Multinational Companies: Exploiting Culture and Regulations

This essay critically evaluates how multinational companies (MNCs) exploit national and regional differences in culture and regulation to their advantage. It discusses the importance of cultural adaptation and adherence to local rules and regulations for successful international expansion. The essay explores factors such as cultural nuances, varying rules and regulations, currency valuations, location advantages, and accounting standards that affect MNC operations. It further examines how host countries can attract foreign direct investment by offering location advantages such as economic development, efficient international trade, human capital resources, tax incentives, and favorable regulations. The essay concludes by highlighting the importance of maintaining international uniformity through strategies like glocalization, where companies adapt to local conditions while maintaining a global perspective, using McDonald's as an example of successful cultural adaptation in a foreign market.

Running head: EXPANSION OF MULTINATION CORPORATION
Expansion of Multination Corporation
Name of the Student
Name of the University
Author Notes

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Location Advantages...................................................................................................................5
International Uniformity..............................................................................................................7
Attracting Foreign Direct Investment..........................................................................................9
Conclusion.....................................................................................................................................11
REFERENCES..............................................................................................................................13

2EXPANSION OF MULTINATION CORPORATION
Introduction
A company, that operates in simultaneously in the domestic and the internal levels is
known as a multinational company. A company goes international when they are seeking an
opportunity to go beyond their domestic market. In the initiative of expanding their market share,
the companies establish their operation overseas. Internationalisation of an organisation is occurs
as a result of the mission to utilise the resources, conditions and opportunities that are provided
by nations other than the domestic country where the country is operating in (Akehurst and
Alexander 2013). It is evident that the companies who want to go international have to adapt
with the local rules and regulations of the state that they are expanding to. Other than the
regulations of the state, the other factor that is crucial for establishment of a company to a
foreign nation is adaptation to the culture that is existent in the nation. The aim of the paper is to
critically evaluate the differences in the culture which can be utilised by the companies while
they seek to explore markets overseas. The paper will also critically evaluate the conditions that
have to present in the host countries in order to bolster the amount of foreign direct investment in
a country along with the policies which the companies can incorporate in order to incorporate
uniformity across all the countries where branches of the company are established in.
Discussion
It can be said that a company has gained multinational stature, if they have been
successful in establishing themselves in the domestic and foreign nations, they have been
successful in gaining international of multinational stature (Csomós and Derudder 2014).
Companies, such as Vodafone, Unilever and Nestle are the examples of the companies who have
been able in gaining the stature of multinational companies (Abugre, Gasor and Sarwar 2013). In

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order to gain such a stature, a company has to ensure, that they incorporate policies through
which they can maintain uniformity in operation across the nations that they are operating in.
Furthermore, the organisations would have to ensure, that they incorporate the operations of their
functional division according to the policies and regulations that are implemented by the
regulatory bodies and the government of the foreign nations or states that they are established in.
It has been found out that expansion of the countries into foreign states results in increase of the
amount of foreign direct investment the country (Wei et al. 2014). This bolsters the economy of
the country and contributes to the economic development of the country. Following are the
factors that affect the efficacy of operations of a multinational company;
1. Culture: Culture is one of the most important factors that determine the
sustainability of a company in the long run (Inglehart 2018). In order to be
successful in a state or country, the company has to make sure, that they
implement policies and operate according to the cultural implications that are
present within the organisation. Culture is the assimilation of the etiquettes and
values of the people of a state or country (Mukherjee and Salazar 2014). The
operations of the company should be aligned the culture of the people according
to which they should implement policies in the organisation. The companies
should pay due attention to the culture of the nation that they are moving into. The
companies should make sure that they take care of the multicultural
considerations that are present within the value system of a country (Clarke and
Georges 2014).
2. Rules and regulations: The rules and regulations of a company are different in
different countries. There are various tariffs, import and export duties that exist in

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different countries (Kennan and Riezman 2013). Furthermore, there are various
regulations of employee and labour regulation laws that exist in a country. The tax
laws are one of the most important regulations that affect the viability of a
multinational company in a country.
3. Valuation of the currencies: With the change of nationality of the base of
operation of a country, the valuations of the currencies, is subject to change. A
rate of currency that might be valuable at one state or nation, might not be
valuable in the other country (Abdoh et al. 2016). Furthermore, the currencies of
the countries keep on fluctuating (Runo 2013). This results in increasing
difficulties that can be faced by the companies. Thus, while seeking the
opportunity to present itself in a different country, the multinational company
should pay close attention to the value of the currency that exists in the state
where they aim to move.
4. Location: Just as every other implication that affect the sustainability of an
organisation in the long run, the location of the organisation is important when it
comes to the establishment of a business in the foreign nations (Nasri and Zarai
2013). The geographical location of a country determines the nature of the climate
that could affect the production of raw materials that can be used by the company.
Furthermore, the location determines, the workforce that is available for
utilisation of the companies (Herd et al. 2017). Thus, location is crucial for the
viability of an organisation in a foreign country in the long run.
5. Accounting standards: The accounting standards that are established in different
countries, might not be similar. There are accounting standards that are

