Ian is an SEO expert, a teacher, a qualified writer, and a social worker. Multinational corporations.
In the modern world, due to globalization and other technological advancements, people have been able to conduct businesses worldwide. Many corporations and companies have expanded their operations and opened up their branches in different countries. Opening up a business in a different country means that it will face different rules and requirements from the mother country's ones. Therefore, to create a sustainable mutual relationship between the multinational corporation and the host country, the two agree on service terms (Stopford, John, 2018).
In this article, we will be discussing the relationship between the host governments and the multinational corporations, specifically the financial and investment requirements that local governments have from those corporations.
Demands of Local Governments on the MNCs and How Their Impacts on Their Success
The local governments play a major role in the success or failure of multinational corporations. Their involvement in businesses provides a conducive environment for the corporations to undertake their activities or make it difficult for the corporation to achieve its goals and objectives (Stopford, John, 2018).
Some of the demand of the local governments to the multinationals are;
1. Generation of Employment to Local Governments' Citizens
Mulltinational corporations have a bigger responsibility to create employment opportunities in their operations. The local governments require the MNCs to consider the local citizens in their plans. Besides, there is no way pure citizens of the mother country can run an organization from where the corporation originates. Therefore, the local government is involved to ensure that the corporations provide jobs for its citizens.
2. Tax Compliance and Participation in Corporate Social Responsibilities
Just like the other businesses in a country, the multinational corporations are required to participate in the community-building activities and conduct their operations to protect the people's health and well-being. On the other hand, the government demands that corporations provide their finances into formations for taxation purposes. Besides, the government needs taxes to provide a conducive environment necessary for corporations to conduct their operations. In this case, the conducive environment refers to the power supply, security, and water supply.
3. Investments Should be Legal
Generally, the governments look forward to supporting businesses and organizations that benefit or contribute to the improvements of their citizens' living standards. Therefore, most governments demand that the multinational companies provide their investment plans and stick to providing the goods and services they are licensed for. In this case, a corporation providing socially unacceptable services such as betting may be asked for more legal requirements than a corporation providing more beneficial services such as medical services (Stopford, John, 2018).
4. Protection of the Local Industries
Multinational companies usually have a larger capital base and ability to compete stiffly in the market. In this case, the government may demand the corporations to offer fair prices for their services or goods to enable the local companies to compete fairly. Besides, people will always prefer to purchase cheaper yet quality products from multinationals. Therefore, the government must intervene to protect the native industries by controlling the bigger companies' prices.
5. Protection of the Environment
Governments are always on the frontline in ensuring that the environment is protected and safeguarded. Therefore, they demand multinational corporations to provide their investment plans to ensure that the proposed investments will not pose a health threat to the people and the environment at large. Specifically, the government demands thin information so that any threatful investments may get stopped or they come up with plans of protecting the environment from destructive activities of the multinationals (Helpman, 2015)
To conclude, as we have seen in the previous paragraphs, the multinational companies contribute greatly to achieving the host country's economic goals and objectives. However, the host countries' governments make different demands to the multinational companies to control their activities and ensure that they benefit from those corporations' operations.
Additionally, we have noticed that the impact of globalization and the advancements in technology have contributed greatly to the expansion and growth of the multinational companies in different continents.
The governments' major demands are that the corporations must employ the citizens of the host country.
The multinationals are also required to invest in activities that they are only licensed for and compete legally to avoid pushing the local industries outside the market. On the other hand, corporations must protect the environment.
J Birkinshaw, SA Terjesen - The future of the multinational …, 2003 - eprints.qut.edu.au
GM Grossman, E Helpman - American Economic Review, 2015 - aeaweb.org
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2020 Ian Muiruri