MULTI NATIONAL CORPORATION’S FEASIBILITY STUDY IN HOST COUNTRY
Multinational corporations are huge and wealthy companies that come from developed countries (home country) and expand to countries with emerging economies and or less-developed countries (host country/ies). Multinational companies most often expand its business to potential host countries with a better economic and political climate that supports their goals of productivity and more profit. But host countries have a different legal and political atmosphere that must be followed by the multinational companies.
Feasibility Study.
Feasibility study is conducted by any business organization to determine the viability of the business plan in a certain area. Technically large businesses conduct international or global marketing analyses that have the same goal and almost the same content as the feasibility study but all-encompassing in its procedure and more comprehensive in detail. The international business marketing strategy is conducted by the MNC before selecting a host country. This study comprises the four (4) p’s or the marketing mix plus an analyses of the environmental influences such as the socio-cultural factors, economic factors, legal and political factors and technological factors, the organizational and management aspect, the physical or the natural environment aspect and the financial aspect of the new plant.
The social aspect of the MNC project is worth mentioning as it has a greater impact on the human resources of the host country. It is observed that host countries, especially the less-developed countries are in a very bad financial shape and the reason why regulations and laws are relaxed for the MNCs is to attract the much need foreign exchange from the foreign investors and provide employment to the nationals who cannot be given jobs by the government. Ideally the social aspect encourages cooperation between the multinational company and the host country so that the MNC rather than exploiting the host countries natural resources and human resources play a constructive role in the economic and financial problems facing the host country. (Nafafbagy, 1985) This is the corporate social responsibility of the MNCs towards host countries. The technical aspect of the feasibility study or environmental analysis includes equipment and installations and infrastructures among others. The organizational and management aspect concerns with the organizational structure, staffing and hiring. And the financial aspect includes start-up cost, operating cost, pricing, projected revenues, sources of financing and projected loss. Multinational corporations are required to follow tax and other regulatory mechanisms in a host country. Although host countries, temper tax and regulatory mechanisms in favor of MNCs, tax and regulatory mechanisms must ideally not subjugate sovereignty of the host country and the interests of the local peoples and employees.
Environmental Impact Assessment.
The environmental aspect of the feasibility study is a very important component of the study. Most MNCs bring more havoc to the environment of the host country than economic benefit. For example while mining companies bring foreign investment, it results to a long-term and irreversible environmental damage to the forests that are depleted and the mountains that are flattened as a result. An environmental impact assessment (EIA) is most always required by any host country from an MNC. An EIA is a document that presents the potential impacts of the proposed project on the natural environment, the biological environment, the cultural environment and the social and economic aspect of a particular area that will be developed or utilized by the MNC. The EIA is a comprehensive process as it requires a free-prior and informed consent from the community concerned and the participation of the whole community in identifying the possible impacts and issues that will arise during the exploration, management and decommissioning of the plant. The EIA is a requirement to ensure that the environment is not sacrificed for economic development.
Developmental Plan.
A development plan is a document that comprehensively lays out the details of the plan of the project from start-up management, utilization of resources and decommissioning of the plant. Ideally the development plan is periodically updated to make sure that the MNC is faithful to its promise of assisting the host country social and economic and environmental development and at the same time ensuring that the goals of sustainability is not sacrificed.
Conclusion.
A feasibility study is not the only tool to ensure that a MNC project is feasible in a new host country. An EIA and a developmental plan are complementary tools to ensure that what is assessed and written in the feasibility study reflects the primary interest of the host country and the MNC.
REFERENCES
Anonymous, n.d. Environmental Impact Assessment. [online] Available at:< http://www.inece.org/EIA/5FAQS.htm> [Accessed 21 May 2011].
Anonymous, n.d. Feasibility Study. [online] Available at:< http://www.umanitoba.ca/afs/agric_economics/MRAC/feasibility.html> [Accessed 21 May 2011].
Ghanaians Migrants Information Services, n.d. Framework for Managing Upstream Petroleum Energy. [online] Available at: < http://www.gmiservices.com/modules.php?name=News&file=print&sid=494> [Accessed 19 May 2011].
Nafafbagy, R., 1995. Operations of Multinational Corporations and Local Enterprises in Arab Countries. First Page Only. Management International Review. Journal of International Business. Vol. 25, No.4, 4th Qtr. [online] Available at:> http://www.jstor.org/pss/40227771> [Accessed 21 May 2011].
Wikipedia, 2011. Foreign Market Entry Modes. [online] Available at:< http://en.wikipedia.org/wiki/Foreign_Market_Entry_Modes> [Accessed 21 May 2011].
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