Table of Contents
The issue of multinational corporations as the most important actors in the global business environment remains a dilemma as some argue that it is a major actor while others argue otherwise. This essay seeks to answer this dilemma using a case study of the global automotive industry. As such, it is true that multinational corporations are very important actors in the global business environment. However, the corporations themselves without involving other actors like the NGOs and different state actors cannot give a clear indication of being the most important actors in the global business environment as some people believe.
The global business environment has in the past two decades experienced a tremendous increase in interconnection and interdependence as the use of technology in business becomes the order of the day. Economic integration processes have been in the forefront in promoting such kind of business connectivity. The developed nations seem to experience a better business environment than the developing nations. Certain states are already focusing on social and fiscal policies as a way of overcoming the continuing effects of economic crises between nations. As some nations continue enjoying their economic achievements, others continue to experience the economic downfall in as much as they may be key players towards ensuring business success of the global business environment (HM Government, 2013). It is obviously impossible to redesign the global governance, which is responsible for ensuring that the international trade runs smoothly, without considering the important role which the international community plays. Peace and tranquillity among nations may come to exist if only the international rules and principles, including the GATT Principles, are put into practice.
Multinational Corporations in the Global Business Environment
According to Iguchi (2015), multinational corporations may be classified into three categories; financial corporations such as banks like the Overseas Chinese Banking Corporation Limited. It also includes industrial corporations such as the Toyota and Petronas automobiles. Lastly, it includes services such as the international airlines like Etihad Airlines, hotels like Hilton Hotels and other services.
Most analysts tend to argue towards the same direction that there is a real transformation that regards the power of different states. More nations are seeing the need of transiting to a global community from their initial states. Such transition is evident in the way some manufactured goods are exported for further processing. In addition, finished products may have a market outside a country’s boundary. Considering the case study of Toyota automotive which operates in nearly all countries in the world, its impact is clear on economies in which it operates on. Isuzu also indicates nearly the same effort as nations share one thing in common-their needs and wants are similar. To some extent, the characteristic similarity has played a great role in bringing different nations together for the sake of doing business. Whereas a nation may provide raw materials, another one may have the skill of assembling the materials and converting it into useful finished products (Iguchi, 2015). To better understand the whole idea, multinational corporations are those companies which operate in more than one nation. However, the question on whether they truly are the main actors in the international business environment remains questionable because most business operations internationally are guided by a number of factors, including the local government as policymakers at the local level, and is referred to as the non-state actors. In addition, there are the state actors whose operations are independent of the foreign governments. The non-state actors also include the international intergovernmental organisations (IGOs) as well as the international non-governmental organisations (NGOs) in addition to the multinational corporations (Liu & Dicken, 2006). There is no doubt that the multinational corporations play a significant role in achieving a global business environment. They act as the drivers for the global economic integration.
Non-state actors are the non-sovereign entities which exercise a significant economic, social and political power at the national level, even though in some cases at the international level of trade. They include trade unions, religious institutions, community organisations, universities and ethnic groupings (Ahiakpor, 2010). Non-governmental organisations, on the other hand, are privately owned organisations which may operate on a voluntary basis to achieve a certain goal-for instance, the advocacy organisations. They affect transnational issues, especially the environmental issues. The multinational corporations focus on having sub-branches in different nations for profit-making objective while at the same time performing its Corporate Social Responsibilities (CSRs). Most of such corporations are state owned-an explanation as to why they easily find their way out of their country of origin.
There are three major reasons why multinational corporations may not be considered the main actors in the global business environment. First, most global conflicts in business are usually internal and with nothing to do with other states of operation. Secondly, some states may not be able to adequately support a multinational corporation’s growth and stability for example by offering security and a favourable environment for business operation. Finally, governments with better economy (in developed countries) may not be able to meet their national agenda because of the effect of globalisation, improvement in technology and expansion of their economies (Liu & Dicken, 2006).
Multinational Corporations organise their production and distribution activities to other nations, mainly through the Foreign Direct Investment (FDI). The Foreign Direct Investment plays the role of management and control activities of industry, in this case, the automotive industry like Toyota. The global business environment is affected by the behavioural factors such as sociology, anthropology and psychology (Monaghan, 2017). In addition, social factors like political disputes and policies may greatly affect the operations of the multinational corporations. Geographical factors such as climatic changes, market size and the availability of certain natural resources only in a particular country may also affect the operations of multinational corporations in the global business environment. Importantly, legal policies (both domestic and international) may affect how an industry operates at the international level. Economic factors such as the difference in costs, market size and countries value of currencies also play a major role in promoting or disrupting a cool global business environment. The six factors affect all industries including the automotive industries in near equal impact, thus one cannot conclude that the multinational corporations from the most important actors in the global business environment.
