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

1819 Words Jul 5th, 2012 8 Pages
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,
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Kaufmann described regulatory quality is about the existence of market policies such as poor bank supervision, and view of unnecessary regulation in areas like business development such as access and obtaining licenses, and whether regulations are applied uniformly. In fact, none of the companies will like preferable on limited freedom of operations in the course of business. However, MNCs concern about the regulatory quality of LDCs because poor regulatory quality introduces misrepresentation into investments and also raise the vagueness and uncertainty of operation. In return, entity will limit their investment especially fixed assets.
For example, India is still unable to provide a competitive business environment. According to the 2012 Doing Business ranking, India is rank at quite low position among 30 economies that improved in general. This indicated that unsatisfactory outcome from Regulatory Reform in India (Regplus, 2011).

5) Rule of law
According to UN, the rule of law is define as a standard of governance where individuals, institutions and entities, public and private, as well as the State itself, are responsible to laws that are openly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards (UN, 2011). Kaufmann said that rule of law is about the society successfully creates an environment

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