The Importance of Energy Strategy for Transnational Business in the Future - Essay Example

Questions: Has globalisation made transnational MNEs more powerful than national governments in EU and USA? Discuss the importance of energy strategyfor transnational business in the future. Answer: INTRODUCTION Multinational organizations are the organizations that deliver their product and services throughout the world. They have significant impacts on the local economies because they are growing and they bring huge investments and developments. It has been argued by various people that the forces of Globalisation have enhanced the power of these transnational MNEs relative to the power of national governments. Actually, Globalisation is the process that occurs when a world- spanning system of communication and implementation integrates the local economies, societies, and cultures. The process of globalisation also refers to the worldwide movement of thoughts, languages, or admired culture through acculturation. National governments are broad coalition governments, which are normally formed during a time of any national emergencies or wars. These national governments consist of all parties in the legislature. The best-known example of national government 1is the National Union government in United States. In this essay, the reasons because of which globalisation have made the transnational MNEs more powerful than national governments in EU and USA will be presented. EXPLANATION “There is a growing view, approaching conventional wisdom that the power of the nation State is eroding from above, by globalisation, and from below, by devolution.”2 In short, globalisation and delegation are the two main factors, which are eroding the nation state. This statement of Ostry gives a clue that globalisation plays a very significant role in influencing the power of the national governments of the state. The main function of national governments is to direct and influence the economies of their countries. Nevertheless, globalisation has resulted in the little influence of the national governments on their economies. With globalisation, the liberty of action of nation states gets limited. These new set of limitations are brought by the internationalisation of economic markets, of technology and of some manufacturing and services. The appearance of World Bank, the European Union and the European central bank etc has also resulted in the novel limitation for the national government. The creation of these limitations by globalisation does not really mean that national government can no longer manage their economies but they have to make themselves adaptive to the pressure of trans-national market forces. The power of national government is not yet disappeared but it has been shrunken as result of globalisation. This overall phenomenon of globalisation has made a decline in the power and influence of national governments in Europe and US. On the other hand, the rise in the nature and power of multi national corporations is the essential part of globalisation. According to Holton, one of the most important variables to be considered when it comes to evaluate the impact of globalisation on individual nation states is variations in the capacities of nation states for the regulation of cross border transactions. The states like the United States have been able to build high level of national capacity because of the transactional regulatory organisations such as World Bank.3 However, the relative power of US declines when the enterprises of the United States in the countries such as China get out of control of the US and operate under the regulations of the host government. The major reason because of which the companies are going international is that the liberalised foreign firms seek to find the low production costs in other countries such as for cost advantage. Another reason could be the flexible and preferential regulations of the host government. As compared to the multinational enterprises of the home countries, the local companies are in more control of the government of the host country. Today, more than 53 percent companies are operating as Transnational Corporations. It is very interesting to note that the total sales of top 200 transnational corporations were higher as compared to the total GDP of 187 countries in 2006.4 These organisations have global impact and responsibilities and to make them accountable, the governments of the home and host states introduce various regulations. Therefore, it is considered that multinational enterprises usually have a considerable influence in the society. The reason why multi national organizations have become more powerful than national government is that brawny markets require large state and transnational involvement. Steady societal relationships and an environment of confidence are also the major requirement for the strong markets. The markets must be organized in a way that people all over the world can take advantage.   Moreover, multinational companies can also have large influence with regard to policy arrangement in many state governments and in international organizations such as the European Union and the World Bank. Privatisation and the beginning of new services also result in the profit of multinational organizations. As I have written above that the power of national governments have been shrunken not disappeared properly, reason for this is that the services and support provided by the national organizations for their citizens have been seen as a great chance for corporations. Various scholars believe that the rise of Multinational organisations during the half of the twentieth century threatened the government privilege. Most of the national governments, which have been affected by the MNCs, are those whose resources were limited in size and scope. For example, USA and EU states are developed economies however; the cheap labour and production processes were the major issues for these states. In order to find the cheap labour and cost advantages, the liberalised local companies emerged to go international. According to Kline, in the current century, the impact of globalisation can actually enhance the disparities and make the impact of MNCs on national governments more complex.5 Kiln also mentioned that continued MNC proliferation ironically reduces the relative power of the individual enterprises and their sovereignty. Moreover, the actions of MNCs especially in the natural resource sector form a kind of surrogate sovereignty and make the impact of national government absent. The rapid growth in the world industrial sector has brought the financial and political power to transnational multinational enterprises. These organisations are representing 50 percent of the world’s top 100 economies and they have actually become monsters out of control. The role of