It has been said that MNCs often introduce new efficiency oriented management practices What can developing host country learn from the MNCs in this respect?

Answer 1

Answer. Multinational Corporations' have played a significant role in thedevelopment of poor countries. Be it introducing best management practices,help in improving productivity, making local people become competitive orimproving the quality of life of people, the contribution of MNCs has beenpraiseworthy. The management style of MNCs' are different with respect todomestic management style.MNCs are known for their efficiency-oriented management systems. When MNCsoperate in a developed host country, the influence on the management practicesof the host country is often positive. This occurs due to the interaction which can bedescribed as "cross-fertilisation" between the two sets of practices. Theinteractionmay bring about improvement in management technologies and practices.In the context of developing countries, MNCs most often introduce newefficiency-oriented" management practices. Thus a developing host country can learn a,good

deal from the MNCs in this respect.MNCs Business CultureOne of the major areas of controversy is the impact of MNCs on host countries'culture. This has several dimensions which we shall discuss:Market Promotion and Advertising: It is known that MNCs rely heavily onadvertising and market promotion to retain and enhance their market share. These advertisements and market promotion techniques very often have theirbasis in the advertisement and market promotion techniques and approachesadopted in home countries of the parents. Thus, it is argued that the MNCs bringwith them to the host country their cultural bias powerfully based in developedcountry. This, according, to some, damages the local culture. This problem maynot be serious in host countries which have similar cultural patterns. But in thosehost countries which belong to different cultures, this problem becomes fairlyacute. Their advertisements and sales promotions have very often distorted localcultural preferences and thus created substantial confusion in the host countries.It may also happen sometimes that such advertisements may not bring thedesired result to the MNC as has been theexperience in the fields of food, drinks and clothes.While the local enterprises are imitating the MNCs in respect of advertisementand market promotion, MNCs are also fast learning the necessity of adaptingtheir promotion campaigns consistent with a host country's culture although themajor refrain remains the global market approach of the MNCs where thematerial differences are expected to be either eliminated or reduced.

MNCs and Social Responsibility: Modern business is expected not to overlook itssocial responsibility. While the government's intervention is disliked, there isincreasing realization that modern business must realize its social responsibility. The. MNCs may have different perceptions of social responsibility. In the homecountry, they can be more sensitive to the national responsibility whereas in thehost country, especially in a developing country, it could be less. This tendency ishowever changing although very slowly. The MNCs are perhaps realising that it isin theirlong-term interest to acknowledge their social responsibility in the host countryalso. But the Bhopal disaster case which was caused by the leak of gas from theUnion Carbide Plant, does not give much hope that MNCs would behave with fullsense of responsibility. The irresponsible behaviour of the, Union Carbide causedmisery to a large number of inhabitants of Bhopal MNCs often sell medicines indeveloping host countries which have been banned in their home countries.

MNCs and Environment Protection in Host Countries

: MNCs are underincreasing pressure by their home governments to give up the technologieswhich damage the environment. Hence MNCs are choosing countries whereenvironment regulations are weak. It is likely that MNCs are not mindful of theenvironmental disaster they create in a host country. What is more concerning isan intellectualsupport to such a shift as has been argued by the Vice-President of the WorldBank, Professor Lawrence Summers. According to him the harm from the shiftingof environmentally pollution prone industries to the developing countries will befar less than if these industries were operated in the developed countries for thepopulation of developed countries has lower limits of tolerance of environmentalpollution and higher level of health consciousness than in the developingcountries.

Restrictive Business Practices

: One of the important aspects of the MNCs'operation has been their restrictive business practices which affect the free

operation of their subsidiaries, affiliates and branches in host countries. Theserestrictive business practices include typing imports to specific sources of interest to MNCs, conditions of technology transfer, price fixation, exports,restrictive use of brand names and trademarks etc.

Efforts at De-stabilisation

: The history of MNCs shows that they have at timestaken recourse to de-stabilisation of inconvenient governments especially indeveloping countries However, MNCs have been found not to be indulging inpolitical de-stabilisation in the developing countries during the latter half of theseventies and the eighties. The absence of such a phenomenon now can beattributed to a few main factors:(i)The MNCs no longer needed to indulge in political de-stabilisation as theinternational ideological environment in the eighties had been suchthat there seemed no basic contradiction between the objectives of theMNCs and the governments of most host developing countries.(ii)The MNCs appreciated the fact of independent governments in thedeveloping countries. These governments have developed the capacityto cope with such situations or contingencies. Similarly, the hostdeveloping countries also recognized the need to adhere to thecommitments made by them. Therefore, in the eighties one witnessedsubstantially lesser number of nationalizations and expropriations thanhad been in the sixties and the early seventies.(iii)The MNCs were not very much interested in raw materials in the eighties. They were steadily withdrawing from these sectors, thus removing theprime cause of confrontation between the host country governmentsand the MNCs.(iv)The emerging importance of smaller MNCs in their own countries has alsocontributed to the growth of confidence of developing countries in the MNCs.