PCCW :Management of Change – Final Assignment

Management of Change – Final Assignment

 

1. Executive Summary

            This assignment is based on the proposed change scenario for PCCW, which underwent crises in the past, leading it to experience needed changes in its internal management and operations. As stated and discussed in the previous assignment, both external and internal factors were considered to be the major driving forces that encouraged the company to undergo such changes in its structure and culture. The proposed change scenario in the previous assignment was deemed a good recommendation for PCCW to cope with the demands of its customers and the demands from its industry. As such, a vision for the renewed organization would be emphasized in this assignment, focusing on the appropriate approach that can be used by the company in order to effectively implement its strategy.

            In addition, aside from discussing the prescription for change for the company, this assignment would also discuss, present, and analyze the proposed actions to be implemented by PCCW. Such would include the discussion on the company’s organizational culture, importance of the change process, the business model to be used, the objectives of the strategy, and the time schedule needed. Such elements of the discussion would be needed, as they emphasize the main components of the change process to be implemented in the organization or company. At the end of the discussion, a conclusion would be provided in order to cite the limitations of the change program proposed.

 

2. Prescription for Change

2.1 Vision for renewed organization

            It has been reported that an organization that has mastered change will develop a vision that will be a detailed, valid business model that can be achieved with a high degree of confidence because of the organization’s track record of change1. Based on this, it can be perceived that along with the changes that must be facilitated in the organization, a change in its vision must also be fostered. This means that PCCW wants to be ahead in the industry, not only in terms of the products and services that it offers, but also in terms of how it manages its workforce in the organization. After the implementation of the proposed change, the company wants to realize that it can maximize its full potential to further improve and develop as a tightly bonded organization that does not only focus on its image in the industry, but also focusing on how it would be able to provide a safe and convenient working environment for its workforce. Currently, the vision of PCCW is to become “committed to providing organizations with extensive connectivity and integrated global communications solutions, and act as preferred partners to bring their business to different countries in Asia, most particularly to China, which can take its business to other parts of the world”2. With the renewed organization, it can be perceived that aside from the focus of the organization to provide effective connectivity and means of communication to many different organizations, it also now includes the focus on providing an effective means of communication, improvement, and development to its own workforce.

 

2.2 Direction and Scope of Change

            It has been emphasized that the term ‘mission’ is often used to express the purpose of organizations in order to distinguish and elaborate its overall aims and philosophy, through a short sentence or passage3, termed as the mission statement. The mission statement makes understandable the possible clear and realistic business objectives of the organization, defining its long-term vision in terms of what it wants to be and whom it wants to serve4. Thus, the role of the organization’s mission/mission statement in its strategic change management is that it sets the direction and trend for the organization to cope with changes. From this, it can be perceived that the macro view of the organization towards its proposed change is aligning its mission/mission statement with the plans, objectives, and philosophy of the organization. Aligning the direction of the proposed change with the mission/mission statement of the organization means that all political, economic, technological, and sociological factors must be given emphasis and consideration. Being proactive means that in order for the organization to effectively manage its coming crisis, it must be able to set goals and deadlines and focus on them5. Such goals and deadlines must therefore be in line with the external and internal drivers of change. On the other end, the scope of change involves the agenda of the proposed change program, and in stating the agenda of the organization, the 7S Framework or the Managerial Molecule made by McKinsey can be used. The 7S Framework is composed of 7 elements, namely, Structure, Strategy, Systems (Hard elements), Staff, Skills, Style, and Shared values (Soft elements). The Hard elements are strategy statements, organization charts, reporting lines, formal processes, and IT systems, which are directly influenced by the management. On the other hand, Soft systems can be more difficult to describe, less tangible, and more influenced by culture. Shared values is placed in the middle of the model because such values are central to the development of all the other critical elements. The organization’s structure, strategy, systems, style, staff, and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators, thus, as the values of the organization change, so do all the other elements6. All the elements in the model are the scope or agenda of the proposed change because the formation of the new PCCW involves the change in organizational culture. Thus, it can be perceived that along with the change in organizational culture, change in values and other elements would follow.

 

2.3 Speed of Change

            The approach to be used by the organization must be a step-by-step approach that would entail a gradual change implementation. This is because PCCW is still recovering from the large debts it had in the past. It cannot use a quick transformational change because PCCW must be able to carefully and effectively assess the measures and change programs that it would use in order to lessen the risks for mistakes and crises. Moreover, a gradual implementation of changes must be employed in order to carefully assess the needed resources for each change program that must be done. In order to illustrate the speed of change, Lewin’s 3-Stage Model of Change or the Unfreezing-Change-Refreeze Model would be used. In the Unfreezing stage, the previous beliefs of the workforce or employees of PCCW are said to be the source of anxiety of the organization, thus, determining the source of crises. The Change stage involves the change of the organizational culture, along with the beliefs of the employees. This stage involves the implementation of the change programs needed for instilling the needed change. The last stage is the refreezing stage, wherein new behavior, beliefs, and culture becomes habitual, thus, involving the development of a new self-concept and identity, and establishing new interpersonal relationships7.

 

3. Proposed Actions

3.1 Organizational culture and Its Importance in the Change Process

            It has been reported that organizational culture is defined as the unique language, values, celebrations, history, and norms each organization has. At a deeper level, organization members create and/or are indoctrinated into unique beliefs and assumptions that form the basis for acting together. These beliefs and assumptions may operate at a conscious level, while basic assumptions such as those about human nature and human relations are more likely to operate at the unconscious level 8. Thus, in this sense, it can be understood that the organization’s culture depends on many factors, including the personal backgrounds of the employees and unofficial and unwritten goals and objectives9. Organizational culture is important in the change process of an organization because through setting a common and appropriate organizational culture, the organization would be able to help establish relationships among all the employees, facilitate effective communication in all levels of the company, and determine overall goals and objectives of the organization.

 

3.2 Business Model Chosen and Its Implications

            The business model chosen for the change of organizational culture, vision, and mission of PCCW is the Loyalty Business Model. This business model is said to be used in strategic management in which the resources of an organization are utilized to increase the loyalty of the customers and its stakeholders in the expectation that the corporate objectives of the company are being met or surpassed. A typical analysis that can be associated with this business model is the fact that the improvement of the quality of a particular product or service would lead to customer satisfaction, thus, leading to customer loyalty, and in turn to profitability. In addition, this business model particularly emphasizes the strength of the business relationship between the company and its customers, wherein its strength is determined by the level of satisfaction of the customers with recent experiences, overall perceptions of quality, commitment of the customer to the relationship, and the bond that exists between the two parties10. In this sense, it can be perceived that the critical elements present in this type of business model include the customer, the organization itself, and the concept of loyalty and satisfaction. This is because the interaction of such elements determines the success of the organization in its industry. This model was chosen because it can be deemed that the customers of PCCW are also its primary customers. If the company is able to satisfy the needs and wants of its labor force or its workforce based on the products and services that it can provide, then it can be perceived that the company would be effective and efficient in satisfying the needs and wants of its customers in the market. Thus, in this regard, the satisfaction and loyalty that the workforce of the company can establish would be indicative of the type of relationship the company can establish with its overall customers in the market and in the industry. Based on this model, it can be predicted that the organizational culture that can exist in the company or organization would be a type of organizational culture conducive for the improvement, development, and communication of employees. This is because through loyalty and satisfaction, the company can establish a trusting relationship with its employees, thus, leading to success and internal harmony.

