market. After the growth of Ford, General Motors (GM) emerged as a potential competitor in the United States. The automotive industry is mainly comprised of the world’s largest passenger automobiles and manufacturers of light truck. The automotive industry is both labour and capital intensive. The labour costs also have a huge impact on this industry. The global automotive industry is in a much better shape than it was few years ago. This happened specially in the United States of America where both sales and profits have recovered from the recent economic crisis. By the year 2002, the global profit of automobile industry is expected to rise by fifty percent. The profits are expected to come from the newly emerging markets. However, market of Japan, South Korea and Europe will experience a stagnant profit growth. The automotive industry has also recovered from the economic crisis. The market of both Japan and South Korea have suffered huge due to the presence of economic crisis (Sun 2016). However, exports and production have sharply rose during these few years. It has been found out that the European Union has been the world’s largest investor in terms of research and development in the automotive sector. The European automotive industry is the world leader in terms of innovation.
The global sales of the passenger automobiles are intended to hit 78.6 million in the recent years. The United States and China have been the largest producer of automobiles in the year 2017. The U.S has also become the key automotive market from the 1900s. this was the time when Ford produced assembly line car in order to manufacture Model T. Europe exported about six million vehicles to the USA, China, Turkey, Russia and Switzerland. There is also a rise in the demand for fuel efficient cars recently. The top six countries in terms of emission reduction are Poland, Slovenia, Bulgaria, Cyprus and Estonia. Though, there was a decline in the sales of the vehicles in Russia and Turkey, the consumer demand in Asia is high, where the sales of the passenger cars have doubled over the years. The automotive industry has also been the major provider of jobs for the citizens.
The automotive industry will face large number of challenges and opportunities. One of the challenges include cost pressure and complexity. As there is increase in the regulations related to the environmental and safety standards, it will raise the costs and will also increase the complexity. The increasing number of derivatives that are serving different vehicle segments o n a single platform will also raise complexity. Japan, China and the US have enacted various laws in order to reduce emissions which will lead to higher costs. The regulation of carbon dioxide will continue to tighten. In order to avoid the use of fuels and gas, the use of electric vehicles might be the answer (Holmes et al. 2016). China has become the world’s largest automobile market with around nineteen million vehicles being sold in the year 2012. There will be a shift in the automotive industry’s economic centre of gravity when sales and market share keep moving towards the emerging markets. The smaller vehicles also have a major growth opportunity which accounted for more than thirty percent of global sales where more than sixty percent of global sales are presented in emerging economies.
Critiques of MNCs as Intra and Inter-organizational Networks
There is a presence of long list of views which explains the internalization of business. In the recent years it has become quite popular for the multinational corporations to be viewed as both inter and intra organizational network. According to the perspective of intra organization, the headquarters are not always the centre of the MNCs. Instead there are subsidiaries which are linked to the headquarters and also to other many subsidiaries in different ways by making MNCs a multicentre organization (Pavlínek 2015).. On the other hand, the inter organizational perspective of the MNCs states that there is a presence of multiple relationships between the shareholders that are external and the local MNCs which includes suppliers, competitors, joint venture partners, governments or research institutions
Most of the scholars concentrate mostly on the internal networks or analyses the external networks. Both the intra organizational and the inter organizational network have a very good perspectives on understanding the MNCs. One of the important characteristics of the network organization is assuming that there is a presence of flows between different organizational units. Therefore, in order to hold the network together linkages and relationships are quite necessary. Without the presence of any interaction between the different units. Therefore, without any kind of interaction between the different units, there will be ko existence of the network organization. Many scholars have presented the ideal types of MNCs during the last decade ( Foss and Pedersen 2002). The ‘ideal type’ of MNCs are mostly said to be future oriented. Authors like Bartlett and Ghoshal suggested a detailed, consistent and a powerful framework model. The framework suggests the flow of material resources are very important. The flows within the multinational corporations can occur at all the levels where the inter functional flows, cross border flows and flows related to inter business can be differentiated. The floes which is present between different organizational functions within the multinational corporations can be termed as inter functional flows. The occurrence of inter business flows takes place when different business units are involved as a provider or the receiver of the flows. When the flow involves units from different countries within the MNCs, it is termed as the cross-border flows. The flow can be further classified between the receiver and the provider of the flows. The headquarters have been termed as the provider of the flows for many years whereas the subsidiaries are considered to be the primary provider of the flows. As most of the flows require the involvement of headquarter, flows between subsidiaries are thought to be quite rare. However, subsidiaries were thought to be the providers of cheap labour along with natural resources. All the four network models of the multinational corporation states that the units are both the providers and receivers of the flows. Flows takes place in the all direction which includes headquarters to subsidiaries and vice versa (Pavlínek 2015). However, the Transnational solution of the Bartlett and Ghoshal considers the flows to and from joint venture partners. The flows that take place within the multinational corporations can either be planned or emergent or intended.
