Steelcase: The State of Multinational Corporations - Assignment Example

Topic: Recommendation report This report will consider the of multinational corporations, with Steelcase in mind, after the financial crisis and based on the results, the main impact of the downturn has been a decline in consumption in the developing and developed countries. This has had the effect of a sharp decline in the capabilities of the multinational corporations. Even though the negative economic effects have been demonstrated in the increasing losses as a result of slumping in sales and obligatory reductions in capacities to produce, the non-economic impacts are also significant as demonstrated by the evolving economic policies as well as increasing trade barriers globally. Contents Abstract 2 Introduction 4 Research Methods 5 Results 8 Conclusion 11 Recommendations 12 References 13 Appendix A: 14 Appendix B: 15 Introduction The director of the Global Client Collaboration department at Steelcase, Inc. asked for a research that would analyze the effects of current global economic crises (2012) on multinational corporations and evaluate possible solutions for the case of Steelcase, Inc. that would assist it to survive this economic environment. Steelcase is a company that manufactures furniture whose head office is in Grand Rapid, Michigan and is the biggest manufacturer of office furniture in the globe. The company has about eighty locations and over eleven thousand employees all over the globe in locations including Malaysia, Mexico and Romania, which are responsible for supporting the local Steelcase dealerships and offices. It also operates show rooms referred to as WorkLife Centers all over the US, Asia and Europe with manufacturing facilities being located in Europe, the Middle East, North America and Asia. The company is mainly involved in designing and producing furniture , wall surfaces, technology tools, architectural products as well as ergonomic among other products. It sells its products online through more than eight hundred dealers in various locations while also offering workplace consulting services in some of its locations of operation. The economic and financial crisis resulted from issues in the US’s financial sector in 2007 that were characterized by unsound lending activities by financial institutions as well as unsatisfactory management of risk that prompted an extraordinary devaluation of assets along with credit squeeze as far as interbank lending was concerned. In a short time, the calamity escalated into a worldwide economic tremor that soon affected the real economies. In numerous economies, the crisis was an imported aspect since the countries in regions outside the US were affected in mid-2008 largely through export markets collapsing. The relatively small export-led economies were particularly affected by a huge decline in demand for various commodities including furniture sold by Steelcase among others. This collapse in markets was followed by credits abroad drying up and a decline in foreign direct investments. A huge depreciation of free-floating currencies accompanied the crisis and this created a challenging liquidity situation for households and businesses that had loans especially in hard foreign currency. The global financial crisis was considered by Datta (2011) to be among the worst slumps in contemporary history as is seen as the most devastating occurrence since the Second World War, as its ramifications continue to be felt in regards to prosperity and growth in the developing and developed countries. The Gross Domestic Product of the economies that are categorized as industrial declined by more than four percent, while the Gross Domestic Product growth rate in the emerging markets decreased from more than eight percent to less than one percent in a very short time (Alfaro & Chen, 2012). The rate of unemployment rose to about nine percent in most of the OECD nations and reached double digits in nations such as Russia and the UK among others. This decline was so severe to the point that the US, which is biggest economy in the world, was able to bring the rate down to eight percent only recently. Global trade decreased by about forty percent, which was a decline that far outpaced the slump in output that left numerous companies including Steelcase will extraordinarily high levels of inventory. The ramifications have been severe and have a profound effect on various industries in terms of decline in employment, sharp declines in output, as well as a slump in trade. Research Methods This research was conducted with the aim of revealing the effects of the financial crisis on multinational corporations and evaluating the probable solutions for these effects especially for a company such as Steelcase. Four approached were used to collect the relevant data concerning this research including the use of secondary sources, a survey as well as an interview. The main research questions that informed the entire study was: What are the measures that should be taken by the multinational corporations in order to survive the economic crisis? Having identified the primary research question, a number of sub questions that contribute to the main question include: What is the situation of multinational corporations in the economic crisis? What are the marketing strategies used by multinational corporations in the economic crisis? What is the sales status of the multinational corporations in the economic crisis? What is the impact of the economic crisis on operations and development of multinational corporations? These were the main questions that informed the study on which this report is founded. Task 1: What is the situation of multinational corporations in the economic crisis? Information for this part of the research was mainly gathered through searching for literature on this subject from the library. In research and collection of information, I encountered a number of sources that I used in compiling the secondary research concerning the effects of the economic crisis on multinational corporations, which formed the first part of the data collection. Task 2: What are the marketing strategies used by multinational corporations in the economic crisis? Information for this section was collected through the interview as well as secondary data sources that address the subject of marketing strategies that were used by the multinationals. Additionally, the survey also briefly touched on this subject but not all the respondents provided relevant information on this subject. It is important to note that nations all over the world experienced huge declines in regards to output, trade and employment while global trade declined by more than forty percent during the