Midterm Question #1

MNC's are complex organizations however, they dominate the worldwide market. Knowing the background and nature of MNC's, answer the following:

Question 1:Identify the benefits and disadvantages of MNC's.

Answer:

Advantages:

• Gaining a strong foothold into the international market



• Low-cost locations



• Cheaper labor costs



• Cheaper raw materials and distribution costs



• Taking advantage of the many tax breaks offered by foreign countries



• Access to new technologies and methods



• Availability of government grants

Disadvantages:

• Trade restrictions imposed at the government-level



• Taxes or tariffs imposed on imports from other countries



• Limited quantities (quotas) of imports



• Effective management of a globally dispersed organization

Question 2: Identify one MNC company and describe its operation.

Answer:

Amway Corporation. As one of the world’s largest direct-sales organizations, Amway has more than 3 million distributors who sell about 450 nutrition, cosmetic and home care products. The DeVos and Van Andel families own Amway and its parent company, Alticor. Richard DeVos Sr. and his wife have long been top campaign contributors, personally giving more than $760,000 in individual contributions during the 2000 election cycle alone, all to Republicans. Amway lobbies on tax issues and on free trade, as 70 percent of the company’s business is done overseas.

Question 3: Describe how the parent control/coordinates with its subsidiaries in other countries or region.

Answer:

Alticor Corporation has lot of subsidiaries including the Amway Corporation. To control the operation in supplying its subsidiaries around the globe. Alticor develop one company - Access Business Group. Access Business Group was formed to develop, manufacture, and distribute products for Alticor companies, as well as to develop and produce contract manufactured products. Due to this vast number of products, Access needed quick access to the thousands of documents they produced: designs, specifications, user manuals, and sales brochures.

Question 4: How is IT maximized or used by this MNC?

Answer:

ARMONK, NY - 16 Nov 2007: Amway Corporation has selected a virtualized IBM (NYSE: IBM) server infrastructure for a worldwide rollout of Oracle's enterprise resource planning applications, the company announced today. The decision to run the applications on hundreds of virtual servers -- rather than an equivalent number of physical boxes -- is expected to provide a significant savings in energy, software and labor costs, Amway said.

The Oracle e-Business Suite applications -- including order entry, financials and shipping -- will be deployed on multiple System p systems, with logical partitions ranging from three to thirty on any given frame. Running the AIX operating system, these machines will handle production, development, test, and quality assurance functions and will serve organizations throughout the company globally.
"The IBM System p servers will be vital to running Amway's business, as they enable our independent business owners to order and receive product," said Randy Gast, supervisor, server technology, Amway. "The System p virtualized platform has been rock-solid, secure and extremely flexible."
"The Amway solution demonstrates how IBM's leadership in virtualization technology through Advanced Power Virtualization is helping customers consolidate their data centers and reduce energy and maintenance expenses in the process," said Scott Handy, vice president of marketing and strategy, IBM Power Systems. "System p servers provide customers with the performance, high availability and scalability they need to run their businesses most efficiently."

Question 5: What were the weaknesses/problems encountered by this MNC from its environment and global setup?

Answer:

Multi-level marketing in America is not new. Amway (Alticor) is one of the pioneering direct-selling companies started in 1959 in Ada, Michigan, USA. Founded by two bestfriend name Rich De Vos and Jay Van Andel. Inspite of the great success of this company still there are lot of critics they receive.Some commented that this company is a cult, scam and the like.

In United Kingdom, Amway UK is finding problem in commerce because the government won't allow its practices even though its there for quire a long time but still the company is trying to do the best things to protect it's independent business distributors and the proctection of it's name.

Cite your reference:

http://wiki.answers.com/Q/What_are_the_advantages_and_disadvantages_of_multinational_businesses
http://www.opensecrets.org/orgs/summary.php?id=D000000111

http://www-03.ibm.com/press/us/en/pressrelease/22629.wss

DUE: Wed.

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