 

3.3 Desired Culture and Its Strategy of Change

            The focus of the proposed change scenario of PCCW is on the establishment of communication means, such as through IT and IS, performance management and supply chain management. Based on such proposed change programs, it can be perceived that the desired culture for the organization would involve the effective cooperation and coordination of the employees in every level of management. This means that the communication process in the organization involves the different levels of management, from the top management to the middle level, and up to the lowest level of management in the organization. This is because communication must be facilitated in all parts of the organization in order to conceive, establish, and sustain a common organizational culture that would benefit the entire organization. From the past evaluations, it can be observed that the values of the current culture of PCCW are focused in the lower half of the scorecard, which emphasizes on the evolution, culture, and social contribution of the company. Given the proposed change program, the values of the desired culture will now be focused in the upper half of the scorecard, which involves the finance, fitness, and client relationships of the organization, being the arenas of basic business. This is the desired culture for the organization at present because it has been reported that when organizational culture is focused in the higher levels of consciousness, cultural transformation involves developing stronger systems and processes, thus, providing more attention to finances and money11. In essence, it can be emphasized that the focus of the values of the desired culture of PCCW in the implementation of the change program would provide more profits, customer satisfaction, and success of the company in its respective industry.

           

3.4 SMART Approach

            The objectives of PCCW must be S.M.A.R.T, which stands for Specific, Measurable, Achievable, Realistic, and Time-Bound. Specific objectives mean that the objectives must be concrete, detailed, focused, and well defined, thus, for PCCW, it must be the objective that facilitates effective communication through using its own Information Systems that involves the different level of management, thus, helping to establish a new and improved organizational culture. Measurable objectives mean that the actions can be tracked and the standard can be used for comparison. The change in the organizational culture of PCCW can be measured through the change or the improvement of the overall performance of the employees, based on their performance evaluations. Objectives are achievable, thus, they should not be difficult to reach, making one motivated to reach them. In this case, the change in the organizational culture through effective communication and coordination of the employees in the company by using an improved Information Systems is in fact achievable. This is also considered a realistic objective because other organizations have already facilitated changes using IS, such as organizations in the United States and Europe. Lastly, the objectives of PCCW must be time-bound, which means that setting deadlines must be done in order to achieve them12. In line with the primary objective of the company, it can be perceived that a longer time period must be provided because the establishment of an effective organizational culture occurs over time.

 

3.5 Action Plan and Time Schedule

            As mentioned earlier, a gradual transformational change must be facilitated in the company. This is because PCCW is still recovering from the large debts it had in the past. Therefore, using Lewin’s 3-Stage Model of Change, the time schedule for the organization can be generated. The Unfreezing stage or the identification of the previous beliefs of the workforce or employees of PCCW must be done as soon as the employees of the organization have interacted and merged. The Change stage, which involves the change of the organizational culture, along with the beliefs of the employees must be done as soon as the crises regarding the clash of organizational cultures have been identified. The last stage or the refreezing stage, wherein new behavior, beliefs, and culture becomes habitual must be done continuously and all throughout the stay of employees in the organization.

 

4. Conclusion

            The proposed changes that would be implemented in PCCW can be evaluated or assessed through identification of its limitations. There limitations can be identified in the implementation of the change program of PCCW. The first limitation of the proposed change program is that it is a time-consuming process. The effects of using Information Systems in the organization would be a tedious process, as some of the employees resist the changes that are proposed by the management of PCCW. In this sense, the organization would be burdened of using or producing the best IS for their company in order to facilitate effective and efficient means of communication and cooperation for the development of its organizational culture. Another limitation of the proposed change program is the fact that the establishment of an organizational culture takes a long time to achieve. This is because it takes a long time for many individuals to build trusting relationships with one another, given the individual differences that can be observed with one another. Lastly, conflicts cannot be eliminated in the organization and among the employees or workers of the organization.

 

 

Bibliography

“About PCCW Global”. (2006). PCCW. Retrieved February 26, 2008, from http://www.pccwglobal.com/about/asia-pacific-overview.php.

Barrett, R. (2006). Building a Values-Driven Organization: A Whole System Approach to Cultural Transformation. Burlington, MA: Elsevier Inc.

Bush, T. and Coleman, M. (2004). Leadership and Strategic Management in Education. London: Sage Publications Company.

Dobson, P., Starkey, K. and Richards, J. (2004). Strategic Management: Issues and Cases, 2nd ed. Malden, MA: Blackwell Publishing.

Driskill, G.W. and Brenton, A.L. (2005). Organizational Culture in Action: A Cultural Analysis Workbook. Thousand Oaks, California: Sage Publications, Inc.

Falleta, S.V. (2005). “Organizational Diagnostic Models: A Review & Synthesis”. Leadersphere, Inc., 1-43.

Holland, W.E. (2000). Change is the Rule: Practical Actions for Change, on Target, on Time, on Budget. Chicago, IL: Dearborn Financial Publishing Inc.

“Loyalty Business Model”. (2008). Wikipedia, the Free Encyclopedia. Retrieved February 26, 2008, from http://en.wikipedia.org/wiki/Loyalty_business_model.

Murphy, P. (2006). Leadership & Cadence: Time Management. Retrieved February 26, 2008, from http://publicsafety.com/article/article.jsp?id=2831&siteSection=14.

Rogers, R., Miles, G., Fuller, E., Hoagberg, M.P., and Dykstra, T. (2004). Security Assessment: Case Studies for Implementing the NSA IAM. Rockland, MA: Syngress Publishing, Inc.

“Setting SMART Objectives”. (2007). The Practice of Leadership. Retrieved February 26, 2008, from http://www.thepracticeofleadership.net/2006/03/11/setting-smart-objectives/.

 Wirth, R.A. (2004). Lewin/Schein’s Change Theory, 1-2.

 

 

References

1 Holland, W.E. (2000). Change is the Rule: Practical Actions for Change, on Target, on Time, on Budget. Chicago, IL: Dearborn Financial Publishing Inc.

2 http://www.pccwglobal.com/about/asia-pacific-overview.php

3 Bush, T. and Coleman, M. (2004). Leadership and Strategic Management in Education. London: Sage Publications Company.

4 Dobson, P., Starkey, K. and Richards, J. (2004). Strategic Management: Issues and Cases, 2nd ed. Malden, MA: Blackwell Publishing.

