Discuss about the Major Factors Influencing Multinational Corporations.
Multinational Corporation investments are initiated after undertaking an international marketing that involves proper decision making on the target market beyond the corporation's country (Anastasia, 2015). There have been issues concerning economy, politics, culture diversification, technological and trade terms concerning the international business environments (Goldstein, 2016; Sawyer, 2016). The targeted markets have always been propelled by cropping up these factors. Such decisions have been taken into considerations while searching for a suitable marketing climate for a Multinational Corporation. However, there are things to put into considerations while implementing the decision that does not need to be done within a home country thus understanding the international corporate platforms is essential. The major question remains as to what factors, challenges, and risks are associated with the operations of operating multinational corporations. The nature of the advancement and competition level associated with the sector selected for investment defines the entry strategies as well as the capacity to drive sustainable profits within the industry regarding the operations of Multinational Corporations. The intent of the evaluation in this paper is to provide an analysis of the factors influencing Multinational Corporation seeking to invest in China as a new market in the telecommunication sector.
Typically, these are organizations, which regulate the production processes in two or more countries, inclusive of the countries of origin. An international organization takes part in various activities that include; exportation and importation, investments in global countries, market licensing, contract manufacturer or establishment of facilities (Editors, 2016). The behavior of the MNCs is a major concern globally since it has led to the rise of numerous socioeconomic problems. Such scenarios have resulted in the adoption of factors that assist or hinder MNC operation in foreign markets (Contrepois et al., 2016; Dong, Zou, & Taylor, 2008). The coordination is essential considering the provision of larger markers across the borders that will result into revenue increase to host country and economies of scale. However, there are also chances to suffer more challenges and even losses. The nature of the operation and the capital of investment, as well as the cultural and political environments, influence the success of Multinational Corporations (Wiederhold, 2016). Therefore, an understanding of the scenarios that surrounds the corporate integration and investment is critical for managerial effectiveness as well as the incorporation of the public interests (Sethi, & Prakash, 2016).
The telecommunication industry in China is one of the developed sectors across the globe. The country has well-developed structures through technology and innovation that encourage the setting of a competitive global environment (Perri & Editors, 2016). Firms seeking to invest in China in the sector have to upgrade to international levels to derive the necessary profit needs. The entrepreneurial culture in China is based on technical fields such as medicine, construction, and telecommunication among others. Several factors related to the China’s economy, international trade terms, legal requirements, and technology influence the entry of Multinational Corporation about the telecommunication sector (Fazal & Wahab, 2014).
The economic growth rate in China has implications for the levels of demand in the international markets despite the different economic levels in various countries. The standard of the national income, as well as the favorable economic indicators, has created an enabling environment for international investment. Such a disparity is significantly incorporated into the strategic plans and operations of multinational corporations. Several elements related to the economic performance influence the operation within the telecommunication sector in China. The level of the per capita income in China has contributed to the success of firms operating on international terms. The determination of a country's wealth is a vital tool that assists in knowing the potential market target and the effective marketing strategies to be implied. The level of the average income of the people defines the nature of the purchasing power as well as the consumption rate. The China’s income level is essential for the telecommunication market since most of the people have embraced technology and can afford the available services based on tastes and preferences.
Moreover, the population structure of the China based on class and lifestyle contributes to the performance of the international businesses. Global trade environments must put into considerations the availability of a suitable class that is targeted at the market. Variations within the group structures between countries must be factored in before establishment. China has been divided into three categories, that is, lower, middle and upper classes, that are significantly marked by different numbers. Such a scenario depicts the nature of consumption behavior for telecommunication services and brands. Chinese marketing systems are highly dependent on the demand and supply of products all over the world. Therefore, any firm seeking to join the industry must reconsider the market structures must be cross-examined to evaluate the potency. Such kind evaluations must be done the right way to thrive in the business environment. For instance, the marketers of Bali's Civet Cat Coffee from the US did not believe it when they supplied the product and the demands escalated in China, although the product was expensive.
International Trade Factors
Furthermore, the effect of transaction motives has contributed to the market structure witnessed in the Chinese markets. The improved technology that enables a diversity of payment services across the multiple currencies is an essential environment or Multinational Corporation investments. It is worth pointing out how important it is to study the manner by which the MNCs goods and services get sold out internationally and the remunerations granted. Most developed countries it is assumed that the financial transaction and banking is high. Thus, it means that I China, one can purchase items and make prompt payments, a factor that has encouraged investments in other foreign markets like Germany, France, and Britain. Businesses transactions can be quick anywhere due to outstanding financial realities; therefore, influencing the performance of Multinational Corporations (Heinecke, 2016).
