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The Formation Of Multinational Enterprises

Firms or particularly Multinational companies (MNC) within their functioning cannot remain "static". They need to break 'boundaries' both in the geographical sense as well as economical sense, to actualize the opportunities in the new markets and emerge successful. As the name indicates, MNCs are Multinational companies, which operate in multi-nations as part of the internationalizations strategy, and therefore are being influenced by various factors. That is, with every businesses wanting to expand their geographical reach and make an imprint in various markets, you will see enough opportunities for it, to initiate an entry into a foreign market. To initiate and actualize the entry, organisations become Multinational firms. Thus, firms which want to successfully tap the opportunities, due to various factors including globalisation, in foreign countries become Multinational companies. To tap those opportunities, businesses have to initiate country specific strategies from the recruitment stage to the recruitment stage, thereby fully evolving and actualizing into MNCs. MNCs are organisations that have substantial direct investment in foreign countries and actively manage those businesses and regard those functions as integral parts of the business both strategically and organizationally. (Barlett, Ghoshal & Beamish 2008, p. 2)

MNCs have to set targets and formulate various strategies in line with the situation prevailing in those foreign markets. As every foreign market or country will have different political, social, economical conditions as well as different customers, competitors, potential employees, etc, etc, there will be many opportunities as well as challenges, that may block the firms' success. Thus, these factors could influence the practices of MNC's, thus enabling the firm to become a complete MNC.

Initial factors that lead to the forming of multinational businesses

Nations and its companies have been engaged in employing other nations and companies to be able to get profits and cultivate their economies. Although this form of trade is going for centuries, certain countries in certain time frame have imposed restrictions upon this international trade. That is, these nations due to one reason or other actualized a protectionist regime, thereby blocking foreign companies to enter and do business in their territory. However, with the advent of globalization and the liberalization of the WTO regimes, this protectionist regime gave away to the regime of free trade, thus leading to the formation and proliferation of MNCs. Many countries have exposed their economies as part of Free Trade with globalization acting as the catalyst.

In literal meaning Globalization is thought as a collective alteration, an increased association between various societies and their fundamentals due to transculturation, the explosive advancement of communication and transportation technologies to assist an exchange of global economy and culture. The arrangement of a global community so there is an immense contact linking differing of the globe, with elevating potential of individual switch over, communal understanding and companionship among "world citizens", thereby resulting in economic cooperation. When one talks about the economical or financial part of globalization, it is clear that globalization has given liberty to the business enterprise to initiate an entry into various possible markets, predicated on the Free Trade regimes of the entering countries, thus resulting in the formation of MNCs. The primary strength of Free Trade is the fact that, it puts forward the idea that minimalistic state role or intervention resulted in better economy and importantly better society. That's, with greater role for private sector and importantly entrepreneurial role for folks, it'll be a 'breeding ground' for MNCs. Free trade proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills in a institutional framework seen as a strong private property rights, free markets, and importantly free trade (Harvey, 2001, p. 2).

Globalisation's role in MNC formation

Among the countless economic based movements, globalisation is one which had and is still having major impact on the economical development of many countries and its own people worldwide. "The word globalisation marks a set of transitions in the global political economy because the 1970's, in which multinational kinds of capitalist organisation commenced to be replaced by transnational" (Appadurai, cited in Meyer and Geschiere 1999, p. 307). Economic part of globalisation is the key because with the whole world learning to be a kind of global village, barriers between the countries are broken with integration happening mainly in the financial aspects. On this scenario, foreign organisations, using the globalisation plank, have entered and will also enter various sectors of the firms resulting in the establishment of several MNCs. "Globalization is widely seen to be the dominant tendency of the time. It is a shorthand expression for a number of processes encompassing worldwide integration of financial systems, trade liberalization, deregulation and market opening" (Mathews 2006, p. 6)

