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Multinational Enterprise

Multinational Enterprise
Globalization is controversial because while it often helps to spur economic growth it leads some to fear for the dilution of national sovereignty over trade, employment, welfare and the environment. The concept of globalization has resulted in embracing of technology in almost all economic sectors, privatization of once state controlled corporations and the emergence of widespread multinationals, some of which yield powers as to influence decision making by state governments. Globalization is a force that surpasses the economic, social, political and cultural elements and reorganizes them to form a new globalized order with an element of uniformity. This has in turn led to a restructuring of international relations previously based on geographically delineated territories. Earlier, international transactions were based on cross-border interactions among territories which affected trade and market trends (Rugman, 2009).
The multinational enterprises (MNEs) are generally cross-border units that fall under the jurisdiction of national territories. Much as they are valuable, the MNEs have been found to pose challenges and conflicts on several issues involving state and interstate structures. In the recent past the MNEs served to reinforce the element of state sovereignty. Of late however, the sovereignty tag has been challenged since the definition of globalization was based on geographic based jurisdictions controlling economic and political aspects. The MNEs have been at the forefront in advancing technology, forming economically strategic coalitions leading to a networked global economy. The debate on whether the multinationals which are both a cause and a result of globalization have compromised territorial sovereignty never ends (Rugman, 2009).
The emergence of multinational enterprises over the years has seen them command a significant portion of the world trade. In what the United Nations terms as international production, the effects caused by the multinationals are causing ripples to government authorities to regulate or control trade and market flows. A new breed of integration has been developed with production no loner being limited by political boundaries. As if in a world of their own, the multinationals are effectively controlling economic paradigms of the world. Today it is almost unimaginable that a single state could have the authority to control the complex web and networking that globalization culture has established. The production networks arising from the multinationals are simply overwhelming and spiralling out of control by sovereign authorities. The connectivity in trade structures and the associated shift from trade to investment has rendered border controls and other domestically instituted regulations almost lose meaning. Some states have been forced to be lenient in formulation of regulations governing investments in their home countries as some are according to the multinationals, ‘restrictive to international competitiveness’. This has resulted in compromise of important parameters such as health and safety of local inhabitants. States have been forced to enter into mutual agreement and deals as the interdependence between them and the international firms becomes of partners and not ‘regulator-regulated’ kind of set up. Owing to inadequacy in governments’ ability to offer some services, they are left at the mercy of such enterprises (Rugman, 2009).
Some enterprises are buoyed to expand their operations globally owing to the inadequate markets available at home. In sectors such as telecommunication, national markets would definitely never satisfy sales targets for the manufacturers. In such a case the firm is forced to look for wider markets outside the jurisdiction of the country of origin so as to cover for production cost and risks. In such a scenario the focus of such a firm would be capturing markets irrespective of state borders. Therefore the position of the state in influencing such trade would be rendered irrelevant. The states have also become dependent on the prowess registered by such firms for survival in aim to remain competitive globally. If such a government attempted to impart unnecessary controls on these firms, it could as well lose the national competitiveness. This thus makes many governments to be influenced by the firms in decision making (Rugman, 2009).
With emerging trends of relational rather than hierarchical networks in business venture, the ability of the state to control trade is diminishing. Today an MNE may be in partnership with thousands of partners from suppliers to distributors which makes its influence affect almost all aspects of various economies. Such alliances leave sovereign authorities’ with no such powers as to regulate the colossus spread of such firms and in effect risk losing their impact on their own people. Actually in such kind of set ups, no sole government can claim to have the mandate to control such firms since they fall under many different regulatory authorities. The authority wielded by MNEs today is so great that their recommendations and demands are usually integrated when formulating any international laws touching on trade. Slowly, they are replacing the sovereign states which have since early times had the prerogative to do so (Rugman, 2009).
The impact of multinational enterprises on employment can be positive or negative. The establishment of multinationals in a country is always a welcome idea as nations anticipate reaping benefits. The benefit may be economical or social. An MNE may allow for utilisation of locally available capital and mostly human capital. This would to improvement in living standards of such employees, upgraded social welfare and gratification of basic human rights. However, emerging statistics indicate that the employment and its associated benefits from the multinationals could be a cause for alarm. By instituting their own employment protocols owing to their different cultural backgrounds, the MNEs could contradict the set regulations by the national governments concerning labour laws. Many international firms show total disregard to the sovereign right of states regarding national laws and local practices and go ahead to implement practices that may contradict the host countries’ traditions. The International Labour Organisation constitution demands that any investor in a foreign country must be ready to comply with the existing national laws and other internationally agreeable standards. As such the multinationals must consult the government and labour organisation within the countries of operation (Enderwick, 1985).
The large economic influence these firms yield has how ever rendered most government such as in Africa unable to control the way in which these firms control labour within their enterprises. Due to most governments being unable to create employment opportunities for their subjects, they become vulnerable to accepting conditions set by the multinationals. This may see the employees undergoing mistreatment through poor working conditions and low remunerations. By allowing these multinational operate haphazardly in the spirit of globalization has seen many states lose the sovereignty integrity. In such countries, the multinationals exercise illegal freedoms to give preferential treatment to foreign expatriates in place of local experts in complete contravention of the international labour laws that demand that a multinational accords priority in employment of nationals of the host country. Governments in ma NY nations have lost the authority to stop widespread discrimination in multinationals operating in their countries on basis of gender, race, colour and physical ability due to the associated economic benefits these governments accrue from the NMEs. This leaves a question as to the value of sovereignty such government would claim to have (Enderwick, 1985).
Increased inter border trade courtesy of globalization has had an impact on the welfare of people living in such countries. Today most government have lost the authority to control inter border activities. Cases of drug trafficking and now human trafficking have become rampant that all a government can do is sensitize its citizens to be vigilant. Multinational firms with interest in countries with weak governments have been accused of funding wars and rebel groups and then take advantage of the anarchy to exploit such countries’ resources and avoid taxation. This may even lead to overthrow of sitting governments that appear to be hindrances in successful penetration of such market leaders. Social stress arises when governments’ sovereignty authority is challenged. With increased globalization, most countries have lost control of restraining incidences of crime, population growth and other social vices. It is a common to hear of drug cartels controlling parts of a country and sometimes holding the ruling regimes to ransom for their continued smooth operations. Such cartels with worldwide connectivity are difficult to control by single sovereign republics and would require collaborative efforts from many more nations of the world (Baker, R., n.d).
The globalization culture has taken a toll on the environment. With continued trade across the world, an equivalent overuse of natural resources has been the result. With increased establishment of industries and other enterprises in the world, natural ecosystems have been destroyed. The extent of deforestation that has characterised the world today is unspeakable with the logging industry being preferred by many due to the ease of disposal. So far more than half the world forest cover has been destroyed for commercial and property purposes. Pollution of the environment from green house gases released by these man made enterprises has affected the global biodiversity. The global warming challenge has affected the entire planet leaving many sovereign governments with no ability to regulate the performance of the large multinationals that continue to pollute the environment with abandon in order to maximise profits. Sea transport which offers the cheapest route for the global trade has resulted in pollution of water masses through release of sulphur and nitrogen oxides that are detrimental to sea life (McAusland, 2008).
Globalisation is a phenomenon that can be described as a double edged sword since while it often helps to spur economic growth; it has also led to dilution of national sovereignty over trade, employment, welfare and the environment. The powers possessed by players in the global trade have surpassed those hitherto perceived as a preserve of sovereign states. There is a need to enforce international laws to govern the operations of these players to avoid a shift from globalization to global anarchy.

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