The Impact of the Non-Governmental Organizations to the Global Business Environment
The global business environment involves the non-governmental organisations as some of the main actors. Currently, the total numbers of NGOs are approximated to stand at over thirty thousand as the number keeps increasing day by day due to its social, political, legal and economic importance to member states. The non-Governmental Organizations have its operations on a volunteer basis whereby two, three or more states form organisations which can promote shared interests based on international trade. They tackle different international challenges, and as such, they influence the way international trade is carried out. For example, such organisations seek to protect the environment and advocate for businesses that do not affect the global environment in terms of global warming and so forth. They also seek to protect human rights in the world of business (Reiche, 2014). The set of actors interact with other actors (state actors and the multinational corporations), and as such, the United Nations and other important international forums recognise such organisations’ opinions and contributions before making an international decision (Gabriela, 2013). The NGOs may be humanitarian, political, economic or social. In most cases, the NGOs always combine more than one of the individual roles through transnational advocacy networks. These NGOs give individuals the opportunity to participate in different international activities which may include decision making.
Amnesty International, for example, is a major contributor on how workers are treated in all industries including the automotive industry like Toyota. It sets an international standard for human rights which must be obeyed by all member states in an international trade chain. The NGO conducts research on different automotive companies and generates an action to end abuse of human rights as well as demand justice for workers whose rights may have been violated (a usually high cost for companies. Religious NGOs act as peacemakers in trade between different nations, thus promoting a peaceful international coexistence. Such an example includes the Catholic church which may intervene in cases whereby a certain country is deprived of its right to trade peacefully like any other in the automotive industry. Environmental NGOs are known to be among the most significant organisations which affect international trade. These organisations advocate for international businesses which are environment-friendly and of insignificant harm to the humans. As such, they majorly affect the decisions made by the automotive industry to make automotive which are environment-friendly. Automotive companies that fail to meet international standards for conserving the environment may not be allowed to operate. Such an organisation includes the WWF. Terrorists and political groups may not be officially registered as the NGOs, but they may affect the international business environment. The famous Al-Qaeda, for instance, may affect business operations in areas where they have taken over. Such groups, therefore, act on the negative side of the global business environment. In conclusion, therefore, is that these Non-Governmental Organizations (NGOs) are as significant actors in the global business environment as the Multinational Corporations.
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The Impact of Sub-State Actors on the Global Business Environment
The sub-state actors include the Intergovernmental Organizations (IGOs) which forms the International Organizations. Such organisations consist of members of three or more nations and are created with a purpose of solving international problems, thus have the powers to make decisions which affect the international business environment. The organisations have state representatives who gather from time to time to discuss issues of mutual interest to all the represented member states. The Intergovernmental Organizations may be of two types (the global and the regional IGOs) according to Gabriela (2013). The global IGOs have a universal membership, for instance, the United Nations (UN), International Monetary Fund, and the World Trade Organization among other organisations. Regional IGOs, on the other hand, are a subset of members based on a particular region or interest. They include the European Union (EU) and the African Union (AU) among other unions.
IGOs are important because they form the platform for solving different challenges which may arise in the global business environment. For example, when Toyota Automotive started experiencing sudden, unintentional acceleration, without such organisations, the Toyota Company could have done little to solve the issue. As such, the IGOs focuses on issues such as global security, environmental conservation, issues with tariffs on international trade. The organisations play a vital key in following up and ensuring that each member state obeys its signed out commitments (Rozalia & Simona, 2012). The WTO, for example, came to exist in order to coordinate negotiation of tariffs for different countries. It also organises meetings at which different countries can discuss issues of importance to the international trade. The global and regional IGOs, therefore, are equally important in ensuring a tolerable global business environment, thus it would be unrealistic to assume that the multinational corporations are the main actors in the global business environment.
In summary, therefore, there is no doubt that the multinational corporations play a major role in the global business environment. It is true that the state has the sovereignty of its territory-a well-known fact by international organisations like the United Nations. Corporations such as Toyota in the automotive industry have no doubt contributed so much to the global business environment. However, it would be wrong to ignore the significance of other non-state actors like the IGOs and conclude that it is the multinational corporations that form the main actors. Each actor contributes significantly to the existence of international trade in the first place. There would, for example, be no international trade if states decided to keep their products and services to themselves. In fact, many nations would feel the effect of their inability to produce certain products and services either due to lack of a raw material or lack of skill. Under such an environment, different countries would be using different tariffs which may be abnormally too high for certain developing nations. Non- Governmental Organizations (NGOs) have played a vital duty in ensuring issues like environmental protection and human rights are preserved at the international level of exchanging goods and services. Both regional and global IGOs play a vital key in solving issues which may arise between and among member states at the time of carrying out global business. It would be ignorant to refute the fact that multinational corporations offer unique products and services to other foreign countries. However, such corporations only exist because of other actors like IGOs who have laid out the procedure for carrying out global business in a peaceful environment.
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