The Effects That Multinational Companies Can Have on the Host Country

Emerging economies like Brazil, Russia, India, and China attracted wide attention in the past two to three decades and have become the preferred destinations of multinationals for globalizing their operations.
While expanding into new territories, multinationals have to analyze and face the complex socio-economic, political and cultural factors that prevail in the different countries they choose to enter. The entry of such firms disturbs many of the existing practices, not the least being the compensation and therefore competitiveness for the country as well as its homegrown businesses. The threat of a more resourceful foreign competitor is not taken lightly by the local firms who are hitherto competing with other local firms to secure due market share. New entrants will change the rules of the game and pose new challenges that would lead to the emergence of new equations and new strategies for survival. At the country level, the economic downturn in the parent country, as at present, can have undesirable contagion effects in the host country. In short,
The term globalization is used both as a description as well as a prescription. In a descriptive way, it is used to mean the ‘process of integration into the world economy’ and in its prescriptive way, it is used to mean ‘strategy of development based on rapid integration with the world economy’ (Nayyar, 2006). Deepak Nayyar puts it best in his words: “It is, in part, an integration of markets (for goods, services, technology, financial assets, and even money) on the demand side, and, in part, an integration of production (horizontal and vertical) on the supply side (Nayyar, 2006). When discussing the impact of multinationals on host countries and local businesses, strategic considerations are relevant.