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Multinational business is a business of a company that has its operations in several countries; the concepts of multinational business are internationalization and globalization. Internationalization is a process of increasing awareness applied by many firms relating to their influence of activities internationally, conduction of transactions, and their future with other firms in other countries. Multinational business is beneficial to their home bases and mother countries when it comes to investments.
The need for multinational business is because of the market size; if a company wants extensions to a larger customer base, the solution will be an expansion of the business internationally. Plans for expansion and growth of a company in search for fresh markets also steer its operations from domestic operations and spread to international territories. The other reason why businesses go global is the need for cost reduction: the cheaper the resources and labor offered in other countries, the better the company’s economies of scale. The increase in number of global consumers, who have similar lifestyles and tastes, supports the rise and existence of multinational business. There is also remarkable increase in international competition (Rogers 78).
Domestic businesses attempt to enter the international market in order to compete rather than operate at losses and smaller costs. Multinational businesses have come up in a large number due to reduction in distribution and transport costs, this means that they incur less operating costs, and hence more profit. Unlike small businesses, multinational company has different business strategies depending on the company in question. Doing business overseas affects different sectors of business. These include finance, marketing, accounting, and economics. Therefore, multinational companies have complex laid down company business strategies to avoid these consequences.
Product Implementation: a company may find out that one product doing well in the home base country may not be so successful in the other countries. Therefore, preliminary test of products in new territories to find out people’s preferences is extremely crucial. Consultants in the intended foreign countries, who know better where the population is concentrated, are assigned to test the products on the shelves.
Strategic outsourcing is another strategy these businesses use. The multinational companies use foreign vendors to do for them the distribution to their customers first in the foreign countries. The countries with the highest competitive advantage are normally those that have less affordable labor and possess abundant natural resources. As part of the strategy, the multinational businesses evaluate the tax laws, economic environment, political, environmental, and any other barriers of trade in the foreign countries of interest.
Financial investment: transaction exposures commonly incurred by any company conducting business overseas due to the fluctuation in their currency rates. Financial risk management is very important; the company negotiating for all its business transactions for a forward exchange manages this; hedge contracts can be used to cover longer periods and years of trade.
Banking and finance are the main contexts in business in Nigeria. Financial institutions form the principal part of the financial sector, which promotes the economy of Nigeria. Banking and finance in Nigeria have evolved; hence several developments have been accomplished to date. The rapidly changing environmental policies and technological innovations have regulated the relationships between the market conditions and financial institutions. The developments in the financial sector can be discussed in reference to the regulatory and supervisory framework, the capital market, money market, development finance, and other financial institutions.
Regulatory and supervisory framework and regulatory institutions are the rules and regulations that govern banking and finance. These recent statutes and rules include Bank and other financial institutions Decree No. 25, the Central Bank of Nigeria Decree No. 24, just to name a few.
The financial institutions and Money market: opportunities for trading in Nigeria offered by the money market in instruments that are short term and monetary policy amendment based on this too. An increase in number of participants in this market has attributed to the rise of multinational companies in Nigeria and establishment of discount houses in the low-income sector institutions. Deregulation of the financial sector has influenced the activities in the money market since September 1986.
The Capital market and its subsequent institutions are mobilizing the long-term funds in Nigeria. The regulatory authority and Nigerian Stock Exchange are the operational institutions issuing stock broking firms and houses. Capital market constitutes the primary and secondary issues of security in business. Development Finance Institutions were banks that contributed to development in the economy. These institutions always contributed to the country’s economy, limited in one point due to insufficiency of funds and low capitalization.
Other financial institutions and funds in Nigeria are insurance companies established to cover individuals as well as corporate bodies against the occurrence of risks. Financial companies specialize in short-term financial non-bank intermediation. Bureau de Change is the institution that has expanded the foreign exchange market and improved accessibility to the same. Primary Mortgage Institutions have mobilized savings for the housing sector developments and ended up supervised by Nigeria’s Mortgage Bank. The National Economic Fund for Reconstruction got its resources from the Central Bank of Nigeria, Federal government, and African Development Bank by credit.
Conduction of business has never been similar in Nigeria due to the culture difference, but the multinational business there has thriven on training their sales, technical, and managerial personnel on how to counteract the conflicting cultures. Adaptation to a country’s institutional context, just like Nigeria, was easier based on the business parties’ anticipation of the commonalities. The multinational companies adjusted and adapted easily by finding new approaches to the old problems, combination of examining the problems, and their respective cultural; perspectives created significant solutions to the diversified cultural perspectives. Ethnocentrism is one of the major problems in adjusting. This is an instance where one group feels superior to others.