5 http://publicsafety.com/article/article.jsp?id=2831&siteSection=14

6 Falleta, S.V. (2005). “Organizational Diagnostic Models: A Review & Synthesis”. Leadersphere, Inc., 1-43.

7 Wirth, R.A. (2004). Lewin/Schein’s Change Theory, 1-2.

8 Driskill, G.W. and Brenton, A.L. (2005). Organizational Culture in Action: A Cultural Analysis Workbook. Thousand Oaks, California: Sage Publications, Inc.

9 Rogers, R., Miles, G., Fuller, E., Hoagberg, M.P., and Dykstra, T. (2004). Security Assessment: Case Studies for Implementing the NSA IAM. Rockland, MA: Syngress Publishing, Inc.

10 http://en.wikipedia.org/wiki/Loyalty_business_model

11 Barrett, R. (2006). Building a Values-Driven Organization: A Whole System Approach to Cultural Transformation. Burlington, MA: Elsevier Inc.

12 http://www.thepracticeofleadership.net/2006/03/11/setting-smart-objectives/

 

 

  

                                   

           

 

Discuss one or two motivation theories and how intrinsic and extrinsic rewards can be motivators?

Discuss one or two motivation theories and how intrinsic and extrinsic rewards can be motivators?

 

The word “motivation” is derived from the word “motivate” which means to move, impel, or induce to act to satisfy a need or want (1999). Any consideration, idea or object prompting or exciting the individual to act or move him to do what his leader wants to be accomplished is what motivation is. Motivation may therefore be defined as a willingness to exert effort to achieve a goal or objective for rewards, whether intrinsic or extrinsic. Motivation implies a promise or expectation of reward as a result of an individual’s action. Without motivation or the will to do, not much by way of accomplishment can be made.

            Several research studies on motivation have been undertaken by industrial psychologists and behavioral scientists. As a result, some theories about motivation and human behavior have been developed by researchers like    (2002).

            For this paper, only two theories on motivation will be discussed with emphasis on an organization environment. Motivation is a very important component of organizations and jobs, anything that is designed to make the individual or group of individuals attain or satisfy their needs is motivation. The two theories to be discussed are Two-Factor Theory and ’ Equity Theory. Situational examples based on organization events and elements will be given to further discuss these two theories on motivation. Furthermore, extrinsic and intrinsic rewards as forms of motivators will be discussed.

 

Herzberg’s Two-Factor Theory

            Herzberg developed this theory from his research in the 1950’s when he and his associates conducted interviews on the problem of attitudes with two hundred engineers and accountants who worked for eleven different companies in the Pittsburg area. Herzberg asked his subjects to tell about the times when they especially liked their jobs and listed the incidents that they mentioned. Then he asked the same people to tell him about the times when they strongly disliked their jobs and, again, he listed the circumstances they mentioned.

            After the data gathered from the interviews were analyzed, Herzberg concluded that people have different categories of needs that were essentially independent of each other and which affect them in different ways. He classified these into two groups; the first group he termed Motivation Factors. These factors were found to be important in motivating employees to superior performance and in improving productivity. The findings indicated that when the employees felt good about their jobs they were motivated to work because they found the job challenging and satisfying with the expectation of accomplishment and rewards (1991).

            The following factors were found to motivate employees to do superior performance:

1.    Achievement – a feeling of personal accomplishment or the feeling of having done a job well.

2.    Recognition – being recognized for doing a job well such as being complimented by the boss or receiving a company reward, promotion, or salary increase.

3.    Participation – being personally involved in one’s work; having some responsibility for making decisions about one’s job.

4.    Growth – challenge of the job itself; and the chance to learn skills, acquire knowledge, and achieve development and advancement. As more varied tasks are included in the job under the job enrichment program, the work is made more interesting and challenging, the job becomes more satisfying and the employees more productive.

With the second question which asked about the times that the subjects felt they were dissatisfied with their jobs, Herzberg arrived at a second list of factors which he termed hygiene or maintenance factors because the presence of these conditions only maintained current levels of efficiency and production or to better job performance (2006). Said conditions concern the environment in which they were working such as company policy, supervision, salary, interpersonal relations, and working conditions.

Since people feel dissatisfied with these conditions or factors were not satisfactory, they are also called dissatisfiers. Thus, if the employee’s salary, fringe benefits, and working conditions, and the company policies are inadequate, the workers will feel dissatisfied.

In other words, when the hygiene or maintenance factors were not satisfactory, productivity decreased. Examples would be when people felt they weren’t paid enough, didn’t like their supervisors, were not happy about their working conditions or were insecure in their jobs. However, if they felt that the maintenance factors were satisfactory, that is, their pay and other working conditions were good, they only maintained current levels of production and efficiency.

            Herzberg classified these two factors as follows:

Motivation Factors

(Job Content)

Hygiene or Maintenance Factors

(Job Environment)

Work itself

Company policy and administration

Achievement

Supervision

Responsibility

Interpersonal relations

Growth and advancement

Working conditions

 

            In applying Herzberg’s Two-Factor Theory to create a high level of performance, certain measures must be adopted by management such as job enrichment or restructuring the job to make it more interesting and challenging to the worker. Some authors have criticized Herzberg’s theory because of his research method. However, his job enrichment program has been found effective in application. This application of job enrichment is popular because it can easily be adopted by all levels of management, payoffs can be realized in a relatively short time span, and it cam be measured in specific terms.

 

Adams’ Equity Theory

            Later in the 1950s and 1960s, psychologists began to focus on the role of motivation in the work place, specifically in the areas of job satisfaction and job performance resulting in a variety of equity-based orientations as that of Adams ( 1994).  asserts that when people work in exchange for pay, they tend to think of their contribution to the job (inputs) in relation to what they get for working (outcomes). Inputs are anything workers perceive as deserving of a payoff such as education, experience, skill, job effort, and seniority among many other things. Outcomes on the other hand, refer to factors individuals see as payoff for their invested efforts. Examples are pay, fringe benefits, job status, seniority benefits, and job perquisites.

            If a person feels that, in comparison to others, what he or she is giving to the organization is equal to what is being received, equity exists. In essence, it is defined by the following equation:

                                    Person’s outcomes   =      Other’s outcomes

                                    Person’s inputs                    Other’s inputs

 

            Four basic postulates are propounded, thus:

1.    Individuals strive to create and maintain a state of equity.

2.    When a state of inequity is perceived, it creates tension which the individual is motivated to reduce or eliminate.

3.    The greater the magnitude of the perceived equity, the greater the motivation to act to reduce the state of tension.

4.    Individuals should perceive an unfavorable equity (e.g. getting a very low pay) than a favorable one (e.g. receiving too much pay).

 

As an example, imagine that you work as a job analyst with another individual in a company. You think you have higher inputs than a fellow worker in the same unit. You have a masters degree in Industrial Relations, trained in computer programming, you have more experience in the rudiments of job analysis and job evaluation, and have worked in the same company longer. However, the other person, who happens to be a relative of the boss’ wife, receives more pay and has a higher status (higher outcomes) than you.