economic crisis. Reactions to the crisis on the part of multinationals differed from the responses of local companies where the multinationals had comparatively better performance than local companies. However, it should be noted that there was significant differentiation in regards to the role of foreign direct investments. The multinationals that had headquarters in host nations that faced sharper declines in credit and demand conditions demonstrated more advantage over the local firms in terms of economic performance (Marinov & Marinova, 2013). Additionally, the multinationals that headquarters in nations with higher occurrences of the crisis that comprised of lower demand and worsening credit conditions, were less successful abroad and this suggested a possible spillover of the effects that were being felt by their home countries. The multinational companies, which shared vertical production relationships with their parent companies, showed more resilience in their performance while the horizontally connected subsidiaries had less positive responses. Another aspect that has to be noted is that the size of the multinational network is also important as being a part of a large multinational at the time of the crisis was linked to better economic performance (Mayrhofer, 2013). Nonetheless, there existed a negative interdependence across the establishments that had been horizontally linked to production. Task 3: What is the sales status of the multinational corporations in the economic crisis? This question was answered through the second phase of data collection that entailed using a research survey to collect information concerning the effect of the economic crisis on multinational companies and their status. The survey way tool was hybrid in nature is contained both closed and open ended questions that were to be answered by the chosen respondents. The chosen respondents for this phase of the research were thirty individuals who were randomly selected from various areas so that bias could be eliminated. Therefore, three groups of respondents were created each with ten individuals from the public, business school students and employees who worked at multinational corporations. The surveys were created online and sent to the respondents through their email addresses; this was after they had consented to take part on the research. The survey tool included questions that allowed the researcher to get a brief profile of the respondents before they answered the questions about the effects of the economic crisis on multinational corporations. The respondents were supposed to send back the duly filled questionnaires through the same means after they had duly filled them. Task 4: What is the impact of the economic crisis on operations and development of multinational corporations? Data on this aspect of the research was collected through a single structured interview in the third phase of the research that was administered to a manager in Steelcase which sought to get the opinion and views of the manager concerning the probable solutions that would assist a multinational company to survive the economic crisis. The interview was conducted one on one with the respondent in his office after he had consented to taking part in the research through signing the consent form. The interview also sought to understand the marketing strategies that were being used by Steelcase during the crisis as well as the views of the manager concerning the economic crisis. Results After data on the effects of the economic crisis on multinational companies and the manner in which the companies can position themselves in order to survive the economic environment was collected through various methods, it was analyzed so that the responses and views of respondents as well as secondary data could be understood. Task1: What is the situation of multinational corporations in the economic crisis? The results of this question clearly demonstrated multinational corporations were affected by the economic crisis as the economic crisis resulted in a recession in various economies all over the globe (Brooks, 2007). As the crisis continued to hit even harder, the multinational companies from different nations started incurring huge losses with most of them having trouble in regards to finances and others being forced to make huge layoffs on both temporary and permanent basis (Pride, Hughes & Kapoor, 2013). This created a situation where companies started looking for new ways of recovering so that they could survive and adjust to the new conditions in their markets. Task 2: What are the marketing strategies used by multinational corporations in the economic crisis? From this question, it became clear that companies had to seek new strategies that could enable them weather the storm and deal with the effects of the economic crisis. The data from this section of the research was largely collected through the interview with the Steelcase manager. He made it clear that the world was evolving at a faster pace than the rate of development of new strategies and this implies that businesses should think ahead. The multinational companies need more than just one business plan and should have alternatives that will ensure they remain prepared for major occurrences. Companies are currently ready to make quick decisions while at the same time having flexible and dynamic teams with an ability to change instantly as events unfold. In some cases, this has translated to centralized authority so that in a major crisis, decisions can be arrived at quickly while in other time decentralized authority has been preferred in order to allow the people who are closest to the occurrences to make decisions in time. Task 3: What is the sales status of the multinational corporations in the economic crisis? The research survey was responsible for coming up with the results of this section of the study from which it was discovered that the economic crisis led to economies slowing down. Together with rises in inflation, numerous households faced a decline in their disposable incomes implying that people spent less, leading to lower sales or commodities. Since sales were declining and support from the parent companies was not sufficient, most multinational companies that operated abroad were forced to neglect some aspects including their corporate social responsibilities as they sought ways of ensuring that they cut costs (Brancaccio & Fontana, 2011). As a result, numerous multinational companies experience high rates of employee turnover and this had a negative effect on the economy as the rate of unemployment rose. Task 4: What is the impact of the economic crisis on operations and development of multinational corporations? The main source