Structure of Large Multinational Corporations - Case Study Example

Running head: MNC and CSR Corporate Social Responsibility in an MNC Insert Name Insert Grade Course Insert Tutor’s Name 19 August 2011 Corporate Social Responsibility in a Multinational Corporation Multinational Corporation Globalization has been in the increase in the recent past with different business organizations striving to have a substantial share in the global market. Emerging markets like India and China continue to attract foreign investment due to the promising markets. The availability of resources and lack of competition in the developing countries also contribute to the globalization and international trade that are witnessed currently. In order to increase their market share, large corporations extend their operations to different countries across the globe. A multinational corporation (MNC) is a corporation that operates in other countries other than its home country (Thinking made easy, 2009). Such organizations often have a head office from where decisions are made that are to be adopted globally. Large multinational corporations have significant influence in the economies of different countries like in the United States (Helpman, 1984, p.451). The MNC can establish its branches or subsidiaries in the other nations with the management of the branches being coordinated from the head office. It can also enter into partnership with a local organization in a given country to execute its operation. Similarly, the MNC can permit a local business organization to use its brand in an agreed deal. Some of the renowned multinational corporations are Coca Cola and Nike (Thinking made easy, 2009). The country of origin of the MNC is referred to as the home country whereas the country where the MNC establishes its foreign investments is referred to as the Host nation. Corporate Social Responsibility The roles that business organizations should play in a given society have also been of concern to socioeconomic analysts. The traditional perception was that business organizations should focus more on the maximization of the final returns. However, it has emerged that other forces emerge that will hinder the achievement of such an objective. The management of the organizations eventually realizes that the contributions of the different stakeholders of their organization are very essential for the success of the business organization. As such, there has been a need to focus not only on maximization of the profits of the organization but also on the needs of the stakeholders of the organization. The stakeholders of a given organization include the shareholders/stockholders, the top management, the employees and their families, the clients/customers, communities, and the society (csrnetwork, 2009). All the members of the society in which a company operates are key stakeholders of the organization. By focusing on the needs of all these members, the role of a business organization then extends beyond mere profit maximization to generating a positive social and economic impact on the society. This latter approach to the roles of business organizations provides light on the corporate social responsibility (CSR) of the organization. The idea had been in existence in business for a long time. However, literatures on the modern concept of CSR can be traced to the 1950s when it was simply termed as social responsibility (SR) (Carroll, 1999, p.269). Individuals began to question the roles that businesspersons played in developing the society. It was observed that business organizations should adopt policies and make decisions that are in line with the development goals of the society (Carroll, 1999, p.270). The term has since been defined and described in different ways by different scholars and global business agencies. It has been seen as the need of organization to consider the social and environmental impacts of their operations when designing these operations and interacting with the key stakeholders (European Commission, 2011). It has also been observed that ‘CSR is about how companies manage their business processes in order to have an overall positive impact on the society’ (Baker, n.d, para.2) All the descriptions amount to the fact that business organizations need to device ways of giving back to the society. CSR is a key player in ensuring sustainable development in a given area (Commission of the European Communities, 2006, p.3). Corporate Social Responsibility reflects on how an organization manages its operations so that it improves the lives of all its stakeholders. It has been noted that developing products that meet customer needs in accordance with the legal provisions is no longer sufficient for business (Leonard, 2008, p.2). In stead, organizations are believed to have economic, legal, ethical, and philanthropic/discretionary roles to play in the society (Jamali & Mirshak, 2007, p.246). To accomplish these, the organization then needs to focus on certain issues. Firstly, the management needs to focus on the needs of their employees. The business organizations should restructure its organizational system so that the employees of the organization are included in the decision-making processes of the organization. In fact, researches have shown that some MNCs currently define different strategic roles in their different branches (Gupta & Govindarajan, 1991, p.769). Secondly, it is necessary to examine the needs of the clients of the organization. The management of the organization should be concerned with the level of satisfaction that the clients obtain from its products and services. The clients should be allowed to contribute to the decision-making