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established in to maintain uniformity of operations. Such a regulation is known as
GAAP or Generally Accepted Accounting Principles (Glover 2014). Hence,
before commencement of operations, a company that is seeking to go
multinational should carry out research regarding whether, the accounting
standards present in the countries that they are operating in, are accepted in the
global levels (Poulis, Poulis and Plakoyiannaki 2013). This would help the
company in maintaining uniformity of operations.
Location Advantages
The advantages that a company are subject to when they opt to stick to the location of a
certain advantages are known as the location advantages (Dunning 2015). The location
advantages are the reasons behind selection of a certain location rather than the other are due to
the advantages that the former provides, that the latter does not provide. Thus, location
advantages, determine, the efficacy of the operations of national branch of a multinational
company. In order to be deemed by multinational companies as a favourable location, the
destination country must provide certain advantages (Verbeke 2013). Foreign direct investment
sis valued by countries as they bolster the economy of a country. Increase in foreign direct
investment, results in the increase of the standard of living and infrastructure of a country. Thus,
countries around the word aim to increase the amount of inward investment that goes into the
economy of a country. Following are certain advantages that can be provided by the destination
nations in order to boost the amount of foreign direct investment towards the country,
1. Economic Development: One of the major factors that determines the amount of the
foreign direct investment that a country offers to potential investors is the economic
development of the country (Soumaré and Tchana 2015). The presence of favourable

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economic condition in a country attracts the potential investors and the companies who
could potentially invest in a country (Guimón and Filippov 2017). Thus, in order to
attract foreign direct investment, the government and regulatory bodies should pay close
importance to the development of the economic standards of the country.
2. Efficacy of international trade: In order to attract potential investors, the regulatory
bodies of a country should incorporate favourable relations with other countries. The
latter must pay specific attention to the trade relations that exist within the country and
other countries. A country that has favourable trade relations with other countries attract
increased good amount of foreign direct investment. Thus, countries should try to
incorporate favourable relations with nations who possess the propensity to invest in a
country.
3. Human Capital Resources: Form the early 1800s, European countries have been
colonising various third world countries. This can be termed as early stages of
internationalisation. Countries such as South Africa, Brazil and India have been some of
the major targets of the countries as a result of the cheap and skilled labour available in
the country (Buckley, Doh and Benischke 2017). Just is in those days, the availability of
skilled and abundant labour is one the major factors that determine the motive of a
country to invest in a country. Thus, the availability of human capital is one of the major
contributors to the viability of the location advantage that it has.
4. Tax Incentives: Foreign direct investment results in the incidence of various taxation
advantages that the investing company may be subject to. Tax incentives ensure increase
the likeliness of investment (Abeler and Jäger 2015). The tax incentive schemes are
decided by the government or the regulatory bodies of the host country, which makes the

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latter favourable for investment. A company might be subject to perks such as
complementary technology, expertise and products or services as a result of the
investment that the company made in the country. Accordingly, availability of tax
incentives makes multinational companies invest in that country rather than in a different
country (Abeler and Jäger 2015). Furthermore, it improves the amount of investment that
the companies are likely to make in the countries.
5. Favourable regulations: Regulations include trade practices, the import and export rates
the economic tax-free zones and other favourable policies that favour the operation of a
multinational company, urge the latter to invest in a country. The latter, backed up by
support from the government results in favourable working conditions for the foreign
investors. It further incorporates smooth functioning of operations of the multinational
company that has contributed to the economy of the host nation by investing. Thus, the
availability of such favourable laws and regulations promote direct investment in a
country. Hence, the host nations that provide such regulations and laws make investment
a favourable and healthy practice.
International Uniformity
In the motive of going international, it is the aim of the multinational corporations to
establish the uniform policies by the help of which they can establish uniformity in operation of
every branch of the organisation that is operating at international level (Baran et al. 2015). The
organisations can maintain uniformity in their policies while operating at domestic levels by
abiding by the motive of glocalisation. Glocalisation is a belief where international organisations
“Think globally, Act locally” (Fujita and Thisse 2013). It is a practice in which the MNCs
maintain international stature, while operating as domestic bodies within the foreign countries