When flows are the basic characteristic of network MNCs, it can be primarily coordinated by the provider of the flows. However, according to Bartlett and Ghoshal, the top management is the major coordinator of the flow. The transnational organization is characterized by different intensities of flow (Conlon and Perkins 2018).. Both the inter and the intra-organizational network have a huge impact on the understanding of the multinational corporations. There is a presence of four models which are related to the multinational organizations, one is White and Poynter’s Horizontal organisation another is Doz and Prahalad’s diversified MNCs and Bartlett’s Transnational solutions.
Literature review:
In order compare the network models of the multinational corporations, a literature review must be carried out. The framework suggested by Bartlett and Ghoshal is one of the most powerful framework which is very detailed and consistent. They provided a clear picture of their Transnational Model. They also declared to follow the importance of the transnational model. This is the reason why the framework suggested by Bartlett and Ghoshal is one of the extremely rich source. Secondly, the ideas of the Heterarchy by Hedlund are slightly vague when compared to the model developed by Bartlett and Ghoshal’s transnational model. The analysis of the work of Hedlund has to be restricted who explicitly deal with Heterarchy. The N form Corporation (Moreno and Terwiesch 2015), MNC as a Nearly Recomposable System and Self renewing MNC are all introduced by Hedlund. It also sees flows as a basic characteristics of the multinational corporations. Thirdly, the work of Doz and Prahalad is of great importance in order to understand the model of DMNC. The article was published in the year of 1991. The authors in this paper systematically tried to describe the characteristics of the DMNC and the characterics was described in this part. They all provide a good understanding of the assumptions of the modern multinational companies and about the flows within the MNCs. Next comes the Horizontal organization which is mainly described by White and Poynter. The articles of White and Poynter appeared in Business Quarterly. As there is not enough information available it is difficult to know whether the flows are only marginally important for White and Poynter. It was also found out that the theory of White was also interesting enough.
Government regulations
The automobile sector is one of the most regulated sectors globally. The government regulation in the automotive industry directly or indirectly affects everything in this industry from the way the cars will look, how their components are to be designed, what are the safety features included and how will be the overall performance of the car. As a result of this the regulations of the government also have a significant effect on the business of the automobiles industry. The regulations of automobiles are designed in order to provide benefit to the consumer and also protect the environment (Holmes et al. 2016). The emissions law also affects the bottom line of the car maker. The catalytic convertor along with other designs are implemented so thqat there is a reduction in the emission of the car. The regulations of government are also not restricted in the United States and most of the vehicles produced there are needed to be shipped globally.
Industry structure:
The automotive sector is one of the biggest job providers in the world directly or indirectly. This particular industry shares twenty two percent of the gross domestic product of a country. The automotive industry is also considered to be one of the most highly capital and labour intensive industry. The major costs for selling and producing automobiles include materials, labour and advertising. The major areas of auto parts manufacturing consists of the original equipment manufacturers (OEM), rubber fabrication and replacement parts production and distribution. As the large automotive manufacturers cannot produce all of their parts, companies of original equipment manufacturers tries to manufacture everything from seats to door handles. Large proportion of revenue comes from selling automobiles in the automotive industry. The Big Three mainly dominates the market of the North America that comprises of General Motors, Chrysler and Ford Motor. However, Toyota motors and Honda motors are two of the largest foreign car manufacturers.