processes in order to have their needs incorporated into the operations. Similarly, the organization should set up different initiatives that directly give back to the society. This involves setting up different social amenities and supporting some vulnerable groups in the society. Corporate Social Responsibility in a Multinational Corporation Every business organization, whether they operate locally or internationally, would wish that they had sustainable development. It is the desire of business organizations to increase market share. An increase in the market share can be achieved if more customers are attracted to, and satisfied by, the products and services of the organization. The quality of the products and services are in turn affected by the employees’ job satisfaction. The level of reputation of the organization also affects the customer’s attraction to the services of the organization. Corporate social responsibility has received significant consideration with the increased globalization and international trade (Jamali & Mirshak, 2007, p.243). It has been stated that the multinational corporations have head offices from where global management decisions are made. The adoption of CSR policies by a multinational corporation then implies that the decision-making processes are performed at the local levels. This calls for a break down of the organizational structure to the low levels. The culture of a given society can reflect on what the members of the society values in a given product or service. Cultural differences among the stakeholders of an organization are observed even at the national levels. The multinational corporations are subject to higher cultural diversity as compared to the local companies. However large and powerful an MNC may be, the company has to adopt the culture in the host nations in order to survive in the foreign markets. The cultures at these local scenes will affect the decisions concerning the operations of the organization. The quality of products and services should be considered in implementing CSR policies (Bueble, 2009, p.11). It is very difficult to make the decisions at the head offices that will suit the different cultures. The needs of the clients of an organization are identifiable at the local levels. The management of the organization also needs to respect the cultural diversity among the employees of the organization. Other than the cultural diversity, the employees of an organization also have different abilities, skills, and expertise. If a multinational corporation has to adopt CSR policies, it has to respect the differences in these abilities. These can be achieved if the management is reduced to lower levels. This will enable the low-level employees to share their views with the management on the appropriate operation procedures that may be adopted. Finally, the CSR policies require the multinational corporation to establish development initiatives in the societies in which they operate. The large multinational corporations do have their operations in the developing nations that are still endowed with plenty of natural resources. Large multinational corporations have developed negative images among the public as the initiator of social and economic problems that hit some countries (Keinert, 2008, p.1). Rather than focusing on how to exploit the resources in the host nations, the multinational corporations are required to establish philanthropic projects aimed at improving the lives of members of the society. An MNC can establish an orphanage home to care for the orphans in a given region. It can also provide free or subsidized health services to the members of the society at certain times. It can initiate charity programs to assist widows, the elderly, or the individuals living with HIV/AIDS. The initiatives could also include providing financial assistance to bright and needy students in a given area. The organizations should also contribute towards the management of a disaster that has hit a given area like hunger. It has been observed that CSR is very essential in the management of the current global economic crisis (Tajani, 2010, p.2). An organization that needs to feature in the global market should then participate in the crisis management programs. Benefits of Corporate Social Responsibility The operations of a multinational corporation in different countries have advantages both to the organization to the host nation. The controversial issue in this case is that the advantage to one party may disadvantage the other party. However, for both the parties, the adoption of CSR policies can add onto these advantages. Benefits to the host nation The adoption of CSR policies by a multinational corporation can contribute significantly to the microeconomic development in the (underdeveloped) host nations (Urip. 2010, P.13; Fobete, 2008.). It has been stated that the essence of corporate social responsibility of an organization is to give back to the community. The members of given society benefits directly from the charity programs initiated by an organization as a way of thanking the members of their society for their continued support. With a good relationship with its customers, certain researches have shown that an organization can influence its customers to support the non-profit initiatives as well (Bhattacharya & Sen, 2004, p.20). The company is also able to provide products and services that suit the needs of the clients. This improves the living standards of the members of a given nation. Similarly, the operations of multinational corporations create job opportunities in the host nations (Urip. 2010, P.13). By engaging the local employees, the organizations