This situation makes you feel that you are being treated unfairly, since you think that your inputs are not being rewarded in the same degree as the other job analyst. Equity theory predicts that you should act to eliminate the tension you feel as a result of perceived inequity.

There are several alternative ways to reduce inequity, with the individual using more than one if the tension is very strong:

1.    reducing work output

2.    reducing the quality of work

3.    convincing the boss to give a raise

4.    quitting

5.    selecting another comparison person

6.    distorting inputs or outcomes as well as those of the comparison person

7.    harassing the comparison person

 

These alternative ways are predicted behaviors and is not used in this context as encouraged ways for workers to behave when they feel that inequity persists in their organization, particularly concerning themselves.

Empirical studies strongly support equity theory predictions, particularly in relation to money outcomes. For example,  (1971) noted that hourly paid subjects who feel underpaid produce fewer units of work and the quality of their work is inferior than those who feel equitably paid. Research results indicate that employees do act to reduce perceived inequities over time, and that they are motivated by considerations of equity. Unfortunately, however, it has been criticized for being vague about certain concepts like mode of inequity reduction an individual will employ and the manner in which a comparison person is chosen.

 

Intrinsic Rewards as Motivators

The best form of motivation is self-motivation with proper attitudes toward his or her work, co-workers and the management because this comes from within the individual. An individual’s own motivators and rewards are his or her own personal drives to achieve his ambition and goals. An individual could reward himself or herself with a vacation for a job well done as an intrinsic motivator. The company may provide the necessary motivations such as good pay, excellent benefits, and good environment but if he or she lacks personal drive, or the will to forge ahead, no amount of motivation will make him strive to great achievement. The employee needs personal initiative and motivation to achieve superior performance. Management should develop in the employees good work attitudes and proper behavior through seminars, conferences, workshops, and consultations.

 

Extrinsic Rewards as Motivators

            There are many positive factors in motivating people, among them is the utilization of extrinsic rewards. Extrinsic rewards can come in many forms like monetary incentives, job security, praise and recognition, sense of belonging, employee participation, and competition among many others (2002). It is up to the management to carefully balance their application because overdoing the use of any can also bring bad results.

            The most commonly used incentive to stimulate the worker to greater production and efficiency is monetary renumeration. Money is unquestionably the single most powerful extrinsic motivator for most people (1992). Unions usually ask for increased pay as a part of their bargaining demand knowing this is what the employees want. While money is important for providing what people need in everyday life, its effect upon work does not last long.

            Several research studies showed that workers do not work harder just for the purpose of making more money alone, but are motivated also by intrinsic rewards such as the desire for accomplishment and success in their job. In other studies, majority of workers feel that they will be most motivated to do their best by monetary rewards.

            Another extrinsic reward as motivator is praise and recognition. Whenever an employee accomplishes a good job, it is good that management recognizes such accomplishment by praising or rewarding the employee so that he or she would be motivated to always do a good job.

            If an employee feels that he or she does not belong to the group, he or she will get dissatisfied and disappointed instead of being motivated. Thus the importance of the sense of belonging within an organization so as an employee will feel motivated. The induction or orientation of a new employee in an organization will make the new employee welcome and make him feel that he is part of the group and that the group accepts him as a member of the team. Any employee who works in an environment where he or she doesn’t feel welcomed will definitely not have the motivation to do their job.

            Making employees participate in meetings, conferences, and work in committees are forms of employee development and can be a string motivator. Participation in decision making stimulates the interest of the employee for greater production, provides job satisfaction, and creates in him or her the feeling of importance.

Competition, although it sounds like a monster, is also a good extrinsic motivator. When done properly, competition can be a good motivator for the employees because it encourages them to use creativity, initiative, better performance, and improved production. With the use of records and charts, management can encourage their employees to work harder to beat their previous records of performance.

Corporate and Specialist Public Relations (MA module)

 

Crisis and issues management and reputation management are inextricably linked Critically argue whether you agree or disagree with this statement, providing practical and theoretical evidence to support your standpoint

 

 

            I agree that crisis and issues management as well as reputations management are linked as it implies imperative aspects that give organizations reasons to discuss certain issues concerned from within like when companies experiencing crisis in terms of operations and delivery for instance that incur motion issues within employees and the management and that the reputation of the company are to be in place (1992; 1994). If presume to define corporate communication with these ideas in mind, there would say that it is the act of effectively conveying to a company’s stakeholders the corporate philosophy that the company regards as the ultimate expression of its corporate culture. Since corporate communication involves selectively communicating the company’s views and objectives to those stakeholders whom it regards as important, it can therefore be described as management strategy as managers consider corporate communication not as just an information activity but as a corporate management issue. If a corporation is to develop and expand its business, it must constantly be looking to the future.

 

 

            Formulating a philosophy, vision or plan of what management hopes the company will one day become is a constant requirement for any corporation and is itself an important corporate activity. The prime concern is to develop the know-how to pursue a future oriented strategy and make a deliberate and conscious effort to use that know how skillfully.  As changes in personal values and behavior are producing changes in the communication of corporate values, a company will win business opportunities in the global marketplace only if it is able to anticipate these changes and has a clear vision of the future, one that is intelligible to society at large and acceptable to its stakeholders. New standards for assessing corporate performance such as rankings of the most admired, the most ethical and the most environmentally friendly corporations, for example, are now being published in most countries; companies are aware of these rankings and try to redefine themselves accordingly (1999). To be more precise, the use of corporate communication to convey management’s clear vision accurately to the company’s stakeholders has made it possible to build a common ground between them.

 

 

 

 

Financial public relations is a public relations specialism, but what is it exactly that makes it a specialism? Additionally, what parts or aspects of this area of practice are common to other areas of PR practice? Argue your response making reference to theory and practical examples as relevant.

 

 

            Public relations is the business, organizational, philanthropic or social function of managing communication between an organization and its audiences. There are many goals to be achieved by the practice of public relations, including education, correcting a mistruth, or building or improving an image.” () According to , public relations is a “form of communication that is primarily directed toward gaining public understanding and acceptance. It tends to deal with issues rather than specifically with products or services. Public relations uses publicity that does not necessitate payment in a wide variety of media and is often placed as news or items of public interest. Because public relations communications are placed in this manner, they offer a legitimacy that advertising does not have, since advertising is publicity that is paid for.

 

 

 

            The practice of PR is used to build rapport with the various publics a company, individual or organization may have. Publicity releases, employee-training seminars and house organs are examples of instruments used in public relations. Financial public relations, a specialized branch of the profession, is concerned with corporate annual reports, stockholder communications, and the disclosure rules of the Securities and Exchange Commission. (2007) Public relations not only entail good communication skills but also the ability to make your audience feel empathy on whatever subject you are talking about. It may also be the process of aligning the thought of your audience to your thoughts and advocacies. The financial public relations integrates a sense of specialism since, it does follow a desired pattern for organization and creation, it connects and links to the organization’s finances that will be related to levels of the organization and informed those involved such as by means of financial statements and annual financial reports respectively. In the PR area, the financial public relations are being discussed by the top management team and that they inquire meetings and conferences with the organization board of executives as possible.