Global structure and market orientation of automotive industry:
The automotive industry is presently confronting to be its greatest innovation. Transformation is one of the crucial part in the modern automotive industry. By considering the size of the industry it can be said that it has the power to continue to influence the direction in which humanity will progress in future (Conlon and Perkins 2018). Some of the trends which can lead to the transformation of the automotive industry consists of autonomous driving, this is undoubtedly one of the very important trends that has been ruling the automobile industry. Connected vehicles is another trend for transforming the industry. Connected vehicles will have the ability to share details about the driving conditions to the other people. Next comes the increase in electric vehicles. With the increase in non -renewable energy crisis, more models of electric vehicles will get into the mass production. Several professionals and industry experts are forecasting that electric cars will soon become more cost effective and much more popular compared to vehicles run by diesel or petrol. Leading automobile manufacturers like Volkswagen, General Motors and Daimler AG already have the entered the market of electric markets.
Institutional structure
In the automotive structure, the Fuel Cell Vehicle has been seen as a sustainable alternative for vehicles which are based on internal combustion engine. There has a been a growing popularity of the fuel cell technology in the automotive industry. There was an extensive battery programmes since the 1990s (Bloomfield 2017). In order to achieve zero emissions, the battery electric vehicle has been seen as the most promising technology. Institutional theory aims to describe the stability of the organizations along with the industries. This theory helps in translating sociological theory to the level of organization. The source of the stability lies in the existence of institutions which aims to shape the organizational behaviour. There are several factors which lead to institutional change. One of them is the new technologies which can provide answers to performance crises. External shock or crises is another factor which can lead to instability in the market. There has also been a presence of rapid industrialization in the Association of Southeast Asian Nations since the year of mid 1980s. The Japanese manufacturers are quite advanced in the electronics and the automobile sectors.
Conclusion
In order to conclude it can be stated that with the growth of scale and number of Multinational enterprises, there has been as increasing recognition of international scale of business. The automotive industry in which where the multinational corporation were growing is not that uniform. The multinational corporation as an organizational network helped to capture the significant development.
Reference list
Arboletti, A., Torresani, G., Palle, N. and Segerberg, P., Accenture Global Services Ltd, 2014. Automotive industry high performance capability assessment. U.S. Patent 8,781,882.
Bloomfield, G.T., 2017. The world automotive industry in transition. In Restructuring the global automobile industry (pp. 19-60). Routledge.
Conlon, R. and Perkins, J., 2018. Wheels and deals: The automotive industry in twentieth-century Australia. Routledge.
Dweiri, F., Kumar, S., Khan, S.A. and Jain, V., 2016. Designing an integrated AHP based decision support system for supplier selection in automotive industry. Expert Systems with Applications, 62, pp.273-283.
Fortwengel, J. and Sydow, J., 2018. When Many Davids Collaborate with One Goliath: How Inter?organizational Networks (Fail to) Manage Size Differentials. British Journal of Management.
Foss, N.J. and Pedersen, T., 2002. Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context. Journal of International Management, 8(1), pp.49-67.
Harwit, E., 2016. China's Automobile Industry: Policies, Problems and Prospects: Policies, Problems and Prospects. Routledge.
Holmes Jr, R.M., Li, H., Hitt, M.A., DeGhetto, K. and Sutton, T., 2016. The Effects of Location and MNC Attributes on MNCs' Establishment of Foreign R&D Centers: Evidence from China. Long Range Planning, 49(5), pp.594-613.
Moreno, A. and Terwiesch, C., 2015. Pricing and production flexibility: An empirical analysis of the US automotive industry. Manufacturing & Service Operations Management, 17(4), pp.428-444.
Mudambi, R. and Navarra, P., 2015. Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs. In The Eclectic Paradigm (pp. 157-191). Palgrave Macmillan, London.
Oliver, C., 1997. Sustainable competitive advantage: combining institutional and resource?based views. Strategic management journal, 18(9), pp.697-713.
Pavlínek, P., 2015. The impact of the 2008–2009 crisis on the automotive industry: global trends and firm-level effects in Central Europe. European Urban and Regional Studies, 22(1), pp.20-40.
Pavlínek, P., 2016. Whose success? The state–foreign capital nexus and the development of the automotive industry in Slovakia. European Urban and Regional Studies, 23(4), pp.571-593.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard business review, 92(11), pp.64-88.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Sun, Y., 2016. The structure and dynamics of intra-and inter-regional research collaborative networks: The case of China (1985–2008). Technological Forecasting and Social Change, 108, pp.70-82.
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