Multinational Corporations

Since industrial revolution, the world has changed tremendously.  Many industries have cropped up causing a great threat to the environment.  Globalization has encouraged free trade between countries leading to development of massive multinational corporations.

Economists have varied ideas on the definition of a Multinational Corporation. However, various dimensions help to established what multinational corporations are.  This is in terms of ownership, management, strategy and its structure. (Root, 1994).

Multinational corporations venture into various countries setting up factories and industries to increase their productivity.  It is largely viewed that sometimes they venture into countries with lenient air and water pollution controls to increase their production.  However, multinational companies usually pursue policies that are host country- oriented (perlmutter, 1969).  Although these corporations may operate in foreign countries the parent company exercises direct control over the policies of its affiliates.

Multinational corporations serve an important role to the economy of the host country. They create employment opportunities, wealth and improve the technological aspect of the host county. (Dunning, 1993).

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Corporations also gain a lot from such an investment. Labor intensive operations can be shifted to countries that can provide cheap labor.  In other cases availability of raw materials and tax advantages act as incentives.  The corporations are able to spread risks instead of putting all the capital in a single country (Dunning, 1993). Examples of multinational corporations include Shell, Coca-Cola, Toshiba, Unilever and Honda.

The Royal Dutch Shell Group is a huge multinational corporation with annual gross sales of more than 179 billion dollars.  It is one of the world’s top oil companies and the seventh largest chemical company. (www.groundwork.org.za/pamphlets/shell.asp)

The company operates in over 140 countries and employs thousands of people.  It is based upon exploration, extraction, and transportation and refining of fossil fuels, oil and gas.   It supplies petroleum products to its thousands services stations around the world. (http://www.groudwork.org.za/pamplets/shell.asp.)

In South Africa Shell Group owns the largest oil refinery called South African Petroleum Refinery (SAPREF).  It operates jointly with British Petroleum (BP). SAPREF is situated in Durban surrounded by residential areas with a huge population of over 200,000 people. (www.groundworks.org.za/pamplets/shell.asp)

The company enjoys a lot of cheap labor and employs over 600 people and the same number of contractors.  The company also through SAPREF is able to refine over 170,000 barrels of crude oil a day.  It has a well connected network in the country with pipelines running from refinery to the storage tanks. Therefore it enjoys a lot of comparative advantages enabling it to grow strongly.

The south Durban basin consists of over 100 industries. SAPREF refinery occupies one of the belts which are near residential areas.  Durban is one of the worst industrial pollution hit zone in South Africa.  Many people as a result have suffered Leukemia Chest complaints and other related ailments. (Butler & Hallowes, 2002).

Many accidents and incidents have also occurred which tarnished its operational record.  These include reported sulphur dioxide emissions, release of hydrogen fluoride into the atmosphere (in 1998) and others.  These has paused a serious threat to the firm, host community and workers. (www.foenl.org)

As a result the South African environmental Alliance group coordinated and lead community action and negotiations with the industry.  There were concerns over excessive pollution from the industry, poor record of industrial operation and management, lack of a strong and enforceable regulatory framework for the industry and others.  Through community mobilization, meetings, demonstrations and media campaigns, shell had to introduce pollution reduction plans and to upgrade its facility.  It was resolved that shell’s international management address local concerns.

This was during shell’s management AGM in London and The Hague (http://www.groundwork.org.za/pamphlets/shell.asp). Although the firm has had to spend a lot of money in repairing the detective pipelines, the company has reduced the rate of pollution and increased efficiency.  There has been growing confidence in the firm and this has improved it sales drastically.

The social fabrics of people, local needs and interests have to be considered by any firm for it to enjoy maximum productivity.  This comes with improved confidence that leads to improved services.  All multinationals therefore ought to carry out a thorough research before investing.  ACME can learn from this experience to boost its productivity.

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