Effect of the Recession on Multinational Enterprises

Effect of the Recession on transnational EnterprisesEconomic recession Is widely distributed slowdown of economic activity everyplace a period of time that measured by bring in Product Domestic (GDP),recession is highly characterized by falling of coronation spending, channel decline, slow crop of cutting business high rate of unemployment.iEconomic recession potbelly be caused by widespread of capitulation in spending and investments, poor micro-economic policies, such as poor control of financial institutions such as banks, and an some other(prenominal) lender institutions as head as other economic variablesDuring economic recession, more business profitability declines and other bankrupt repayable to lack foodstuffs for their products and services, galore(postnominal) customers have inadequate money to bargain for these products and services.Economic recession also reckon stock markets, where by shargon of the companies drops sharply and reduce authorization to investorsGovernment revenues decline due to economic recession, thus government fails to provide social services and other future plans.Economic recession in one country enkindle also affect others, in sense that recession has magnitude, many multinational companies sound more than one country, and and then impact in one county stub have multiplier resultants in other countries, many FDIs also depart be abnormalE.g. economic recession which was hit USA in 2008/2009 which was maked to united states housing sing and subprime mortgage crisis, was affected not only in America but almost all over the world, many business affected with this recession, stock markets such as NYSE,LSTE, and other banks were bankrupted such as warner brothers.ii impress of Economic RecessionHigh rate of unemployment, recession can contribute to high rate of unemployment in sense that may troupe reduce number of staff in order to strive in recession it leads to other problems, such as people who l ack jobs may engage in criminals in order to survive.Recession may lead people to lack disposable income and other fails to repay their loans hence many families be affected.Decline in productivity, where by many business profits falls, other besotteds bankruptcy, hence and affect the whole financial system.Recession has negative impact due to decline of growth domestic produces (GDP) where by its affect economic as tumesce social life.Many in the buff businesses collapse, and hence fails to repay their loans banks.Recession can led to decline in living standard due to the situation people depend on wage and salaries, this can have negative impact on stability of families and individuals health and well-beingMultinational Corporation (MNC) or transnational corporation, is an enterprise that manages production or delivered service in more than one country, multination co surgical procedure has been achieved due to advancement in information technologies as well globalization,Br itish is one of country which have many multination companies such British petroleum Vodafone, Virgin, Rynair as which ensnarl within and outside the country, they atomic number 18 concerned to operate in emerging economies such as India, china, Africa and brazil-nut treeBritish companies usually engaged in transnational businessAcquire modernistic markets, British multinational usually going external in order to search recent markets for their products and services, many enormous firms sheepcote to china, India, brazil and Africa due to growing of consumer purchasing power.Increasing sales, firms expand international so as to extend its market share hence being able to compete.Acquiring resources, with child(p) firms adjudicated to go globally because to find resources so as to continue producing and ensure production equal can be controlled hence to able to pass benefit to customers.Cheap labor, due to growing of stiff competition in the markets, large firms fight to r educe production cost in order to earn profit, this led companies looking afield areas where cheap labor is available.Global Strategies, many firms consider engaged in international business as strategies in order to survive in a stiff competitionGrowing consumer pressure, tastes and preferences of consumer has changed dynamic, income increase consumer can be able to purchase luxurious products and services, growing income to emerging economies influence many firms to set their operation and respond to these marketsThe external environment is an essential element for the business to operate international due to the fact business do depend on external environment because and changes can have multiplier effect toward business, if the country policies towards economy are good and there is peace and security business will achieve as well as economyPESLTEL for British Multinational Enterprises arePoliticalBritish MNE they are highly interested to operate in where there high democracy a nd freedom of speech, and where there is a less government intervention towards business unless its breaking the abiding laws.Multinational Enterprise, interested operates in a country which there is peace and security, and that countries have diplomatic relation with other countries.Tax policy is well structured and can be predicted, this give opportunity for business to incorporate into their business, in a country where taxation policy is highly uncertainty many British MNE are not interested to invest in these countriesMultinational enterprises interested to know all regulatory bodies governing trade, local anesthetic and international business such competition laws, employment laws, Business ownership laws, health and safety laws, foreign and local trade regulatory, fair competition bodies as well as environment protection laws main objectives is to halt sure the business running smooth.EconomicBritish Multination enterprises are interested in invest in a country where a GDP is heading toward good direction, this is good conducive environment for growth of businessAlso British MNE prefer to engage in international business in a countries which their economies are growing and their citizen has disposable income in sense that this will provide market as well as access to raw material.British MNE prefer to invest in countries which have national relative advantage, such as huge population as well as huge market, good climatically condition availability of natural resources such gas, oil and minerals.British MNE also interested to invest in a country which has efficient money supply low interest rateBritish MNE are highly consider types of economic system, preferred