globalisation comes in enhancing the power of these Multinational companies because increasing internationalisation insisted the companies to ask the governments of the states for tax breaks etc. Another very simple reason because of which it is considered that globalisation has made transnational MNEs more powerful than national governments is the increasing mergers and acquisitions of the companies. There are very few transnational organisations which special in one sector and even the new start ups go for diversifies skills and resources because companies look into the long-term perspective. Since, a long term vision of a new start up can be to go international, therefore, these companies try to influence the governments through every possible manner. The power comes to an enterprise only if it gets able to build efficient productive capacity in a number of countries. The profits generated by transnational MNEs are the part of foreign capital flows, which moves between the two territories. Since, the countries usually go for open outward oriented approach for boosting the economic growth and development, therefore, the roles of these enterprises increase in the economy, thereby, making the national governments dependent on them. In Ireland, a considerable portion of MNCs are the US enterprises, therefore, they directly affect the changes in collective bargaining in Ireland. For example, US MNCs have introduced their own arrangements of salary systems, flexibility etc. Moreover, in 2006, the total number of people employed in FDI manufacturing companies in Ireland was 100,687.6 This figure also shows that MNCs give huge employment opportunities in the state; therefore, national governments have to reduce their power to encourage their growth. For understanding the impact of increasing power of transnational MNEs on relative power of national governments, a simple example of the bankruptcy of General Motors Corporation is sufficient. The bankruptcy of European division of GM resulted in the enhanced unemployment in Europe. The failure of the business created a dilemma not only for European governments but also for US government, which has a large stake in the organisation. If a single organisation has such a huge impact on economies of EU and US, then the increasing transnational MNEs because of globalisation also raises serious concerns for the national governments. The significant impact of increasing power of transnational companies relative to national governments of EU and USA is also evident from the increasing anti-globalisation movement in these states. The national government has also started the anti-globalisation movement. Anti-globalisation is the term used for the action taken by the political leaders and national government in order to maintain their power and carry out independent decision-making. Therefore, from the above discussion it is evident that the sovereignty and power of the national governments of EU and USA have been threatened by the globalisation because the forces of globalisation have enhanced the power of transnational enterprises. Importance of energy strategy for Transnational Companies Addressing the importance of energy strategy for transnational companies in future is very important because the energy path, which the states such as US may follow over the next years, directly influence the operations of transnational organisations. For example, the companies such as Intel, Google etc. depend on the quick expansion of high technologies and supply of energy especially in the form of electricity.7Therefore, the energy strategy if positively influences the performance of the transnational MNEs, and then it might make them more powerful. The enhanced power of MNEs will affect the policies of the states and national governments. The energy strategy of the states can create problems for the transnational enterprises in the future. If the states go for enhancing the energy efficiencies for rapid technology developments, then it would have a positive impact on the transnational companies. On the other hand, if the states develop the energy strategy in consideration to the economic and social developments, then the interest of the transnational enterprises become the second priority of the state because less focus is given towards technology development. Therefore, the paths available to the state for energy strategy are mutually exclusive. The energy strategy of the state also affects the nuclear proliferation, because of which concerns like terrorism also increase. Such concerns also have a direct impact on the companies operation across their borders. The current energy strategy of America is seeking to achieve three aims. The first objective of energy strategy of America is to create a reliable supply of energy for meeting the demands of the American economy for the next year. The second objective is to enhance the economic growth. The third objective is to offer environmental welfare of future generations. It means that the current energy strategy of the states is giving more focus towards enhancing the economic growth and environmental welfare. This shows that this strategy can have a direct impact on the transnational enterprises, which always hope to find great benefits through energy strategy. Hence, energy strategy is really important for the transnational MNEs because it does not only influence the profitability and growth of these organisations but it also affect the relative power of these enterprises in the home and host states. Bibliography Dobbins, T., 2009. Ireland: Multinational companies and collective bargaining. [Online] Available at: http://www.eurofound.europa.eu/eiro/studies/TN0904049s/ie0904049q.htm [Accessed 16 January 2010] Foundation for GAIA, n.d. Transnational Corporations. [Online] Available at: http://www.foundation-for-gaia.org/index.php?option=com_content&view=article&id=59&Itemid=85. [Accessed 15 January 2010] Gray, J. 1999. Globalisation. [Online] Available at: http://www.infed.org/biblio/globalization.htm [Accessed 15 January 2010] Holton, R.J., 1998. Globalization and the nation-state. [Online] Palgrave Macmillan. Available at: http://books.google.com.pk/books?id=nwb_Y6YNd5gC&dq=globalization+made+transnational+MNEs+powerful&source=gbs_navlinks_s. [Accessed 15 January 2010] Kline, J. M., 2006. MNCs and Surrogate Sovereignty. [Online] Available at: http://www.britannica.com/bps/additionalcontent/18/24443150/MNCs-and-Surrogate-Sovereignty [Accessed 16 January 2010] Lovins, A. B., 1976. Energy Strategy: The Road Not Taken. [Online] Available at: http://www.foreignaffairs.com/articles/26604/amory-b-lovins/energy-strategy-the-road-not-taken [Accessed 16 January 2010] Ostry, S., 1998. Globalisation and the Nation State”Erosian from Above. [Online] Available at: http://www.utoronto.ca/cis/ostry/docs_pdf/timlin.pdf [Accessed 15 January 2010] Read More