A transnational company is a corporation that is registered and operates in more than one country at the same time (West’s Encyclopedia of American La., n.d.).
A transnational corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in one other, or many other countries. Some companies will outsource a portion or sometimes all of their Information Technology (IT) functions to a foreign country for a verity of reason. Companies that move a portion of their operations, such as IT, need to investigate the advantages, disadvantages, and tradeoffs of moving a critical component of their business operations to a foreign market.
ASPECTS AND ISSUES
WHAT BUSINESS OWNER WOULD NOT WANT TO JUMP IMPULSIVELY AT THE CHANCE TO ACCESS FOREIGN CAPITAL, INCREASED RESOURCES, AND ACCESS CHEAPER LABOR? HOWEVER, THERE ARE BARRIERS, CONSIDER THE OBSTACLES ENCOUNTERED IN THE DOMESTIC MANAGEMENT OF AN IT DEPARTMENT. TAKE THOSE OBSTACLES AND MOVE THEM TO A NEW CULTURE IN ANOTHER COUNTRY, THEN ADD ECONOMIC REGULATIONS, LACK OF LOCAL TECHNOLOGICAL INFRASTRUCTURE, LANGUAGE BARRIERS, AND POSSIBLE POLITICAL TURMOIL (IT world, 2001).
THOSE BENEFITS SEEM TO DIMINISH WITH THIS MIX ADDED IN, AND THIS IS JUST THE BEGINNING.
OTHER CONSIDERATIONS WILL INCLUDE THE LOCAL CUSTOMS. DOES THE LOCAL POPULATION OF THE AREA CHOSEN WORK WELL WITH TIME CONSTRAINTS? WILL RELIGIOUS RITES, CUSTOMS, AND TRADITIONS INTERFERE WITH THE BUSINESS GOALS OR PRODUCTIVITY DESIRED? WILL QUALITY AND CONTROL STANDARDS BE ABLE TO BE ENFORCED? BASED ON SOME WIDE EYED NEWS REPORTS GLOBAL EXPANSION SEEMS NEARLY IMPOSSIBLE. HOWEVER, BASED ON EVIDENCE TO THE CONTRARY, CREATING A TRANSNATIONAL OPERATION IS NOT IMPOSSIBLE, IN FACT THE CURRENT ECONOMIC MODEL IS GLOBAL WITH TRANSNATIONAL COMPANIES EXPANDING.
The Research paper on Wall Street Companies Business Local
Introduction: According to Robert Templer McDonald's opened its 25, 000 th branch recently! "Anthropologists Find McDonald's May Deserve More Respect in Asia," WSJ Interactive Edition). He also reported that the giant fast food firm began operation in its 117 th country. With such international presence it is little wonder that Ronald and the rest of the McDonald's crew pose such a "ripe target" ...
ADVANTAGES
Economic conditions or cost structure have made locating or relocating facilities in a foreign country beneficial. The cost of land and building is a benefit that has a strong economic draw to business. Also the maintenance to keep these facilities is lower than domestic rates. Along with these lower costs of facilities are the lower cost of employment wages and labor. However, the company needs to acquaint itself with the culture it is moving to as some cultures do consider pay rates important and other cultures consider training and knowledge equally important or even more important (Jamie Marulanda, 2010).
Other factors creating a beneficial scenario for a company to transfer some, or all, of its IT workload to a foreign country is the flexibility of the service language spoken. Many countries teach students multiple languages during education. These different languages can give companies the flexibility of providing their customers with different language options from which to choose. Another benefit may be an expansion of business operating hours offered to customers. Foreign countries located in different time zones, enable companies to strategically placing service centers in specific time zone enabling them to offer customer service on a 24-hour bases.
As a business operates in these foreign countries, they develop and build communication and technological infrastructure to be successful in these areas. With this increased infrastructure the door is opened to the transnational company to begin marketing its goods and services to this local community. Leveraging the new market helps the company to expand and helps ensure its continued presence in the area. With this growth and expansion further diversity is engrained into the business. This diversity and the insight to manage it gives the transnational business a competitive advantage over traditional businesses that only compete in local markets and lack this element of cultural diversity.
The Essay on Many MNEs may want to start operations in some foreign country
Establishment mode means that the MNE starts its operations from scratch in the foreign country usually through a wholly owned subsidiary where as in entry mode; this can be accomplished by a subsidiary or through partnership with a local party which involves shared ownership. In this study the authors examine the effect of same variables on both these choices available to a company. They do it ...
Strategically analyzing cultures and countries will enable an organization can place IT functions in areas that will tremendously benefit not only the company but also the area into which they move.
DISADVANTAGES
There are also disadvantages for transnational companies as well as advantages. Many times these can be one and the same depending on the perspective. As the Multilanguage abilities can be a benefit, they can also be a challenge. Even though people can speak a foreign language, they sometimes do not understand all the inflections or the meaning of some idioms that may be common to an area that the company serves. This can cause some annoyance and even offensive for some customers.
Another hurdle can be the lack of infrastructure in the desired area. This includes everything from the desired quantity and quality of phone lines, OC3 or T1 lines or capability, necessary workspace for the desired employees, or the availability of hardware or ability to obtain it where it needs to go because of the potential host nation’s legal restrictions or other challenges. These obstacles can usually be met and defeated but there are time and cost considerations in meeting these.
There are also the potential for a difficult or even hostile political climate. This consideration is one that can change rapidly in many areas of the world, and can be quite unexpected. Conditions in Egypt, for the last few weeks can be used as an example of how a seemingly stable country can have civil unrest quickly and unexpectedly.
The limited ability or inability to find and identify high quality employees can be a problem. Poor communication can create an inability to choose quality employees who will consistently deliver the level of service desired by the transnational company for IT functions. Accompanying this is the ability of the company to establish the overall quality and control measure that may be easily establish in another location.
The Research paper on Heineken Transnational Companies
Global distribution channels vary in general because everyone is trying to discover a way to make money without getting the flow of current distribution channels. Each channel is a very important chapter in the process of the global channel in order for the world to obtain some type of harmony within the distributing between the channels. The article discusses brand management on a global scale. ...
Conclusion
Many variables are involved in choosing and establishing a foreign IT counterpart for a domestic division. The benefits can outweigh the disadvantages. However, diligent study and reconnaissance of an area and culture is mandatory to build the appropriate cost benefit models helping management choose where and when the best fit is for the intended move to a foreign IT office.
References
IT World. (2001, March 22).
Special report on IT globalization. Retrieved from http://www.itworld.com/print/36615
Jamie Marulanda. (2010, May 1).
Transnational operations. the company of the future. Retrieved from http://www.thecompanyofthefuture.com/post/Transnational-Operations.aspx
West’s Encyclopedia of American La. (n.d.) edition 2. S.v. “Transnational Corporation.” Retrieved February 6 2011 from http://legal-dictionary.thefreedictionary.com/Transnational+Corporation