Multinational business strategies faced limitations when it came to the country context. The variables that led to set back in business strategies were namely: the social organization of Nigeria, the environmental and technological differences, language, conception of authority, on-verbal communication behavior, and time for conception. All the above have affected communication and have always been the crucial part of the business. Translation errors between parties in business result in misinformation and mistranslated ideas in business. Shadings extremely valuable to business weaken when parties with different languages meet for business and instances of a touchy negotiator, their misunderstanding of some concepts result in conflict.
Attitudes to different dialects and ascents in a county created communication barriers in international business, amongst the Italians, Germans, and French business parties with the natives of Nigeria. Culture biases related to technology and environment also affected their communication; notions of settlement logistics, organization of the territories, topography, climate, and transportation contributed to factors that hindereding the laid down business strategies Availability of the natural resources and population influenced the views of the export and domestic marketers (Palc%u030Cic%u030C and Brane 82).
Industrial Clusters are geographic concentrations of interconnected companies. In Nigeria, the option of industrial clustering was a way of facilitating growth and boosting the economy. The push came from developed agencies of small and medium enterprises. These Small and Medium Development Agencies in Nigeria formed clusters in all the local 774 governments. They developed other industrial development Centers, 23 in number, in six geo-political zones in the country, the plan to produce locally made products further led to traditional clusters. This brought to improved standards of goods, innovation, and competitiveness; the new innovative technology improved the importation of goods and created more jobs for the Nigerian people, hence the improved standards of living. An action center of Africa was majorly to boost the production of locally made goods and improve strategies. This relevancy only became possible through a concept referred to as ‘Helix Concept’ to transform the existing clumped clusters into innovative clusters for an improvement in the economy of Nigeria. The Small and Medium Development Agencies in Nigeria developed and formed a database for the other clusters and acted as a resource center for issues by stakeholders interacted, shared ideas and facilities among other cluster operators.
The development of clusters was a new direction into building privatization, macroeconomic stabilization, opening of markets, and reduction in business costs. Clusters fostered high levels of innovation increasing productivity. This got accomplished by enacting economic policies and competitive strategy. The economic world map boosted by the clusters; masses of several industries and institutions linked up in one place, enjoyed the success of the competitive field. Clusters affect and influence competition by driving the innovation pace and direction, increasing the company’s productivity based in the area, and, lastly, by stimulating new business formations within the old existing clusters.
Local clusters in relation to Global economy: the existence of clusters is essential in competition macroeconomics, and the location plays an advantage as well in competition. Influences of new clusters have increased knowledge in competition and the dynamism of the economy. They represent thinking in a new way about the state, local economies, nation, and further necessitate new company roles, the government, and enhance institution competitiveness (Homann, Koslowski and Christoph 59).
Diffusion means the process of adopting new products by a consumer marketplace; diffusion of technology is the adoption of new skills and techniques in the consumer marketplace. Several factors influence the global diffusion and their effects on the same. The technological innovation risky nature blocked the diffusion of new technologies, hence limited productivity and competitiveness in the market. International collaboration with other countries also affects the success of technology diffusion into other countries. Location of the countries that have the different technology determines their success and acts as a setback in local production of goods for the market. Flow of capital; availability, or constant supply, significantly boosts the economies of scale, and hence improves the productivity through easy and faster diffusion of technology.
The gap in adoption rates regulates the diffusion gradient of technology. This reflects on the other globalization disparities. For example, diffusion of computer technology in Nigeria has grown because of the collaboration at the cross-borders of the different integrating countries. There are also the effects of patents and technological diffusion. Patents can stifle the development of technology and limit their diffusion. They also promote the diffusion of knowledge on technology to diverse countries leading to shared knowledge in technology, hence technological diffusion. Patents create awareness of innovation and invention that boosts productivity and improve economy globally.
In conclusion, the conception of the influence of institutions, industrial clusters, and diffusion of technology is extensive. The fact that culture in a country is neither monochromic nor polychromic complicated the multinational business and globalization in general. Global multinational business has fluctuated over the years, and many indicators show the increasing trend in globalization. The factors that hold the three issues in effect to the development of economy in the world are flow in financials, labor and work, innovations in technology, sustainability in environment, strategies in an organization, and degree of global integration as well as competition.