International and Social Trade factors have the impacts on the goods and services that are going to be exchanged in the new markets. Such consideration affects the quality, type, functional properties, and even the level of demands of that particular commodity (Nolke, 2016). The geographic distribution of natural resources in China has biased the forms and nature of investments. The country has focused on the industrial manufacturing and technology to cater for the unfavorable weather conditions. The geographical nature of a state could create favorable and unfavorable conditions to facilitate multinational corporations. For example, China is centrally placed to facilitate easy markets to the neighboring countries (Pain, 2015). The climatic condition in China has little implication on the telecommunication sector unlike on the manufacturing and production industries. Firms such as China Telecom and Verizon have intensified their capacity based on the favorable trade terms.
Moreover, the culture and the language barriers have contributed to the challenges faced in the Chinese market. Some disappointing scenarios have been counteracted in making international advertisements that consequently could not assist the MNC market the products (Elfstrom, 2016). For instance, according to the Chinese dialect "coca-cola" is translated as "female horse stuffed into wax". However, with cultural integration, diversity management, and social inclusion, the effect of language and culture has been controlled by the corporate sector across the globe (Lundan, 2016). The tastes and preferences associated with the consumers and targeted market in China define the magnitude of the profits to be attained. The MCNs seeking to invest in the telecommunication sector in China must factor tastes in new regions. Individuals' behavior is shaped by culture and personality, which defines the success of businesses in different areas. When a multinational corporation intends to introduce a product into the Chinese market, succinct consultation must be done.
Nevertheless, the political stability in China has been favorable for international investment, which is an imperative factor in global trade, where one will have to consider strongly before dominating into a foreign market. It is essential to note that instances of wars have largely affected MNC in other parts of the world. Unrest from politics is another source of instability in global countries that discourage the establishment of Multinational Corporations due to risks of losses. China adopted policies of opening to the foreign trade and rapidly developed since the 1970s. Therefore, political relations have a great implications international business (Anguelov, 2016). On the other hand, the element of product adaptation has encouraged the corporate investment levels in the country, which has contributed to lower rates of entrepreneurial conflict among nations seeking to venture into the Chinese market. Such measures should be taken into an account before venturing into the telecommunication market.
A legal formality that characterizes the Chinese corporate engagements tailored to specific sectors of investment has great implications on international trade environments. Some of the regulations and legal parameters either have encouraged or discouraged MNCs entry in the country. Laws are always enacted by controlling the trade lines based on the standards. Such regulations favor the establishment of multinational corporations. States set legislation that will influence the ability of a multinational corporation to operate in their environment for various reasons. For instance, in Thailand, there are specified rules that there will be no foreign company or individual that can own up to 49% of the total shares, so one must be willing to open up a partnership to carry out the operation. Thus, foreign investors must be aware of the implementation processes and operation control before making any moves (Lundan, 2016).
Each firm seeking to invest in China must have a permit that allows the business to operate as a foreign organization. Particular limitations were allowing an MNC to carry out its activities in China as outlines the jurisdictive nature associated with the manufacturing or selling of the specified products. The government undertakes such moves to ensure the country benefits from the accrued revenue by carrying out such legal approaches. Such directives are necessary before the exploration of markets by multinational corporations. Taxation is another manner of which the Chinese government cashes in from foreign multinational corporations. Such a move ensures that most of the citizens' expenditures do not exit the country, which guarantees a stable national income cycle. Therefore, MNCs must be cautious on this to shape market strategy since levies will influence the ability to make a profit or incur a loss (Wendt, 2016; Slemrod, 2016). Certain fees such as the Outbound Payment in the country established by the State Administrative of Taxation during international businesses affect most of the MNCs operating in China. Some of these charges can be recurring or single deal. Much more, this fee could be high considering the foreign operation capacity.
Moreover, the use of tax bureau to monitor compliance and transparency has set a strict environment for foreign business operating in China. The existence of the anti-dumping duties in China restricts the operations of manufacturing firms. Therefore, adherence to these provides smooth trade between the host and the foreign nations; however, there is the need for harmonization. Most of the tariffs have always been granted to equalize the exchanges between the domestic companies and the multinational corporations, purposely not to lose business to the foreign investor. Such charges must be taken into account especially in the international trade environment. Such a situation is mainly to subject the residence to purchase domestic products. Several established strict regulations on who can invest in specific sectors in the country make it necessary for the Multinational Corporations to conduct an evaluation of the requirements as well as the limitations associated with such moves. The existence of great risks emanating from the legal structure may scare away potential telecommunication MNCs from the implementation of their plans (Heinecke, 2016).
