Dynamics of Expansion for Multi-National Companies
- by siteadmin
The expansion of multinational companies is not a new phenomenon in the post-industrial world. But what are some of the most important dynamics for this?
The biggest dynamics include:
1) “Hybrid economy”
2) Law, power and politics
3) New markets
4) Competition with local businesses
First, what are hybrid economies? They are economies that have both strong private enterprise systems as well as state-run ones. For example, China has converted to a hybrid system with its recent economic boom after trying many different things. This forces MNCs to be flexible in their business models in order to keep up exports in these countries’ markets. However, it isn’t all so simple. MNCs are forced to deal with the economic systems of local governments, leading to transactions becoming difficult. They must consider unpredictable economic systems within unstable societies.
Secondly, what is law, power and politics? It’s easy enough to say that politicians interfere with business – it’s a fact of life. However, they also have other effects on the dynamics of expansion for companies. The political landscape can lead to changes in export/import regulations or foreign trade policies that can affect an MNC’s business practice. This creates uncertainty about what will happen next – so businesses are put at risk if they don’t have backup plans up their sleeves.
Thirdly, what are new markets? Expanding into new markets means having less control over them (than if they were expanding into existing markets). Market expansion is difficult because of the many demands that come with it. If a model doesn’t work, companies have to change them or face issues. Also, new markets cause a lot of competition from other businesses that want a share in them. This can be tough because MNCs have to deal with regulations and local competitors at the same time – this often slows down processes that limit profit by creating bottlenecks due to administrative costs or long decision-making timelines.
Fourthly, what is competition with local businesses? In some countries where MNCs are based, there are sometimes already well-established domestic enterprises. Competition between these local companies and MNCs may pose problems because of the disparity in terms of business practices (i.e., an MNC might argue that they’re at a disadvantage due to local companies). However, this isn’t always true because some MNCs can be flexible enough to adapt – and they may even end up better than the local businesses in some areas. Still, there are cases when MNC dominance is harmful. If their market grows too much with monopolistic tendencies, local enterprises can go extinct if not supported by government policies or action taken by other people.
To sum up, competition between companies with different backgrounds is nothing new but it poses issues for both types of firms nonetheless. The dynamics of expansion for multinational companies means having to deal with bigger problems down the line – which is why they need to stay ahead of the curve.
The expansion of multinational companies is not a new phenomenon in the post-industrial world. But what are some of the most important dynamics for this? The biggest dynamics include: 1) “Hybrid economy” 2) Law, power and politics 3) New markets 4) Competition with local businesses First, what are hybrid economies? They are economies that have…