improve on the living standards in the society. This is improved further if the needs of these employees and their dependants are considered as required in the CSR policies. Besides, corporate social responsibility requires that the management to encourage innovative and inventive ideas by the employees. Multinational corporations operating in some developing nation introduces the latest modern technology and expertise in the country. If the organization engages the local employees and provides room for research, the employees can easily learn and adopt the new technology and skills. These skills can then be transferred to the local companies if the employees shift to such organizations. This improves on the technology industry in a given country. Benefits to the MNC By adopting CSR policies, a multinational corporation can benefit in a number of ways all of which amount to increased sales. Firstly, by giving back to the society through various philanthropic initiatives, the organization improves on its image within the society (Urip. 2010, P.13). Some researches have shown that there is a positive correlation between the corporate social responsibility of an organization and the clients’ attitude towards its products (Bhattacharya & Sen, 2004, p.9). This provides a competitive advantage to the corporation. Many customers then develop positive attitudes towards the organization, which, they believe, is out to care for their welfare. The market share of such an organization is also increased since it provides products that meet customer demands. Listening to the needs of the employees of an MNC and involving them in the decision-making processes motivates these employees. This eventually increases the output of the organization. Providing incentives to employees like increased salary or employee appraisal based on performance motivates the employees. Including the employees in the decision-making processes, make them feel part of the organization. It can be argued that large multinational corporations tend to have excessive influence on political issues in the host countries. The adoption of the CSR policies can increase this influence to the benefit of the MNC. A company that gives back to the society and has developed strong relations with the locals can influence the enactment of fiscal and monetary policies to their advantage. They can also have access to better resources due to this influence. Conclusion It can then be observed that corporate social responsibility applies to the multinational corporations in much the same way as it does to the other companies that operate within a country. The fact that MNC operates across different cultures necessitates the adoption of these polices even more. It might appear that giving back to the society is only of benefit to the host nation. However, this ensures that the MNC gets hold of the customers and compete with the local and other foreign investors. In the end, the company manages to improve the lives of the members of the society and increase on its operations simultaneously. It then suffices to conclude that such organizations should develop corporate social responsibility policies. Reference List Baker, M., N.d. Corporate Social Responsibility - What does it mean? (Online). Available from http://www.mallenbaker.net/csr/definition.php [Accessed August 19, 2011] Bhattacharya, C and Sen, S., 2004. Doing Better at Doing Good: When, Why, and How Consumers Respond to Corporate Social Initiatives. California Management Review, 47(1); pp.9-24. (Online). Available from http://www.davideacrowther.com/csrmodule/csrreading4b.pdf [Accessed August 19, 2011] Bueble, E., 2009. 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Fobete, D., 2008. Multinational Corporation and Third World Development. Norderstedt: GRIN Verlag Gupta, A. and Govindarajan, V., 1991. Knowledge Flows and the Structure of Control within Multinational Corporations. The Academy of Management Review, 16(4), pp. 768-792. (Online). Available from http://leeds-faculty.colorado.edu/selto/CURISES%202009%20Cost%20Mgt/CURISES%20Readings/govindarajan%20mgt%20control.pdf [Accessed August 19, 2011]. Helpman, E., 1984. A simple theory of international trade with multinational corporations. Journal of Political Economy, 92(3): 451-471. (Online) Available from http://dash.harvard.edu/bitstream/handle/1/3445092/Helpman_SimpleTheory.pdf?sequence=2 [Accessed August 19, 2011]. Jamali, D. and Mirshak, R., 2007. Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context. Journal of Business Ethics, 72:243–262. (Online). Available from http://www.kantakji.com/fiqh/Files/Companies/w125.pdf [Accessed August 19, 2011]. Keinert, C., 2008. Corporate social responsibility as an international strategy. Heidelberg: Springer. Leonard, H., 2008. Corporate Social Responsibility. Harvard Business School and Harvard Kennedy School. (Online). Available from http://charlesrivercentre.com/brochures/CSR-20080421-NC.pdf [Accessed August 19, 2011]. Tajani, A., June 2010. Speech of Vice-President Tajani to the Leaders’ Summit of the United Nations Global Compact. Leaders’ Summit of the United Nations Global Compact, New York. (Online). Available from http://ec.europa.eu/enterprise/policies/sustainable-business/files/csr/documents/speech-a-tajani-10-331_en.pdf [Accessed August 19, 2011]. Thinking made easy. 2009. A Multinational Corporation: Nike. (Online). Available from http://ivythesis.typepad.com/term_paper_topics/2009/06/a-multinational-corporation-nike.html [Accessed August 19, 2011]. Urip, S., 2010. CSR Strategies: Corporate Social Responsibility for a Competitive Edge in Emerging Markets. 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