Intercultural management - Essay Example

Then different types of corruption and its effects on the MNCs will be evaluated. Finally, probable solutions or measures will be analyzed which the government, regulatory bodies, or organizations are adopting to curb corruption and deal with such situations (Wei, 2000, p. 5). There are various forms of corruption: bribery, fraud, embezzlement, etc. In this work we will only include the issue of corruption which affects operational investment costs. According to Macrae (1982), corruption is an arrangement involving a private exchange between two or more parties.

It also influences the resource allocation and makes people neglect their responsibilities. In case of FDI, the foreign investors have to pay extra cost in form of bribes for getting licenses or the permit from the government. Therefore, corruption in the countries has also raised the cost of investment there. These unnecessary costs have also reduced the margin of profitability of the investment being done. It has also been noticed that corruption adversely affects the economic performance of a country.

Since the 1980s, debts have fuelled the consumption of the US and drove the global economy and its growth. However, in 2008 this economic paradigm collapsed and resulted in an economic breakdown. The government shortage expenditure, backed with paper money formation, has been replaced by debt-funded confidential expenditure as a major source of global development. The US came out of depression of $4 trillion because of Federal Reserves’ support of $2 trillion. These issues will be discussed in detail later in this study.

Types of Corruption In this section we will discuss various types or forms of corruption that prevail in the global market: a) petty corruption, b) gifts, c) big corruption. It can be said that quantitative distinction can be drawn between big and small corruption and a qualitative distinction can be made between the illicit and legal aspects of these kinds of corruption. Petty corruption means small corruption such as taking small bribes, etc. In poor countries, petty corruption prevails in every level of society.

Gifts given as signs of gratitude for some official favor can be considered as petty corruption. Giving gifts is offering goods or services of some value to a person or organization with a view to some benefit from this person or organization. Various organizations have clearly specified guidelines regarding acceptance of gifts from clients. When those guidelines are overlooked, it is considered a case of corruption. Lastly, money laundering cases can be the examples of big corruption, as well as taking bribes from MNCs who wanted to invest in the country, tax evasion, etc.

Corruption was also responsible for the global economic crisis of 2008. Even unnecessarily inflating the prices of products and services for earning supernormal profits is also a form of huge corruption. Effects of Corruption on MNCs The types of corruption have been mentioned in the section above. In this section the effects of such corruption on the MNCs will be discussed. The kinds of corruptions are being explained in the sequence of their entry modes. In case of forming joint ventures vs.

wholly owned subsidiaries, most of the firms face the corruption of bribes from the state officials. In cases of franchising or master franchising,