Question

QUESTION 2: What challenges do multinational companies face in a global economy? What opportunities do multinational companies face in a global economy?

Answer 1

Challenges of multinational companies face in a global economy

1.Challenge of nationalism

This problem occurs in some countries in the world especially India where the local government and politicians always prefer national products than multinational products, Moreover, there will be a public perception that companies are taking advantage of the markets of the operating country and takes away profit to the home country

2.Ethnic and cultural difference

Ethnic and cultural difference is one of the biggest challenged because the taste of the people of the country may not be the taste of the people of the other country. So a successful marketing strategy may not work in all markets because people in different areas have different tastes and preference ie a competitive leader in a country may not be the competitive leader of the other country

3.Laws of different countries

Laws of countries are different for eg: In India standard hours to work in a day is 8 hours where has in many other countries it may differ. So companies investment in knowledgeable corporate counsel will not work.

4.Currency fluctuations

Currency fluctuations occur in seconds thereby difficult to fix rates for global transactions.

5.The strategic relationship between nations

Suppose a war has broken between the two nations or a dispute among nations in any diplomatic matters can dampen the prospects of multinational companies operating in those countries.

Opportunities of multinational companies facing in the global economy

1. Competitive advantage

Competitive advantage is a situation where a company enjoys a superior position over the other. Multinational companies will definitely have a competitive advantage over the other because the larger the turnover the more you cover the fixed cost when the fixed cost is covered then the margin of profit of the product is high because it has to cover only the variable costs. Many multinational companies' overall sales are high so the cash reserves will be also high so that the companies will be able to serve their customers better than the others by giving special offers where other companies could not even imagine it.

2.Employment opportunities

Nations welcome multinational companies because it creates huge employment opportunities in the local market thereby contributing to the development of the nation.

3.Infrastructure development

Nations also welcome multinational companies because they need good infrastructure for conducting their business which automatically develops the infrastructure of the nation.

4.Good quality of goods or service at a low price

Since multinational companies enjoy a competitive advantage it is easier for them to provide goods or services at a lower price. which makes multinational companies in further increase of profit resulting in further competitive advantage.