In 1976 the country of Mexico was experiencing a serious economic crisis. The value of its Peso was down 55 percent. The country was in the mist of economic uncertainty. The cause of this economic crisis was a change in Mexico’s foreign investment policies. Any foreign businesses operating in Mexico at the time had to have great financial concerns of its own. With the value of the Peso less than half what it used to be, the company’s assets that were tied up in local currency were also worth less than fifty percent of what it once was. Other instances such as the economic decline in the Asian market in 1997, and the devaluing of the Russian ruble in 1998 stand as constant reminders of the volatility of some overseas economic environments.
The economic risks facing MNC’s operating in an overseas environment have forced manager’s to conduct economic risk assessments. The methods by which they do this are the quantitative approach which attempts statistically to measure creditworthiness--the qualitative approach which takes into account political polices of a country, a combination of both the quantitative and qualitative approach and the checklist approach, which categorizes countries in terms of their ability to withstand economic volatility (Deresky: …show more content…
Culture, religion, business practices and even labor laws may vary in another country. By tailoring the companies’ management style and product line to suit the needs of the people in the country the MNC is operating in, the MNC stands a greater chance for success. During one’s travels to many different countries during twenty-four plus years of military service; McDonald’s, KFC and Pizza Hut to name a few, have had great success in the global market. The reason for these companies global success lies with their willingness to act local and tailor their organizations and product line to the needs of the local culture. In the Muslim countries of Southwest Asia, Pizza Huts’ menu has been totally revamped and they are able to sell great tasting pizzas, even meat lovers pizzas that are 100 percent pork free.
Many argue that, since MNC’s operate in a global context, they should use their capital, skills, and power to play proactive roles in handling worldwide social and economic problems and that, at the least, they should be concerned with host-country welfare (Deresky: 2008). The whole issue of social responsibility in regards to MNC’s is one of morality and the human condition. A greater responsibility is to improve overall conditions in third world countries in which MNC’s