 

 

            As a company’s stakeholders diversify, societal expectations will change from time to time and from place to place. Heterogeneous societies demand that a company satisfy the varying interests of their members. The most important of the values a company communicates is its basic philosophy, in short, its basic value system and corporate objectives, a public relations professional, believed that a company could only maintain good relations with society by actively and accurately disclosing its policies, plans and problems without concealing anything; in other words, forming common ground between a company and society was conducive to the company’s growth. As suggests, a company’s stakeholders are growing steadily more diverse. When a company communicates a new mission statement to society, it takes into consideration the diverse responses to it that are generated by a diverse society, then makes sure these ideas are reflected in its next management strategy.

 

            The cycle is only achieved by creating common ground with society as a corporation needs to accept social change and make use of the intelligence and good sense of its stakeholders to produce a business model that will create added value; to be more precise what is needed is the creation of values that will foster a win-win relationship between the company and society. A company’s information services are often ineffective because they are carried out as a jumble of separate projects advertising, public relations, investor relations, customer satisfaction policies, recruiting and social responsibility activities, to name just a few. The entire organization must instead be united behind a single philosophy and information must be communicated on both a permanent and daily basis this means linking divisions to one another as a strategy to unify the entire company by breaking down barriers and producing synergies among divisions (2000).

 

 

 

In the current business environment it is not uncommon for an organisation to change or modify its corporate identity. Discuss why this is common/and why organisations enter into such programmes. What are the potential pitfalls of this change? Ensure that in responding to the question you make reference to practical examples and relevant theory.

 

 

            Organization business environment is a critical aspect that has positive outcome to corporate identity as it is important because it provides the organization ample security in terms of business stability and growth assumptions as the organizations enter into various programs to foster and strengthen its public relations and corporate communications in order to discover potential business partners or alliances and increase the work and production demands from within. Change within organization is not a novel issue for organizations to always update and modify its business identity to relate to their partners, employees and its desired customers such as for instance, Dell Corp. enter into environment programs as well as social programs to develop more on the relevant side as they have enough social responsibility to people and the society as a whole.        

 

 

            Management communication will try to persuade individual subordinates that the goals of the organization are desirable. Its specific purpose is to transmit authority and to achieve cooperation with the organization and more precisely: developing a shared vision of the company maintaining trust in the organizational leadership, managing the change process and motivating employees. In the face of this heterogeneous group of communications, it is essential to obtain a durable coordination between the different forms of internal and external communication. A strategic approach of corporate communication implies a new vision of the role of communication both within the organization and between the organization and its environment. Identity and image constitute two key concepts of corporate communication in the field of project marketing, the ultimate goal being the creation of a positive and durable basis for relationships with the multigroups on which the company depends. Concerning the particular dimensions of corporate communication, it appeared that the traditional communication mix arrives late after the management communication and the organizational communication. Concerning the tools, the relational network seems to be the best adapted to the particular situation and the targeting allows a good despatching of the resources at this level.

 

 

 

Internal communications is best practiced using formal methods of communication Critically argue whether you agree or disagree with this statement, providing practical and theoretical evidence to support your standpoint.

 

            I agree to the statement that internal communications is best practiced using formal methods in communication process due to the fact that business organizations do follow specific sets of standards and principles in forms of legal documents and there is a certain level of communication protocol to follow providing every business the decency to operate its business plans and realize actions and objectives. The method of communication in formal way can be in terms of weekly and or monthly reports set by a formal meeting handling as it is mostly done by the public relations department or within the HR team. The realization of a company’s aims based on its values and determined by its global strategy and policy might be endangered by aims originating from society and based on quite different values. Company behaviour may aim at influencing the decision makers or background to protect the company’s values (1998). This behaviour of a company is clearly determined by its position in society, or by relations established with politicians which mean an alliance for the company for a given period of time or in respect of one particular issue. The popular belief is that the aim of lobbying is to maintain protectionism and to abuse all its advantages (1998).

 

 

 (2000) define corporate identity as who we (the organisation) area and what we stand for and corporate image as how we are perceived and it is generally accepted that image forms a key part in the underpinning of corporate reputation. Making reference to theory and practical examples explain how image and identity interrelate and how this relationship can lead to a positive or negative reputation.

 

            Image and identity are considered significant and crucial factors in keeping the standard ways and norms of the organization as there maintains the process cycle of trust and empowerment among staff and management groups and one example of keeping organizations in its definite status and business giving competitors such enough reasons to think and test their business tactics. The image for example of Cathay Pacific being one of trusted carrier in Asia is always up to the challenge maintaining better and useful venue for its business identity to be always known and remembered by the people and to those loyal to their services offered every now and then. Communication is strategic – now more than ever. Many company executives consider communication as purely tactical in both its nature and its execution. In an information driven age, communication is an integral part of the corporate strategy. Strategic issues include an orientation of communication to an organization’s priorities, as well as toward the external environment. Integrity and credibility are the pillars of strategic communication. Realistic measurement systems and processes for improvement are strategic tools for success.

 

            The internal system directs activities of organising to accomplish goals that are based on the gathering and interpretation of data on expectations and attitudes, and on conditions, from the corporation’s relevant environment through external channels of communication. External systems of communication are also used to present relevant information about the internal processes of the corporation to the relevant external environment to attempt to influence the behaviour of the various publics. Internal communication processes are directed towards establishment of structure and stability in organising, while external communication processes are directed towards innovation by facilitating identification of directions for corporate development (1990). Managers and leaders seek co-operation for a productive balance between stability and innovation. Departments should not be allowed to seek independence and the concern of managers is not to be encroachment, but how to remove barriers to real co-operative working so that communicating really can add value to business enterprise. The model we seek to build and deploy does not promote the engagement of non-specialists in competition to manage traditional communication departments. Rather we seek to foster greater recognition of corporate dependencies, the need for wider participation in constructing meanings, identity, and knowledge (1992) and shared organisational goals.

 

            The corporate communication approach enables the reconciliation of social and economic interests, for business is in reality a socio-economic institution upon which we are all dependent, and may allow the vista of a “life ethic” to temper the debilitating effects of the mutation of citizens into consumers.  (1993) stakeholder view of the firm requires that managers see stakeholders’ groups and their sub-groups, at least until the legitimacy of claims and respective power have been examined, as both:

-       those who the management group thinks have some stake in the firm

-       those groups that themselves think they have some stake in the firm

It is then necessary to examine the nature of each relationship, as well as recognising that some stakeholder groups also have relationships with each other. Stakeholder expectations cannot be ignored, but can be missed and/or misinterpreted. Corporate community is the new form of organisation governance that shifts emphasis from profit to democracy by unifying the goals of all parties by focusing on the needs of the corporation’s constituents (1995).

