The Reason for Which Firms become Multinational
The progress made in the past decade in the process of globalization has been facilitated by the modern communication, means of transportation and legal as well as the political structure of international market. Other economic conditions and open market to international trade finance such as WTO and GATT and other regional blocs including NAFTA and ASEAN has created the utmost opportunities for national firms to broaden their approach for their products and services (Navarettiet al,2004). Therefore, today it is seen that firms which hold the enterprise endeavor to control its production and service facilities outside of their domestic country (Dunning& Lundan, 2008). This is achieved by accessing the degree of transnationality which enables the organization to facilitate the characters of globalization. Hire professional essay writing services. Best custom assignment writing service are available online.
The Main Phases of Firms’ Globalization for UAE/GCC Countries
The process of globalization and internationalization of firms of UAE/GCC Countries mainly pass through two dominant phases. The main focus is mostly given to the first phase of globalization of firm which is related to initial entry of the firms into foreign market and also includes goals of internationalization, choice of entry mode and the strategy to draw the path of their next process of internationalization and to enhance the marketing performance.
In the second phase, firms of UAE/GCC focus on the later stage of the globalization where firms decide to locate the parts of the production or to outsource the activities in foreign country. Thus, the process of the globalization starts with the sales and marketing end of the value chain. In addition, the decisions of production activities in abroad or to outsource are considered as part of the international market operations ((Economic review of the Arab world, 2002) .Hire professional essay writing services.
The Primary Risks Associated with the Globalization Process
There are basically three primary risks associated with the globalization process including foreign risk, currency risk and political risk (Narula, 2003).
Foreign Risk:The process of globalization for a firm involves foreign trade, foreign investment and dealing with foreign currency. All these factors together create financial risks caused by existence in foreign country.
Foreign Currency Risk:There is massive currency risk involves in the globalization such as risk of exchange rate movement. The risk of adverse exchange rate movement is exposed to foreign investors due to currency factor.
Political Risk:In the process of globalization involves some potential political risks specifically for multinational firms which make investment in abroad. Overseas business production can negatively be impacted by the changing political climate while placing risks on the business process. You can buy dissertation online.
Besides, there are other risks involve such as falling environmental standard and change in air quality especially in major industrial sectors can affect the firm’s globalization. However, integration of firms with the business community can help to adopt strategy for controlling such factor, there is labor standard issue connected with the same process.
Failures in Corporate Governance
It is very obvious that the corporate governance is very essential facet of every organization. There are various organizations which are having great collection of rules of corporate governance. These set of rules and regulations are created for the individual from the lowest position to the highest position in the company and they are bound to follow them. Company faces many issues and problems when the corporate governance is not maintained. To understand these reasons it is favorable to understand the case of corporate governance failure at Enron.
In the case of Enron, every time a new issue comes up while taking into consideration. Enron is a firm where the top management is allowed to maintain the culture of rule breaking and fraudulent environment. It seems that the incentives of performance developed a climate where workers seek to generate profits at the expense of stated standards of ethics and strategic goals of a company. Enron possesses all the procedures and structures for good corporate governance. Moreover, the company had a corporate social responsibility task force and code of conduct related to security, human rights, social investment and public involvement. But still, no one followed the code of conduct in the company. The board of directors permitted the management to violate the code openly and specifically when the permission was given to CFO to serve the special purpose entities or SPEs. The audit committee permitted the problematic practices of accounting and did not attempt to realize the transactions of SPE which leads the auditors to failure in preventing the questionable accounting. buy research papers from our professional writers
The utilization of doubtful practices of accounting and disclosure, the approval by the board and verification by the auditors appeared from many forces which includes the executive compensation practices, out dated and rule based accounting standards etc. The complicated corporate financial arrangements developed in order to reduce taxes and hide the true status of the company while compromising the independence of public accounting firms.
Structure of Board in the context of Corporate Governance Reform
The board basically comprises of directors. The directors have two duties which encompass everything, such duties include the directors to be well informed, act reasonably and monitor the risks of the company. The duty of loyalty requires the directors to act in the interests of company and shareholders while avoiding the conflicts and collisions of any interest.
The board of director selects the executive leadership of company, monitor the performance of executive and compensate the executive along the performance. The executive is accountable to board and in turn to board is accountable to the shareholders. It is also agreed that the board should have various independent directors for the company and the management. They should actively participate in the governance of the organization. Order professional term paper writing service
It is also believed that the companies should reform their corporate governance at every level. The companies should adopt the practices while setting examples of practices for their competitors and companions. The components and elements should be able to support the whole system to work.
Giorgio Barba Navaretti, Anthony Venables, Frank Barry,Multinational firms in the world economy, Princeton University Press, 2004
John H. Dunning, Sarianna M. Lundan,Edward Elgar Publishing, 2008
Rajneesh Narula,Globalization& technology