With these MNCs providing good employment and the resultant good development, people of those countries have became financially stable and 're going searching for material comforts, leading to impacts on social change. From earlier times, many Third World countries including Asian and African countries only indulged in agriculture for his or her livelihood. However, with the onset of globalization and the checking their markets as Free Trade regimes, these countries and their governments started to focus on industrial development, by improving their own industries and importantly by facilitating entry of foreign companies. Thus, globalization and the resultant Free Trade turned out to be a great boon for the formation and the development of MNCs. These countries as part of their Free Trade regimes opened up their markets and enticed the foreign companies with a slew of beneficial financial and social schemes. The other reason why MNCs are further welcomed by the foreign countries resulting in further evolution is the need for economic development, as there is still major portion of population moving into abject poverty. "Despite formidable strides in poverty reduction. . . According to World Bank calculations, out of a total 2. 3 billion people in China and India, roughly 1. 5 billion earn significantly less than US$2 per day. Only rapid economical growth can hit them out of abject poverty" (Aslam). So, it is clear that the existing economical growth will be sustained and even accelerated by these countries by welcoming MNCs in a more optimal manner. Like a sizeable part of good profits reached the local employees, thereby enhancing their economic standing and also optimizing country's economy, MNCs can become the phenomenon. Although, there are some opposition to MNCs on the lands that this severely impacts the indigenous firms, people has began to realise that MNCs aren't the culprit. Lack of customers and market share, happens mainly due to the inability of the local businesses, nonetheless they wrongly fear that large multinationals would drive them into extinction and cripple domestic entrepreneurship. (Bhagwati 2004, p. 181). So, this globalization and the resultant professional and financial optimization are welcomed by majority of people, with the federal government of these countries also taking maximum initiatives to support MNCs.

Factors during Recruitment process that aids MNC's formation

One of the primary factors which play a key role in the formation of the MNCs is the workforce. That's, MNCs will normally put more focus during. Optimal recruitment function is only going to provide constant availability of effective employees. This recruitment function in a MNC will be quite different from the recruitment in a national firm, with regional factors being the strong criterion. National or indigenous companies will normally be established by recruiting the 'sons' and the 'daughters', that is, citizens of a particular country, while MNCs will have a variety of employees from many countries taking into account both national and regional factors. In MNCs, the employees will be recruited mainly from the neighborhood population, thus giving the organizations a multinational outlook. Recruitment of the diverse local or regional staff under the concepts of IRHM is a common feature in MNC. That is, MNC will be consisted of employees from three national or country categories, when they are recruited to fulfil the many needs of the MNC. The employees from the parent country where the firm is usually headquartered or based (or came from) are called Parent Country nationals (PCNs). The employees from the host country where a subsidiary or MNC may be located are called host country nationals (HCNs). Finally, you will see third or other countries which may be the source of labor, finance, research and development, and the employees from these countries are called third country nationals (TCNs) (Scullion & Collings 2006). Among these three groups of workers, MNC's will be duty bound and also logically recruit the first two groups of workers and therefore can be an MNC in actual sense of the term. This recruitment process, aside from complying with the unwritten rule of giving maximum employment to the local population, will also benefit the MNC in lots of ways. That is, aside from elevating the organisation's image in the eyes of the neighborhood population, it will also provide them with surplus and sometimes cheap labour. Thus, MNC by recruiting HCNs within regional factors can perform two targets in one single action.


With globalisation making both negative and positive impacts, multinational businesses with sound business strategies should have surmount the challenges. Unison of humans into a team, with an urge to usher the organisation into a successful 'territory' will actualize, only if the staff show optimum functionality. But, as a kind of cycle, only if apt, qualified, equipped workers are recruited, they could exhibit optimum functionality. With the, as discussed in this paper, the staffing process of the organisations has to be optimum. That is, as it pertains to Multinational companies stationed or positioned in foreign lands, all the organisational processes need to be implemented in a highly effective manner predicated on the many influencing factors.

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