 

 

Public relations and marketing should always be equal and distinct communications functions in organizations Critically argue whether you agree or disagree with this statement, providing practical and theoretical evidence to support your standpoint.

 

            The interests of employees, customers, and other stakeholders were not really goals of the company, but simply a means to meet the interests of shareholders – to make money. If the goal of enterprise is to make money, then the interest of business is opposed to the interests of society. Even the concept of “corporate social responsibility” has not remedied the problem. It has proven useful in educating people in business about their social obligations, but in focusing on social service, the economic realities of productivity, revenues, and profits have been ignored. (1996) proposes a stakeholder model of the corporation, which views the corporation as a socio-economic system composed of various equally important constituencies: employees, customers, suppliers, the public and its government representatives, and investors.

 

 

            The stakeholder has obligations to the corporation as well as rights. The view is gaining wide acceptance because managers realise that they need the support of these groups. Halal’s return-on-resources model shows that all stakeholders invest financial and social resources, they incur costs and expect gains these resources are their stake in the organisation (1994). Corporate managers are dependent on stakeholders because the economic role of the firm is to combine as effectively as possible the unique resources each stakeholder contributes: the risk capital of investors; the talents, training, and efforts of employees; the continued patronage of customers; the capabilities of business partners; and the economic infrastructure provided by government (1996). Public relations is a necessary and complementary overhead in a responsible enterprise. The marketing concept views the business enterprise as an organised process designed to create and keep a customer (1969).

 

            Marketing is a two-way mediating process between the customer and the corporation balance is needed between management, which focuses on stabilising the corporation’s transformation processes, and leadership, which seeks to innovate by focusing attention on the external environment (1990). The part of management concerned with the management of relationships is public relations, which may also be described by the terms public affairs, corporate communications and corporate affairs. These terms do have different meanings: public relations is the practise of managing important relationships, and public affairs deals with relationships involved in public policy development and with issues management. Corporate communications recognises the importance of managed communication in relationships and includes forms of communication used for corporate purposes. Communication is central to the tomorrow’s company approach, and communication between people is the core of business activity. The traditional emphasis of marketing, however, does not fit this philosophy.

 

            Corporate communication (1994, 1997) is a vital management function in contemporary organizations. It is the total of a corporation’s efforts to communicate effectively and profitably. It is a strategic action practiced by professionals within an organization, or on behalf of a client. It is the creation and maintenance of strong internal and external relationships. The actions any particular corporation takes to achieve that goal depend in large part on the character of the organization and its relationship with its suppliers, its community, its employees, and its customers. Depending on the organization, corporate communication can include such traditional disciplines as: public relations, investor relations, employee relations, community relations, media relations, labor relations, government relations, technical communication, training and employee development, marketing communication, management communication. Many organizations also include philanthropic activity, crisis and emergency communication, and advertising as part of corporate communication functions. Understanding corporate communication provides the vision a company requires in an information driven economy for strategic planning. Since global business is based on information, customers, employees, investors, suppliers, and the general public now expect a high level of communication and candor from the companies that operate in their community.

 

 

            Corporate communication promotes strong corporate culture; a coherent corporate identity; a genuine sense of corporate citizenship; an appropriate and professional relationship with the press; a quick and responsible way of communicating in a crisis or emergency situation; an understanding of communication tools and technologies; a sophisticated approach to global communication. Organizations committed to employees and to the community have a definite communication philosophy. Companies may refer to it as their communication policy, or their mission statement. The philosophy may be articulated through statements of commitment to employees, customers, and other stakeholders. The written statement of corporate commitment to goals and values is often the external manifestation of the communication philosophy. It is not necessary for a written statement to exist to have a philosophy, but if the written statement does not represent corporate behavior and values, its hollowness will be apparent to everyone. For companies operating globally, a strong corporate communication philosophy offers the foundation for an international code of ethics. Companies that have commitment to social responsibility are rewarded with greater name recognition, more productive employees, lower R&D costs, fewer regulatory hurdles and stronger synergy among business units (1994, 1997). Nevertheless, an organization’s culture plays a powerful role in its success, and in its failure as the discussion of a corporation’s culture offers a foundation for the understanding the group’s behavior and suggests ways to perpetuate or change the cultures.

 

Is Corporate Social Responsibility part of the domain (an area of / function/ creation) of Public Relations in organisation; if not what is the relation of PR to CSR? (Critically reflect on your response and your viewpoint).

 

            Public relations are an unavoidable function in any organization. As  (1984) notes: An organization has no choice whether to 'have' public relations. All organizations are communicating with all audiences that are of importance to them. The decision is not whether to have public relations, but whether these relations will be handled in a planned, organized manner or allowed to be accidental, haphazard and possibly inconsistent. No industry probably agonizes more over how to make its clients comprehend what they are buying than the public relations business like public relations consultancy. Presidents and counselors of public relations agency worry about the difficult partnership with clients just as much as clients also worry about their relationship with their agency (1992). In any organization, not only in the public relations department, loyal clients are an intangible asset that adds value to the balance sheet. They represent the goodwill earned by the company. Loyal and repeat clients not only contribute revenue by returning again and again to avail of services from the same company, but act as advocates, referring new customers and reducing acquisition tools. Corporate Social Responsibility or CSR is one of the leading theories relating to corporate governance. The theory talks about the responsibility of the corporation, or any organization for that matter, to all its stakeholders, which comprises mainly of its customers, employees, etc. The theory mainly states that the organization should keep in mind the interests of their shareholders and not only the possibility of making higher profit. The significance of the role of communication in a company implies the recognition and transfer of values from the environment by the external component and the integration of these values into the company’s attitude through the processes of the internal component result in changes in attitude towards values, and changes in the company’s values and priorities. Consequently, there affect corporate output and efficiency (1998; 1998;  1999).

            The concept of high quality goods or service will be transmitted by marketing communication for the other activities of the company, and the product and process innovations should promote the image of the company accordingly. As (2000) note, investment in CSR promotes product differentiation contributing to a socially responsible corporate image. The image of a company is present in the reputation of the company beside the guarantees built into the products and service. The reputation of a company might be considered to be its distinctive social position based on values and which is attainable only by continuous value-creating activities in all the operational fields of a company.

Critically evaluate the relationship between Public Affairs and democracy.

 

            Communication is the key to a mutually profitable relationship. Company management has to be willing to tell the agency its specific needs and desires. Without knowing management’s expectations, it's impossible to meet the goals. To create an effective campaign, the agency has to know everything about the product or service how it works, its benefits and features, its shortcomings, its channels of distribution, as well as products and features offered by the competition. It's impossible for the agency to learn this information by mind reading or through osmosis (1997). The concept of relationships between organizations and stakeholders is central to their theory of public relations and organizational effectiveness. A growing number of public relations consultancies in many parts of the world have come to recognize the importance not only of measuring communications efforts, but also measuring how effective they have been in building good relationships with key internal and external constituencies such as the clients themselves. It has never been easy for public relations practitioners to measure communications effectiveness. Similarly, it is not any easier to measure how effective an organization such as a consultancy has been in building and maintaining sound client relationships, good deal of thought and care needs as relationships development and management in the field of public relations still has ways to go.

