International Trade and Business - Essay Example

In developed countries multinational companies are likely to face consumers who have a large disposable income and therefore consumers are more concerned about the quality and not the price, in other developing countries consumers are more concerned about the price and quantity. Different countries have their own standards set by governments and even the consumers, example a multinational company aimed at producing food stuffs may be required to provide its production formula to the authorities in order for them to determine whether such products are fit, an example is the venture of coca cola company into India where the company was supposed to provide information about the formula used to make the drinks, the company declined and its rival Pepsi provided its formula and entered the market, however the authorities later announced that Pepsi contained harmful substances that were used in making pesticides.

From this example therefore it shows the extent of the problem faced by a multinational company due to the cultural differences.The government may also have a different culture and policy whereby the firm may be required to hire workers from the host country and not import its own workers from abroad, this posses a problem due to the existence of differing labour laws and movements, the available labour may also not be as efficient and may not be as productive and therefore the problem of inefficiency may arise due to these policies by the government.

Language differences:A multinational company may face language barriers whereby there may be a language used in the host country may differ from their native language, this may pose a problem whereby the company may incur expenses hiring interpreters in the host country. Other differences may be the use of colour in their products where some products may be rejected in the bases of colours that may signify certain feelings about a product. All these should be taken into consideration before initiating any investment.

Individualism and collectivism:Individualism refers to the existence of very weak ties between the individual and other members in the society, collectivism refers to a situation where there are strong ties between the individual and the other members of the society, multinational companies face these cultural difference because in cases where the society is characterised by collectivism people who are born in the same family are strongly integrated which protect them for the exchange for continuing loyalty,