The Pros And Cons Of Multinational Businesses

There is certainly a constant increase in the number of companies operating internationally, as multinational and multicultural enterprises are recently becoming the norm and the world is becoming more accustomed to foreign companies. New destinations in the company’s business are multiplying and more projects are being successfully achieved with multicultural businesses. Multinational corporations are in existence because there are definite economic conditions that make it achievable for a corporation to become associated in the production of goods and services in a foreign location productively. Joint Ventures (JVs) are becoming more and more important to multinational enterprises as it is more beneficiary to the business than the Wholly Owned Subsidiaries (WOSs) in foreign countries where there is an uncertainty between both the formal and informal external environment. (DON’T FORGET TO CITE HERE!!! slagen) . Advantages of breaching out to foreign countries can be the ability of MNEs to start up operations which are foreign-based through either the JVs or through WOSs. (Brouthers and Hennart, 2007, Chen, 2008 and Chen and Hennart, 2002). While the WOSs allow for total control of the MNEs operations, they also can be of risk of external uncertainty (Anderson and Gatignon, 1986, Gatignon and Anderson, 1988, Hill et al., 1990 and Root, 1987).

All this does not go without pitfalls though as companies make costly mistakes when in an unfamiliar setting due to perhaps, lack of cultural sensitivity and these mistakes can be avoided by adequately researching international enterprises before committing resources