 

            The relationship between public affairs and democracy I believe, is just simple if only every nations and sectors are united and one to keep a healthy and effective society as well as ideal business milieu as public affairs is not possible without the assimilation of democracy in control like for instance, in politics it is imperative for the politicians and people in government authority to embrace public affairs such as engaging into platforms agenda and meeting de avance’ also, in broadcast journalism the notion of public affairs is considered to be as the main skeleton in order for the news programs to run smoothly into the radio and television sets of the audiences’ homes and because it is possible to achieve implies, a sense of value for embracing democracy as it reflects the power as well as influence of the people, by the people and for the people.  

 

 

 

 

 

 

 

 

 

 

 

ABSTRACT PAPER ON SOCIAL POLICY

The government must be the one to have a primary concern towards the citizen they are involved in, they have some responsibilities to be made to help their people on their needs. Some of the provisions made are medical attention, unemployed people have the chance to work, pensions will be given for those honored citizen and becoming more inclined to work even after their retirement, the offer of education including sports to acquire skills and help build rapport to younger people. There will be an idea between the citizens and the government to give each other their own advantages and benefits. However, it is said to have several implementations to be followed, either through the various decisions of the members, through peer consideration and influence of private sections. Moreover, monetary matters for the people are required to provide their needs, communication, technology and the changes in the policies within the government may have an effect on the welfare.

 

Multinational corporations have existed since the beginning of overseas trade

Multinational Operations Create Poverty in Many Countries and Wealth in Only a Few

 

Introduction

 

            Multinational corporations have existed since the beginning of overseas trade; thus it remained a part of the business scene throughout history. During the 17th and 18th centuries with the creation of large, monopolistic concerns, multinationals were viewed as agent of civilization and played a vital role in the commercial and industrial development of Asia, South America and Africa.

            It retained its favorable image as agents of improved global relations through commercial ties by the end of the 19th century since advances in communications closely linked the world markets. However, the existence of close international trading relations did not prevent the occurrence of two world wars in the first half of twentieth century. But, after the period of conflict, an even more closely bound world economy emerged.             Multinational corporations have grown in power and visibility in recent years. Both governments and the consumers worldwide have come to viewed it more ambivalently. Indeed, multinationals today are viewed with more suspicion given its perceived lack of concern for the economic well-being of particular geographic regions and the public impression that multinationals are gaining power in relation to international trade federations and organizations, national government agencies and local, national and international labor organizations. However, as barriers to international trade continue to be removed; multinational corporations continue to expand its power and influence despite such concerns. (). Indeed, multinational corporations that operate internationally offers wealth to some countries but no one can deny that it also offers poverty to some.

 

 What is a Multinational Corporation?

            Multinational corporations originated early in 20th century and proliferated after World War II. Typically, a multinational corporation develops new products in its native country and manufactures them abroad, often in Third World nations, thus gaining trade advantages and economies of labor and materials. Many smaller corporations became multinational, some of them in developing nations, during the last two decades of the 20th century ( 2008).

            It is a business concern with operations in more than one country.  The operations outside the company’s home country may be linked to the parent by merger, operated as subsidiaries or have considerable autonomy

            Furthermore, it has also manufacturing, sales and service subsidiaries in one or more foreign countries. MNCs is also known as transnational or international corporation ( 2008). All major multinational firms are either American or Japanese or Western European. Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW are examples of these multinational corporations (2008).

            MNCs had worldwide influence over other business entities and even over governments. In addition to approximately 250,000 overseas affiliates running cross-continental businesses, over 40,000 multinational corporations are currently operating in the global economy. The top 200 multinational corporations had combined sales of $7.1 trillion, which is equivalent to 28.3 percent of the world's gross domestic product in 1995. These MNCs having the capacity to shape global trade, production, and financial transactions are headquartered in the United States, Western Europe and Japan

 

 

Methodology

According to  (1983), the collection of information and the rules for confirmation is not only the part of research, it is more about the way of explanation and the resources by which explanations are produced. With this consideration, the research design for this paper was influenced by the following factors: (1) The need to meet the learning objectives of the multinational corporations; (2) The requirement for credibility of this research and; (3) The extent of the effects of multinational corporations to the host countries in accordance to poverty and wealth issues they provide.

            Basically, qualitative method of research will be considered as the approach of this study. The qualitative method is chosen because there are only limited measurable data available on the subject of poverty and wealth per se. As every research project is built on a methodological approach, this study will deal on the philosophical position of interpretivist, which relies on the underlying assumption that the general condition needs to be taken into consideration in order to fully understand a phenomena, in this case, the phenomena is the impact of multinational operations to different countries.

 

Analysis

Motives for Establishing Multinational Corporations

            There are motives why multinational corporations bring businesses and invest in other countries particularly in the Third World.

 

a. Desire for growth

            A corporation may have reached a level of meeting domestic demands and anticipate little additional growth; thus, a new foreign market might provide opportunities for new growth. ( 1998)

 

b. To escape the protectionist policies of an importing country

            Through direct foreign investment, a corporation can bypass high tariffs that prevent its goods from being competitively priced. For example, when the European Common Market (the predecessor of the European Union) placed tariffs on goods produced by outsiders, U.S. corporations responded by setting up European subsidiaries ( 1998).

 

c. Preventing competition

            The most certain method of preventing actual or potential competition from foreign businesses is to acquire those businesses ( 1998).

 

d. To reduce cost

            Another motive for establishing subsidiaries in other nations is to reduce costs, mainly through the use of cheap foreign labor in developing countries. A multinational corporation can hold down costs by shifting some or all of its production facilities abroad (1998).

MNC holds that they create employment, create wealth, and improve technology in countries that are in dire need of such development. Critics, however, point to their inordinate political influence, their exploitation of developing nations, and the loss of jobs that result in the corporations' home countries.

  Concerns about Multinational Corporations             There is no doubt that MNC can bring economic success to the host country. However, labor organizations and government agencies worldwide as well as social welfare and environmental protection groups questions its motives and actions of establishing businesses to other nations             National and international labor unions have expressed concern that multinational corporations in economically developed countries can avoid labor negotiations by simply moving their jobs to developing countries where labor costs are markedly less             The labor organizations in developing countries also face the converse of the same problem since they are usually obliged to negotiate with the national subsidiary of the multinational corporation in their country, which is usually willing to negotiate contract terms only on the basis of domestic wage standards, which may be well below those in the parent company's country             Social welfare organizations are similarly concerned about the actions of multinationals, which are presumably less interested in social matters in countries in which they maintain subsidiary operations. Environmental protection agencies on the other hand are concerns on the hazardous operations of MNC in countries with minimal environmental protection statutes             Finally, government agencies fear the growing power of multinationals, which once again can use the threat of removing their operations from a country to secure favorable regulation and legislation             All of these concerns are valid, and abuses have undoubtedly occurred, but many forces are also at work to keep multinational corporations from wielding unlimited power over even their own operations.