of data for this section of the research was the structured interview that was administered to a manager at Steelcase who explained the effects of the economic crisis on the development and operation of multinational companies. The bigger multinational institutions spent a considerable energy and time purchasing and selling complex commodities that even they could not understand them or the inherent risks they were taking. On the other hand, the smaller companies ran simpler businesses that entailed buying and selling physical commodities as opposed to pieces of paper. Additionally, the larger corporations are more visible and get a lot of attention from the media and this is the reason why it was easy to know that the large companies were facing challenges associated with the crisis. These companies experienced considerable declines in revenues from sales and this directly affects its day to day operations as production must be matched to demand, as well as development since creative new and innovative products requires financial capital (Chaulia, 2014). Conclusion This research was conducted with a specific emphasis on the effects of the economic crisis on multinational companies through collecting data using interviews, questionnaires as well as secondary research. The research can therefore conclude that: After the crisis, multinational corporations have ensured that they have the capacity to use their flexibility and broad operations to make timely strategic moves that will guarantee them to withstand unforeseen economic events. Through increasing exports in such a manner that they can be able to offset declines in local sales, the multinationals can be able to keep their plants in operation while avoiding layoffs. The relatively few number of studies that assessed to impact of various crises on the activities of multinational companies have dwelt mainly on the long-term instead of the immediate ramifications of the events. However, the a crisis takes place, most of the international corporations are able to survive with their actual objectives during the periods of economic uncertainty being to minimize damage and maximize on new opportunities that may be manifested. Even though previous research has considered to risks of recession in particular regions or industries, this report tried to capture comprehensive factors of the economic crisis and the manner in which it affected multinationals. The impact of debt and banking crises as far as subsidiary sales are concerned were small when crises take place at separate times. Nonetheless, during the currency crunches, most of the subsidiaries of multinational companies increased their exports immediately after the crisis and increased it even further two years later. Since the prices of products made locally decline with the depreciation of currency, these commodities are more preferred in the markets thereby encouraging subsidiaries to make diversions of their output from the domestic markets to the more lucrative international destinations. Recommendations After the research was conducted and the results concerning the effect of the current economic crisis on multinational was analyzed, a few recommendations have been developed. I suggest that an additional study on the measures being taken by the multinational companies to avert another major economic crisis be conducted. This study should involve people who are associated with multinational companies, those who study these forms of businesses and those have the highest likelihood of being affected by events that affect these companies. The sample population for the study should be chosen beforehand to ensure that they fit the criteria for the sample population of the study. At the end of the study, the various measures that will have been identified will be compared against each other to find the one that is most viable. The groups of the respondents must be big enough so that accurate data can be collected. I further propose that multinational companies should understand that crises are unforeseen events and it is difficult to predict when they are likely to occur and their and how hard they hit. In this research, it has been clear that multinationals face different effects of the economic crisis depending on their areas of operation, commodities and size of the business. Nonetheless, I propose that all multinational companies should develop measures that will assist them to deal with economic crises in the event that they take place in future. References Alfaro, L., & Chen, X. M. (2012) Surviving the Global Financial Crisis; Foreign Ownership and Establishment Performance. The World Bank Development Research Group, Trade and Integration Team. Policy Research Working Paper 5946, pp. 2-33.  Brancaccio, E., & Fontana, G. (2011). The global economic crisis. Abingdon, Oxon: Routledge. Brooks, S. (2007). Producing security. Princeton, N.J.: Princeton University Press. Chaulia, S. (2014). Politics of the Global Economic Crisis. Hoboken: Taylor and Francis. Datta, S. (2011). Economics. Hoboken N.J.: John Wiley & Sons. Marinov, M., & Marinova, S. (2013). Emerging economies and firms in the global crisis. Houndmills, Basingstoke: Palgrave Macmillan. Mayrhofer, U. (2013). Management of multinational companies. Houndmills, Basingstoke: Palgrave Macmillan. Pride, W., Hughes, R., & Kapoor, J. (2013). Foundations of business. Mason, OH: South-Western/Cengage Learning. Appendix A: Survey This survey is used for collecting information for a report about the effects of current economic crisis on multinational corporations. Thanks for your response! 1. Would you describe yourself as: a. American Indian/Native American b. Asian c. Black/African American d. Hispanic/Latino e. White/Caucasian f. Pacific Islander g. Other 2. What is the highest level of education you completed? a. High school b. Currently in College c. Two-year college degree/A.A/A.S. d. Four-year college degree/B.A/B.S. e. Completed masters or professional degree f. Advanced Graduate work or Ph.D. 3. How would you describe your current employment status? a. Employed full time b. Employed part time c. Unemployed/Looking for work d. Student e. Homemaker f. Retired 4. Do you agree with the saying ”The current economic crisis has negative effect.”? Circle one. a. Strongly agree b. Agree c. Neutral d. Disagree e. Strongly disagree 5. What’s your opinion for what should multinational corporations do to survive under the economic crisis? Appendix B: Interview Questions What do you think of the current economic crisis? What are your company’s marketing strategies under this economic environment? What are the possible solutions you think a multinational company can take to survive in the economic crisis? Read More