Impacts of Government Interventions on Multinational Companies

Question: Discuss About The Interventions On Multinational Companies? Answer: Introduction Government interventions could be interpreted as the actions embraced by a government in relation to its market economy with the aim of improving the country's economy beyond the basic fraud regulations and enforcement of contracts and provision of goods to the public. It is necessary to look at a market too. Markets operating on free forces do always yield the best or desired economic and social outcomes (Cantwell and Narula, 2004). Government interventions are paramount to help in balancing the economy through fiscal and monetary policies. For our case study let us look at Wallis drilling company, a privately owned organization based in Australia. It is one of Australia's leading drilling companies with over 55 drills and above 250 workers. Due to the unique management styles and the use of sophisticated equipment, the company has built several drills and has a vast experience in the international market. The operations of Wallis Drilling Company cover a vast number of internationa l places which include China, India, Indonesia and several other countries in Africa like Cameroon, Egypt, Gabon and Guinea just to mention but few. With a special focus on Japan as an international market, we analyze some of the ways in which government interventions have affected the companys operations especially in the international fonts. Government Interventions One of the most common intervention approaches used by the government involves the aspect of tariffs. In this case, the government imposes taxes on imported products in a bid to control the amount of goods and services entering the international markets (Calof, 2009). The Wallis drilling company has faced various challenges in its bid to explore the external markets especially in cases where the governments levy heavy taxes on their products. This hinders the movement of workers and machines which may result in a reduction in the quality of available products. The other government control measure is the use of quota. In this system, the government implements policies which are aimed at restricting or controlling the quantity of products which are imported by a country. Due to such regulations, the drilling company, for instance, is only allowed to install a given number of drills in the external market. The remaining opportunities are left for the local industries (Caves, 2006). The quota system also results in restrictions in the number of personnel that the company can move to the external subsidiaries. Such obstacles may force the company to acquire and a train employee from the host countries which is not only time consuming but also consumes the companys resources. The other intervention which may be considered relevant to Wallis drilling company is the use of regulation and technical standards. For instance, Japan being one of the developed countries in terms of technology has escalated the standards which foreign investors ought to attain in order to gain entry into the international markets. Consequently, the machines and equipment may be subjected to expensive testing procedures which in one way or the other impact the establishment of drills in the foreign market areas (Harrison, 2011). Impacts of Government Interventions The government interventions applied in different market areas are always meant to safeguard the local companies while maintaining the right economic levels. This implies that the importance of foreign investors in a countrys economy cannot be underrated. On the other hand, the presence of foreign investors has to be controlled which results in a number of impacts especially on the foreign company (Johnson and Turner, 2010). To begin with, the measures lead to a rise in the cost of production as experienced by the foreign company. This arises due to the high taxes charged on the exports of both machines and equipment which means the drilling company has to spend a lot before eventually establishing the drills in the international markets. The restrictions also have impacts on the foreign companies in line with the aspect of human resource management. Through the regulations and standards, the number of foreign employees allowed to work in the international markets is regulated. The company therefore lacks enough control over the composition of its human resource fraternity which may lead to poor work output especially when the company has to work with inexperience personnel. Conclusion The government interventions have since played a crucial role in enhancing the stability of economies in the host countries. The regulations have been crucial in ensuring a balance in the distribution and use of resources (Long and Mills, 2008). However, the regulations may act as obstacles to the development and expansion of the international companies. This becomes the case especially when the companies have to endure high costs in their bid to venture the international markets. It would therefore be important to come up with regulatory measure which are effective not only for the host countries but the foreign investors as wells References Cantwell, J. and Narula, R. (2004) International business and the eclectic paradigm: developing the OLI framework, Journal of International Business Studies, 35(1), 456 -458. Calof, J. (2009) Adapting to foreign markets: explaining internationalization, International Business Review, 4(2), pp. 115-130. Caves, E. (2006) Multinational Enterprise and Economic Analysis, 2nd Edn., Basingstoke: Palgrave Macmillan Harrison, A. (2011) International Entry and Country Analysis, A lecture programme delivered at technical university of Kosice, viewed 11, May 2016. Johnson, D. and Turner, C. (2010) International Business, 2nd Edn., London: Routledge. Long, B. and Mills, J. (2008) Globalization, postcolonial theory, and organizational analysis: lessons from the Rwanda genocide. Critical Perspectives on International Business, 4(1), pp. 389-409.