Problems and Challenges Faced by Multinational Corporations (Mncs...

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Problems and Challenges Faced by Multinational Corporations (Mncs) Operating in Less Developed Countries (Ldcs)

By | July 2012
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Introductions
A multinational corporation (MNC) is a corporation that operating in two or more countries, known as host countries but managed from one country, known as home country. Multinational Corporation is also known as international corporation (Wikipedia, 2011). Besides that, MNC can be defined as a corporation that derives revenues from operations in countries other than home country (BusinessDictionary, 2011). The objective of MNC to operate in other countries is to gain competitive advantage through several ways. Firstly, MNC is able to take advantage of difference in country-specific circumstances. For example, MNC may choose to locate its productions in less developed country like Vietnam to gain cheap labor cost. Secondly, MNC is trying to reach economies of scale. For example, MNC is able to obtain cheaper price in bulk purchasing then production in bulk and sell in bulk. Therefore, unit cost of production and selling can be reduced so increase revenues. Thirdly, MNC is also able to choose the best serving mode in particular country such as exporting, licensing and direct investment. For example, exporting enables MNC to enter a low-price or commodity-type market with the absence of set-up costs. Less developed countries can be referred as least developed countries (LDC). According to United Nations (UN), LDCs are countries that which have low income, human resource weakness and high degree of economic vulnerability. Low income criterion in LDCs are judged based on a three years average estimate of the gross national income (GNI) or gross domestic product (GDP) per capita (Nationsonline, 2011). Weak human resources can be measured by a composite index based on the indicators of health, education and adult literacy which may cause poor development in certain countries. Lastly, the economic vulnerability is another characteristic of LDCs which can be measured by composite index based on the indicators of the share of manufacturing in GDP, the share...