 

 

 

Benefits of Multinational Investment

A. To Host Nations and Governments

            Access to Foreign Capital

            Development of Resources

            Technology and Productivity Improvement

            Management and Marketing Skills

            Revenue and Taxation

            Diplomatic and Economic Alliances

            Even if MNCs use financial power to impose unfavorable conditions or unfair terms on host nations particularly in the Third World, is not surprising that nations still compete to attract MNC investment because of such benefits. Governments offer MNCs attractive terms including tax holidays, low cost land for factories, concessions, advantageous depreciation and other incentives just for its investments ( 2001).

            Acceleration in national development is the prize won by governments in granting these short-term advantages. Such multinational investment will not only provide benefits to the economy of the host nation but also to its political leadership ( 2001).

            Access to capital, both equity and debt which not available to the host nation is bring by these multinational corporations. Multinational investment in natural resources permits the realization of income and value from hidden national assets such as oil, hydroelectric potential and other minerals. Technologies which are not normally available to the host nation are often utilized by these investments; thus national productivity is improved by access to the specialized machinery, modern tools and laborsaving equipment that MNCs use in its operations (2001).

            The techniques of modern management to supervise and safeguard the investment such as planning and management system, personnel policies, safety training and other proven techniques to enhance efficiency and train local staff are also brought by these multinational investors. The investment of intellectual capital becomes part of the host nation’s business culture as employees move into and through the MNC organization (2001).

            Finally, attracting MNC investment increases concrete benefits of political value to the nation’s leadership. The increased revenue and tax income in the long term even if deferred by tax holidays and temporary abatements are the most obvious in these benefits. Furthermore, MNC investments increase the host country’s diplomatic and economic stature since it provide the project materials, markets and capital to them (2001).

 

B. To Individuals

            Employment and Jobs

            Skills and Education

            Entrepreneurial Opportunities

            Consumer Products and Services

            Modern Commercial Institutions

            The benefits that MNC brings to the individual citizens of the host nation are visible. It creates work that did not previously exist.  Workers are technically trained freely provided by MNCs. There are also supervisory and leadership content and potential for other positions; thus permitting local employees to achieve increased responsibility and compensation at rates more attractive than the local market provided previously ( 2001).

            A new job created in local companies which provide goods and services to the MNC investor brings a very significant employment effect. Support enterprises develop around the new investment which provides construction, local transportation, food service, supplies, and other necessities create an important employment and income multiplier in the local economy ( 2001).

            Inevitably, since the national and individual wealth increase, sellers of products seeking new markets are attracted.  Demands for basic products that improve individual nutrition, health, communication and mobility are also created. Moreover, multinational investors bring new or improve products into the local markets, either directly through new factory investments or indirectly by import (2001).

            Finally, since multinational investors required sophisticated banking, transportation and commercial services to support its operations, local firms are organized to provide these services. Sometimes other MNC also invest to support this valuable existing relationship.  All other local companies and individuals also had the access to these improved useful services since it is offered at lower cost ( 2001).

 

Other Benefits

a. Multinational investment supplements domestic investment and leads to increased economic activity.

            The past investment strongly influenced a country’s economic growth rate. Therefore, future output will be higher if the level of investment in a country is increased ( 1998).

b. Multinational investment provides host countries with much-needed foreign currency.

            The initial flow of capital into the host country and the (presumed) increase in exports caused by the presence of multinationals have beneficial effects on the host country's balance of payments. The inflow of foreign exchange also helps to reduce balance of payments deficits and allows host countries to import more goods and services from abroad (1998).

c. Multinational companies and their subsidiaries frequently have very high profit margins, so they generate large amounts of tax revenue for host governments ( 1998).

d. Multinational companies bring with them a host of managerial skills, business knowledge and (most importantly) technological information which are of immense benefit to host countries (1998).

 

Criticisms on the these Benefits

a. Multinational investments may not raise the aggregate level of output in the host country since its main aim is to maximize its profit. Considering predatory pricing, combined with large grants and subsidies from the host governments, MNCs also often displace existing companies or prevent the emergence of new competitors because they can offer lower prices and higher wages than the indigenous competitors. MNC may also prevent the natural emergence or expansion of indigenous suppliers by buying intermediate products from overseas affiliates; thus profits that would otherwise have accrued to local entrepreneurs, and probably been reinvested locally, are instead repatriated abroad. Moreover, the host country becomes more dependent on multinational companies for employment and output ( 1998).

b. Because MNC desire to buy inputs from affiliates in other countries, it imports both inputs and capital equipment. Furthermore, it also sends back to its home countries the profit and royalties as well as the management fees and interest payments. Thus, it suggests a negative net effect on the host country’s balance of payment (Roberts 1998).

c. Transfer pricing can be used by MNCs to switch their profits to countries with very low rates of corporation tax. Also, the corporation tax it paid is actually outweighed by the subsidies and grants it receives from the host governments aside from the generous tax succession and allowances. MNCs further reduce the host government’s revenues by displacing indigenous competitors (1998).

d. It is cheaper and easier to allow MNCs to "transfer" its technology by establishing subsidiaries, employing and training local people and forming linkages with the domestic economy. On the other hand, technological advancement would require vast amounts of research and development expenditure on the part of indigenous companies ( 1998).

             Moreover, the multinational company's technical knowledge is often of little (external) benefit to the host economy. When technology is transferred to the host country, it is often inappropriate and incompatible to the needs of the host economy. The introduction of the labor-shedding technology to developing economies, also, can lead to increases in unemployment and deprivation ( 1998).

 

Negative Effects of MNCs’ Investments

a. Multinational companies change local consumption patterns.

            Luxury goods that are produce in developing countries are sold locally. MNCs advertise its products in order to create demands. However, it is argued that these changes in demand patterns of host countries are the result of economic development and increased prosperity not of MNC activity, since multinational companies merely respond to changing demand patterns. (1998)

b. Multinational companies lead to increased inequality and contribute to the development of urban slums in developing countries.

            MNCs pay high wages relative to the host country average. Consequently, only small proportion of the population is on high income, while the rest struggle to earn a subsistence income. There is also an unbalanced compensation offering since the workers in the city are earning high wages compare to those in provinces and rural areas. Furthermore, since, multinational companies require host countries to finance part of its investments, it draw resources away from other areas, including agriculture, which can lead to increased unemployment. (1998)

c. Multinational companies reduce the host country's sovereignty and economic independence.

            Multinational often make decisions which affect the long term welfare of citizens in host countries, particularly about environmental matters. It often has no incentive to consult host governments about the use of non-renewable resources. Furthermore, multinationals often influence the political processes of host countries by using economic and fiscal aspects (1998).