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that they are established in. The motive of the companies abiding by this belief is to stick to the
locally aligned operations in the foreign country or countries that they are established in.
The companies operate in a domestic level and implement strategic goals and policies
through which they can attain competitive advantage in the local markets. When they are able to
achieve competitive advantage in the locally in the countries they are established in, it can be
said that they can achieve competitive advantage as a whole or in the international level. The
same can be explained by the help of the following example. McDonalds have been established a
successful multinational company for decade (Nandini 2014). The main product that the
company deals in is hamburger. The prime ingredient to make the patties is beef and pork. Thus,
in their motive to move to Indian they had to modify their products according to the consumer
behaviour in the country. Most of the population of the country is vegetarian. Thus, the beef and
pork patties would not be consumed by majority of the population. The initiative of McDonalds
in India would have failed if they had not modified their products according to the behaviour of
the Indian consumers. Furthermore, there exists various religious taboos against the consumption
of beef and pork in India. Accordingly, the company created Burgers with chicken based patties
for the first time (Nandini 2014). Chicken is a form of meat that is common for consumption of
the non-vegetarians in the country. Moreover, they devised potato based patties and called it the
“Alo Tikki Burger” (Nandini 2014). They were successful in maintaining parity with the
behaviour of the locals of the country and thus the move became a huge success in the country.
At that point, the company was one of the first fast food multinational organisation to establish
themselves in the India. This is one of the many examples that justify the power of glocalisation
and maintaining uniformity in operations of companies across different countries. Hence,
different organisational policies help in attaining the favourable nature of operation of the

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company that helps them in gaining competitive advantage in the international as well as the
domestic markets of the countries that they are established in.
The regulations that are present in and the countries that the company are present in
determine the nature of operations that are carried out or implemented by the companies. The
regulations are important factors that have to be considered by the companies before
incorporating their objectives that they have established in a particular country. The mission of
the MNCs are to maintain uniformity in their mission. The aim to maintain the main goals that is
gaining competitive advantage and being successful at establishing corporate governance while
maintaining their profitability at the same time. While policies and strategies that are used to the
aforementioned factors might be different for the different countries, it is the company as a
global unit who would be affected as a whole by the favourable activities that are being carried
out by the company in a multinational level. The ultimate goal of the company is to satisfy their
stakeholders, thus, glocalisation is a policy which helps the companies in satisfying the
stakeholder of the company and achieve corporate governance as a result of the same. Hence, it
can be said that the operations of a company might be different in different countries, however,
they should be perfectly aligned with the needs and behaviour of the people of the country that
the company is operating in.
Attracting Foreign Direct Investment
Foreign Direct Investment in a country contributes to the economic development of a
country. Thus, it should be the aim of government of countries to boost the amount of foreign
direct investment that flow inward to the country as it helps in developing the economic
condition of a country. Encouraging the amount of foreign direct investment showcase the social
responsibility that the governments have for the people of the countries (Kastrati 2013). This is

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more applicable for the government and regulatory bodies of developing and underdeveloped
countries as foreign direct investment would help in bolstering the economic conditions of the
country. Following are the reasons why foreign direct investment should be encouraged by the
governments of developing and under developed countries:
1. Employment opportunities: The incidence of the former implies that there will be
incidence of opportunities that will be available for the employable population of the
country. Employment is an issue in developing countries and foreign direct investment
helps in creation of opportunities that help in advancement of the people of the
community.
2. Improves the skills of the workforce: People of a country who are employed in MNCs
come in contact with their foreign peers and thus they can learn skills and tricks that they
were not aware of. The company who are investing in the country van also benefit from
the same as they can learn skills and improve on the same that they already possessed.
3. Healthy competition: As a result of the foreign direct investment in the country, new
standard benchmarks would be established in the country. Thus, the locally established
firms would aim to gain party with their international competitors. Healthy competition
would lead to improvement of services that the companies provide to the people of the
country. Thus, this would help in boosting the quality of life of the people of the country.
There are various strategies that should be adopted by the regulatory authorities of country or the
government bodies. These strategies help in boosting the amount of foreign direct investment in
the country. Following are the strategies that can be used by the governments and regulatory
authorities to encourage the inflow of foreign direct investment in their country.

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1) Mobilise FDI: By incorporating favourable regulations towards the investment of FDI,
the countries can ensure that they maximise the inflow of investment in their country.
Governments who aim to increase the amount of FDI inflow should make sure that they
revoke or remove impositions and restriction on FDI (Tingley et al. 2015). This would
encourage FDI inwards.
2) Establishment of IPA: IPA is the short form of investment promotion agencies. The main
purpose of creation of such agencies is to highlight the industries in a country which
would result in high amount of profitability for the investors (Antonopoulos and Bachtler
2015). It is a body that is used to create a link between the foreign investors and the
economy of the country.
3) Infrastructure: Favourable infrastructure attracts potential investors to a country. The
availability of operations such as turnkey project and others, attract potential investors
who want to save their time, maximise their profitability and associate themselves with a
country that offers favourable infrastructure.
4) Location of the target industry: The government should be able to locate the industry in
which FDI is needed. The industries that are considered bolstering on the country do not
require foreign direct investment. However, the industries that are lagging behind could
use foreign direct investment that could boost the competency of the industry. Thus,
location of the target industry is of key consideration.
Conclusion
On a concluding note it can be said that FDI helps in improvement and development of
the economy of the country that is aiming to attract the investment. The culture of a nation, rules
and regulations, locations and accounting standards that are resent within a country help in