Type: Review
Pages: 6 | Words: 1508
Reading Time: 7 Minutes

Presently, globalization is increasing friendly relationships between countries. As a result, corporations have an easy time performing businesses in foreign soil. As corporations and multinationals become larger, their influence and interests go further accordingly as compared to other companies. A Multinational Corporation in this case can be defined as a firm that has its facilities and other assets operating in more than one country (Fontaine, 2007). These companies often are making more profits than those companies that only conduct business in one nation. This means that they have an extremely large budget as compared to the other companies. Additionally, Multinational corporations have an immense number of employees ranging from a diverse societies. This is proving to be a significant challenge for corporations and because of this; they require strategic solutions to avoid these challenges.

The challenge of a multinational company is to blend several employees who have different nationalities, cultures and beliefs. This is a big issue for the companies because if the employees differ in views and ideas it may lead to poor performance due to lack of proper understanding and communication. An excellent example is when an employee from India goes to work in a Japanese corporation. In this case, the two parties have different cultures, nationalities and believe. As a result, the Indian employee might have difficulties in work leading to poor performance in the company (Carden & Egan, 2008). Additionally, the Indian employee might be insulted if the Japanese conflicts with Indian cultures. Instead of the corporations increasing quality in performance, they might lead to poor quality in job performance.

In addition to cultural challenges, has a challenge in advertising for job opportunities in foreign countries. This is because the advertisement might cause a different perspective in the foreign society especially if the advertisement might affect the cultures. For instance, a multinational corporation trying to penetrate the black society from America or Asia might cause trouble if they advertise a job with a discriminatory remark. In this case, they might state that the job is for the blacks only. This remark might be discriminatory, and it might affect the black community. In this situation, the corporations might have simply wanted to say that they are giving first priority to the locals as part of their corporate social responsibility. Instead, the locals have a different perspective of the corporation’s intentions. As a result, the corporation might taint its name resulting to poor profitability levels leading to decreasing levels of competitive advantage.

Despite the cultural challenges, these Multinational corporations still face other problems such as global growth patterns. In this case, developed countries are no longer source of cheap labor. According to statistics, developed countries are providing quality cheap labor to corporations as compared to developing nations. As a result, corporations prefer to employ people from developing nations as employees in their corporations. This often leads to the corporations having troubles with local nations. Local employees start to form strikes in a bid to fight for their rights like increase in payments and more employment opportunities. In this case, local governments and consumer start losing faith with the corporations leading to low profitability levels. Additionally, the corporation losses the competitive advantage they were enjoying in the market.

Political stability in the host countries also pauses as a great challenge to the multinational corporations whereby they may have branches in a country that is faced with war due to political pressure or external attacks. Such a situation will lead to huge losses due to lack of business or destruction of the property it holds. The current government can solve the situation in a bid to control and maintain peace within since the multinational corporations is beneficial to both the government in terms of taxes and to the citizens in the form of employment. Political stability may also affect the taxing of the firms such that the government may impose high tax tariffs on them to promote the development and growth of local industries, most multinational corporations are normally affected negatively with such situations.

Multinational corporations are also hit by economic problems such as financial crises and high inflation rates. These conditions in effect make them have high operating costs leading to the fall of some branches. In a different point of view of taxation, government can only tax headquarters of multinational corporations; they cannot tax the subsidiaries overseas. In this case, they are not supposed to tax employees twice. For instance, home countries tend to tax the employees working oversees. Similarly, foreign governments tend to tax employees working in their country. As a result, this becomes extremely difficult for the company to conduct the accounts of the companies. Additionally, the corporations start losing foreign employees due to the burden of tax that is constantly placed on them by the two nations. For instance, China tends to tax employees from Taiwan. Similarly, Taiwan tends to tax the same employees despite the fact that they have already been taxed (Magala, 2005).

Many problems do arise when Multinationals are being run, apart from the ones discussed above; some may include acute shortage of the work force, which includes skilled labor. Skilled labor may be managerial or technical which may not be readily available when need arises. Challenges of unfriendly business environment are also experienced such as corruption and negative attitude from the local that may hinder the growth of the business. In general, there may also be the problem of conflict of interest among the three parties the government, multinational corporations and the public. This occurs in a situation where the government may want the firm to run business to gain from tax collection while the firm wants to benefit from profit gain (Center for Financial & Management Studies, 2012). On the other hand, the public finds the whole business is a scum or a hazard to the surrounding environment due to the by-product or the goods actually produced. These factors affect the multinational corporations at large but not internally as a firm. The following discussion will be explaining some of the internal factors, how they affect them and ways in which they can be controlled.

The Multinational corporations may be facing challenges in running a business in the foreign countries, but despite that, they still benefit both their home and host countries. For example, the host country can reduce imports and increase exports due to goods produced by multinational corporations in their country. This helps to improve balance of payment. The host country’s business can also get management expertise from the multinational corporations. The home country benefits because they create opportunities for marketing the products produced throughout the world (Sippola & Smale, 2007). They also create employment opportunities to their citizens both at home and abroad. In short, they give a boost to the industrial activities in their country.

In order for corporations to over come these challenges, they need to create policies that are going to suppress these challenges. To begin with, employers must learn about believes and cultures in each nationality in order to have joint views and share successes. Firs the management of corporations need to employ professional employees who are extremely proficient in cultures. These professionals need to more from one country to another gathering information about the different cultures for purposes of ensuring that the management create excellent strategies. In this case, they should consider all the cultures that might affect employees and societies if they are broken. Additionally, they should consider those cultures that would be an added advantage for the corporations.

Secondly, in a bid to solve the cultural challenges, the firms need to strategize properly to create a policy that will harmonize all the cultures. Intercultural competence is the ability of successful communication with people of other cultures. Multinational corporations should train their foreign employees to be intercultural competent whereby they are able to capture and understand any communications with people from foreign societies who often have specific feelings and concepts (Mor Barak, 2005). In this case, training programs for all employees should be created to ensure that no employees offend the other employee’s cultures unknowingly yet it could be avoided. This will result in the harmonization of the different cultures in the corporations.


Currently, business transactions are becoming global. This is where many companies are being able to conduct business at a global level. For this reason, it is becoming complicated every day for multination corporations. In the human resource department, there is an increase in the diversity of the employees in the company. In this case, management is facing many challenges. The challenges range from the different cultures to the different economies. In cultural differences, companies might offend foreign employees if they make remarks that offend their cultures. On the part of economic differences, developing companies have different economic levels as compared to developed countries. In this case, there is cheap labor in developing countries. This might result to problems in developing countries leading to a decrease in competitive advantage. However, learning of different cultures by corporations and training of the employees are excellent strategies to solve these challenges.

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