The Impact of Multinational Organizations on International Commerce and Inter-Country Relations

Negative and positive impacts of multinational organizations on international commerce and inter-country relations?

Multinational organizations have rapidly grown in scale. Many products used daily are manufactured by multinational firms. While these organizations have a significant presence, they are also product hubs for goods and services. The essay provides a discussion on the negative and positive impacts of multinational on international business. The destructive and progressive impacts of multinational corporations on global business and inter-country relations have widely been debated in empirical and social studies. Social scientists have focused on the negative impact of multinational firms such as labor regulation and collective bargaining (Meardi & Marginson, 2014). From a positive stand point, multinational companies have been avenues for developing mechanisms in international commerce and inter-country relations. Specifically, the multinationals promote the creation of organizational channels in host nations that integrates workers, representatives as well as inter-regional networks. Moreover, multinational organizations play an important role when it comes to creating job opportunities, owing to increased foreign direct investment (FDI) by ten-fold and workers by three-fold. Nonetheless, the significance differs from country to country, especially pegged on the fact that FDI is higher in advanced economy in comparison to the global average (Suyanto, 2013). Multinational organizations positively impact international business and inter-country relations through productivity, wage and export surplus. In addition, global forms create a positive wage spillover by offering high remunerations to workers and good working conditions to attract and retain workers. However, Coca-Cola understands the relevance of diversity and inclusion, as such; its workers reflect rich diversity of human capital from different backgrounds (Pratap, 2017). Moreover, multinational corporations have good business skills that companies in host nations can learn from with regard to export opportunities. Commercial connection or partnerships presents companies with a platform to learn strategies to penetrate export markets. Multinational organizations are useful when it comes to productivity and technology spillovers that are essential in international business for a long-term trajectory (Narula & Driffield, 2012). In short, the transfer of technology to domestic firms improves productivity. Nevertheless, multinational organizations can have detrimental effects on international commerce and inter-country relations. Multinationals such as Nike, for instance, have been accused of poor working conditions, low wages, child labor, pollution and for forth. Furthermore, because of multinationals, the productivity of domestic companies has often plummeted due to a decline in the market share (Suyantoa 2013). Intense competition within the industry can greatly affect domestic companies but also create enabling conditions for multinationals seeking for cost-effective labor. IKEA, for instance, sought for a competitive edge in the production by destabilizing the host economy. While Coca-Cola fosters international business, it has adversely affected inter-country relations. At some point, the organization has been accused of violating rights of the local population. According to Chowdhury, Mustu, Haley & Melanie (2011), Coca-Cola was accused of unfriendly environmental practices particularly exploiting ground water in countries it operates contributing to acute water problems. Even though multinational companies can adversely affect international commerce, whereby the least competitive exit, survivors are able to compete in domestic and foreign markets. Essentially, this is beneficial for domestic organizations in terms of wage levels and improved employee rights.

References

Chowdhury, N., Mustu, B., Haley, S. D., & Melanie, Y. (2011). The Human Right to Water and the Responsibilities of Businesses: An Analysis of Legal Issues

Meardi, G., & Marginson, P. (2014). Global labor governance: potential and limits of an emerging perspective. Work, employment and society, 28(4), 651-662.

Narula, R. & Driffield, N. (2012) Does FDI cause development? The ambiguity of the evidence and why it matters. The European Journal of Development Research. 24( 1), 1-7.

Pratap, A. (Febuary 11, 2017). HR management at Coca Cola: Performance Management and Innovation. Retrieved on January 20, 2017 from https://www.cheshnotes.com/2017/02/hr-management-at-coca-cola-performance management-and-innovation/

Suyanto, R.S. (2013). Foreign direct investment spillovers and technical efficiency in the Indonesian pharmaceutical sector: Firm level evidence. Applied Economics, 45(3), 383- 395.