Challenges Facing Multinational Corporations
Most of the challenges facing multinational corporations are caused by the rapidly changing business environment across the globe. The huge disparities in markets across the world makes it difficult for multinational corporations to find a better footing and grow their revenue bases considering that they target a global audience. This has ensured stiff competition on the international platform, such that many multinationals have been forced to implement counter-effective measures like mergers, acquisitions among other strategies in order to remain in business.
Examining the Challenges Facing Multinational Corporations
Multinational Corporations refer to companies that operate in two or more countries. As a result of this international presence, they have a competitive edge over several players in those markets. In fact, multinational corporations have greater power in the market and command a larger customer base. However, this does not mean that they do not face challenges. They do and quite a number of them.
In assessing the challenges facing multinational corporations, it is important to note that the problems vary depending on the corporation, its products and services, target market, international trade agreements among others. Besides, there are also some challenges that may not have significant effects on the general performance of multinational corporations. According to Protiviti Risk and Business Consulting, there were ten challenges facing multinationals in 2013. However, these have changed over time to impact different complications.
The Main Challenges Facing Multinational Corporations
The following are the key challenges facing multinationals;
The economic conditions always impact market trends; buying behaviors of customers. Considering that many economies are not doing well and trying to rise from the heat of inflation, the rate of consumer spending is still quite low. As a result of this, many multinationals are unable to generate profits. Such losses push the companies to take drastic measures like job cuts, in order to stay afloat.
High Costs of Labor
Many multinationals have often been faced with high labor costs in various host countries. When the cost of labor is high, the overall operational costs also go up, thereby decreasing profit margins. In fact, several multinational corporations have set up key operations like manufacturing plants in foreign countries, far away from their headquarters just to avoid inflated labor costs.
Management of Operations and supply chain
In emerging economies, it is not easy for multinationals to maintain efficient operations and reliable supply chain because of the processes it requires. For the multinational corporation to achieve these two, it will need to create effective production and distribution processes that can handle a global audience, which is quite expensive and can take a long time. For instance, in developing markets like India, China and Brazil, there is a new breed of consumers that need various industrial goods. This means a multinational eyeing the market must come up with distribution processes to meet all the shifting customer demands.
Conflict of Interest
Since multinationals seek to operate in different countries, there is usually a disagreement on the varying needs of the business, the government of the day and general public. This, may lead to the implementation of certain laws and regulations hindering multinationals from exploiting their full potential in those markets.
Political Instability in some countries
The political climates of countries vary from one to another, and may often change without warnings. The political environment of a country can have different impacts on the performance of multinational corporations. Countries facing political instability, characterized by conflicts and wars like the Middle East and some parts of Africa have very poor economic standings, which hinder the thriving of businesses. Based on the threats and risks presented in those economies, many multinationals often shy away from venturing into the markets. This curtails expansion.
Other Challenges Facing Multinational Corporation
Apart from the problems outlined above, there are other challenges too that are experienced by some multinational corporations. These include;
- Cyber risks caused by technology
- Retaining top talent
- Maintaining a competitive edge in the market
Generally, there are many challenges facing multinational corporations and it is up to the companies to identify their respective strengths, weaknesses, opportunities and threats in the market and act on them effectively for sustainability.
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