Furthermore, individual host countries would like to know the extent of control of overseas businesses that an MNC controls before permission is granted. Such restrictions may involve the formulation of an international team of managers that will check the foreign power. Therefore, such rules must be considered before a final decision is arrived at to avoid turn backs. Cases of discrimination in an international market may lead to inhibition or prohibition for the establishment of multinational corporations. Other kinds of biases involve price, for example, affordability of locally available goods than similar imported goods. In such a scenario, there will be a rough time for the international business to carry on. Therefore, MNCs willing to venture in China should ensure their home countries are in a cordial relation regarding corporate engagements. Quotas share the same principles with tariffs regarding the restriction of foreign business profits. A quota is initiated to motivate the domestic trade in the host country. Thus, MNCs seeking to excel in Chinese telecommunication market should exercise their trades in compliance environments, which will ensure that they do not suffer from economies of scale (Maurer, 2016).
Technology as a factor has an imperative role in the economic realization and income gain for all multinational corporations operating in China irrespective of the sector. The management of international businesses depends solely on the technical competencies as well as technical manufacturing skill that are used globally for communication, research, and development. Therefore, knowledge of technology has been one of the elements that attract most of the MNCs to invest in China due to aggression required in the telecommunication sector as depicted by the transformational changes within China Telecom Company. Every MNC's primary interest of time is to revolve around technological transfers to access foreign markets. Availability of infrastructure and other technical expertise are fundamental to the prevalence of MNCs in the Chinese market. For example, firms specializing in the manufacture of mobile phones, computers, and other electronics have found it easy to access the technical resources in China. The levels of technology development help in the determination of the extent of exposure or understanding of the population. Such consideration may assist in evaluating where to establish different levels of technical operations. For example, sophisticated techniques operations are cheaper in China compared to low-tech, such states such as the East African countries. The importance of technology transfer from the international dimensions to the local environment in China is associated with research and development, which is essential for competitive advantage for firms. Such relationships are useful in determining the levels of foreign direct investment through global markets taking place in MNCs.
Moreover, the benefits received by China through external development regarding the use of and improvement of the existing technologies through the substantial transmission favors the international firms seeking to invest in the telecommunication sector. Such a move has assisted the country as well as the firms to attaining economic growth and expanded market structures. Broadband connections in China, which entail high-velocity transmission technologies, has attracted technology-based investment within the state and internationally. For example, a cable modem that enables operators to use similar coaxial cables, fiber optics assisting in the conversion of the electrical signal into light and wireless connection meant for home or business linkages aided by radio waves are favorable for telecommunication firms operating on a large scale (Goerzen, 2016). Therefore, it becomes fundamental in the creation of new global markets within multinational corporations. Broadband connectivity enables one to access internet services on the phone that is required during MNC implementation overseas. Thus, communication can be channeled through intranet and e-mails. It also makes one always connected to the internet (Goerzen, 2016). Furthermore, technological experience in China, which is attained through established training mechanisms, is vital in creating a sustainable foreign market for MNCs during functional development. Such approach provides a comparative analysis of the international business environments. Thus, this helps to point out the relevance of MNCs that operate in foreign markets (Noble, 2000).
The emergence of foreign markets in China poses a growing risk to the advanced economy due to shifts in prices from the stable countries. Such motions are stimulated by the economic changes from manufacturing to prioritizing on the domestic consumption. Although, the strict limits on the Chinese government to foreign MNC have been harmonized creating the capital markets to be more porous allowing it to expand its businesses. Further, its financial integration is likely to increase, narrowing the gap with the economic prowess like the US. Regarding the International Monetary Fund an increase in global marketing opportunities has made it the third largest in the world valued at $6.7 trillion based on market capitalism. However, most Multinational Corporation reported inadequate communications on policies and increasing risks of spill-over from the markets.
Moreover, for any firm seeking to expand its operations to international markets such as China should ensure the capital base is significant enough to take advantage of the economies of scale. Each firm should make sure that modern technology defines the baseline of resources invested in the business. Such undertakings are essential because most companies in China and other developed economies have firms that have been established over the years with advanced competitive advantages. Operating businesses based on the succinct research evaluations for the possible niche guarantees the success of Multinational Corporations in China. Besides, it is imperative to incorporate the benefits that come with transformational approaches to a competitive market such as mergers, collaboration, and acquisition. Nevertheless, the Chinese market is suitable for investment by MNCs.
To conclude, the key factors to take into account while establishing new foreign markets for multinational corporations seeking to invests in Chinese telecommunication sector are based on the economy, technology, international trade, and legal measures. Technology seems to be very eminent in the strengthening MNCs and has more benefits to the host country since the world turns the world into a global village. MNC also takes control of the operations by executing a proper marketing strategy that holds. In China, the terms of trade, the legal structure of the corporate sector and the availability of resources favor the establishment of international businesses. Therefore, it is essential for organizations to consider evaluating internal and external factors to determine the extent to which they will affect the productivity and performance of the corporation across the diverse market. A multidimensional approach to the factors of production, resources, and the market will assist the organizations to form strategies that will guarantee compliance as well as profitability for the firms. Such an approach is essential in forecasting, risk management, and value creation.
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