capitalism where by supply and demand is controlled by marketsMultinational Enterprises interested to operate in countries which are not prone to recession and depression, due to the fact these affect companies profitability..Technological factorAdvancement in Information and tele communication technologies (ICT) and innovation contribute for multination enterprises to participate in international business, technologies such as internet, teleconferencing, where companion headquarters can have two ways communication with scattered branches around the world.Transport Innovation, training of maritime technology and existence of many airline companies, contribute MNE to engage in international businessTransportation innovation, Development of maritime technology and existence of many airline companies in transportation system lead easier to fly around the world at competitive fares and conduct business.Many international companies inject huge sum of capital in research and development to come up with a newer, better and innovative products due to increase of competition among international companies as well growing of consumer pressure due to increase in of incomeSocial factorsMultinational enterprises interested to operate in country which there is large population, hence be a market of the products and services provided by these multinational companies, many multinational companies interested to operate in china, India and most of African countries due to large population.Due to powerful economies of western countries and globalization, social culture and life style affects other societies, such as Africans and Asian societies adopt a western culture, and hence create opportunity for MNE to engage in international businessAnsoff Matrix good exampleSource tuitor2u.netAnsoff Matrix Model is one strategic tools objectives, and most well-known(a) framework for deciding upon strategies for growth, the firms which attempts to grow depend on wither its market to a new or animated products or in a new or existing marketsMarket Penetration is when a firm descends to market existing products to its customer, the aim is to maintain or increase market share to the existing products to customers and increase usage of existing customersStrategies such as, co mpetitive pricing strategy, advertising, sales promotion and also private selling as well as aggressive promotional campaign and led market to be unattractive for competitors.Market Development, Is when firm decide to sell its existing product into new market, firm can implement this strategy by, by moving into new geographical areas such as exporting to a new country, new product dimension or packaging, new distribution channel or unalike pricing strategies which can attract new customer.Products Development, is the growth strategy where by firm introduce new products into existing markets, strategies such as upgrading which can appeal to existing marketsDiversification, is the growth strategy where by firms decide to market new products to a new markets, diversification can relate or unrelated depending with company policies.Strategies to execute in recession periodIn period of Economic Recession many multinational enterprises should recapitulation their growth strategies, due recession which affect the prosperity their business,By using Ansoff Matrix Model as strategic tools for growth, Multinational Enterprise can adopt this in survive.The first strategy should be execute for multinational companies in a recession period is cut operation cost and reaming with summation business in order to surviveThe appropriate strategy, which Multinational Enterprise can execute, is by market development strategy, where by firm can decide to shut down their operations in countries which affected with recession due to the fact recession affect purchasing power, hence people fails to buys products and services, firms can decide to operate in countries which economy is growing.Other Strategies which can be adopted by the Multinational enterprises is diversification strategy where by firms can decide to market new products to a new markets, a Multination company can decide to diversity their business and start new business e.g. electricity firm can decide to enter into hotel business but there is lot of risk to be considered before fashioning decision to diversifyMultinational Enterprises can decide to diversify their operation into new emerging market, and which are not affected with recession, countries such as china, India and Brazil.Globalization is the broadening set of interdependent relationships among people from incompatible parts of a worlds thats to be divided into nations, the growth of globalization has accelerated due to advancement in information and telecommunication technologies such as internet, teleconferencing, Enterprise resource planning (ERPs),Knowledge management (KM), guest relationship Management (CRM).I do agree that the benefit of new technologies will off-set the in investment in RD. in one perspective but in other circumstances new technologies major power increase investment in RD, this can argued as follows.New technologies divine service multinational companies to reduce cost as well as time which were previou sly invested in RD due to the fact the time interpreted to come up with the new product is essential due to competition among multinational companiesDevelopment of new application software, such has designing and drawings software, CAD, 3Ds helps companies to design a products which meets customers taste and preferences to customer across the world.Internet technologies help multinational companies to advertise and sell their products and services on line around where it can reach many customers at a low cost.Internet technologies also helps RD departments in multinational companies to get instant review about their products, such as how customer perceive that products, their weaknesses. This feedback helps companies to come with the newer and innovative products in the market.In other circumstances new technologies in RD contribute to increasing competition to multinational companies, due to the fact barriers for innovation become low, companies now days can but these technologies on shelves and entering into business.Despite of new technology, in RD, the competition become stiff, due to emerging economies such as china, India have decide to engaged in international business.New technologies helps to reduce investment in RD but also create new challenges due to the fact many small emerging companies used technology as strategy to engage in international business, and create stiff competition.