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Types of Multinational Corporation

Last Updated on April 25, 2022 By Methew Harbor Leave a Comment

Multinational corporations operate in multiple countries across one or more than one regions. Being global is way different from functioning in one country. The operations and finances broaden, and you have to manage a larger workforce. However, the company also generates high revenue and provides employment opportunities to the locals.

Multinational companies make at least 25% of their revenue from branches in other countries.

MNCs work in different ways and organizational structures. Each company could have its particular structure and objectives. Multinationals have a central office in their home country while operating in others. There are four common types of Multinational Corporations. They are divided according to their management structure, objectives, and growth phases.

Decentralized Corporation

Decentralized corporations do not have a central office and operate in many locations worldwide. Despite not having a headquarter in the home country, their presence is quite significant. Decentralized corporations are typically seen to have fast growth as each subsidiary has its own management system. Each unit operates individually and interacts with the local market. The branches are not dependent on the parent branch for everyday functions and manage on their own.

Global Centralized Corporations

Opposed to decentralized, global centralized corporations function by all decisions from the central office. They have their headquarters in the home country where the CEOs and major stakeholders of the corporation reside. The domestic and international operations are all managed under the same roof, especially when it comes to decision-making. Such organizations typically purchase raw materials through cheap resources to manufacture in their best-technology facility. However, any decisions to be made in any subsidiary branches have to be approved by the head office in the home country.

International Corporation

International corporations are different from others in the way that they do not work under the same umbrella as local. While global centralized and decentralized organizations have all the decision-making in one place, international corporations have a specific internal division to manage the business in other countries. This department oversees all operations internationally. It is typically created to research international markets and create new relevant products. International corporations enable companies to make decisions that various cultures appreciate to avoid conflict. Yet, it may be challenging to build a unified brand image when the division works independently.

Transnational Corporation

Transnational corporations work as a parent-subsidiary relationship where the parent company or the head office instructs the subsidiary companies. The structure is generally decentralized, and the headquarters do not make all decisions for the subsidiary branch. Though sometimes you might also find centralized transnational corporations. These multinational corporations are gaining more popularity as they help add value to the business and expand it swiftly.

What you should know more

What is the global presence of multinational corporations?

Multinational corporations are among the most revenue-generating corporations globally. 52 out of the top 100 largest economies worldwide are MNCs.

What are some multinational companies’ examples?

The most common examples of multinational corporations are Amazon, Apple, and Microsoft. They are the top organization with a presence in multiple countries across continents.

What are the advantages of multinational companies?

Multinational companies offer various advantages like employing the local people, reaching the target market and researching new products, removing monopolies and providing more options to buyers, and improving the host country’s economy.

The Bottom Line

Multinational corporations grow rapidly as their presence in multiple countries allows them to reach a wider customer base. MNCs are of four types, generally based on their objectives and managerial structures. They work as parent-subsidiary where the parent branch makes the decision or as decentralized corporations where each office works independently. If you want to expand your business, converting your company into a multinational can be beneficial.

Methew Harbor

Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.

Benefits of Multinational Corporations

Last Updated on April 25, 2022 By Methew Harbor Leave a Comment

Every individual’s dream is to work in an MNC (multinational corporation), and why wouldn’t it be!

Multinational corporations have always been believed to be beneficial. They provide better opportunities than local companies and it is true to an extent. National or local corporations typically try to manipulate the employees to get the most work for the least wages, MNCs have a better reputation. They offer a better salary and have company values and rules that let the employees work comfortably.

Benefits of Multinational Corporations

If you are unsure about taking the MNC job you have been offered, here’s all you need to know about the benefits of multinational corporations.

Quality Standards

Multinationals are usually more renowned globally and trusted for their products. But, do you wonder why?

MNCs put extra effort and complete vigilance into ensuring that their products are up to the mark. They have a higher budget than locals producing the same goods so they use better facilities to monitor the quality. MNCs also offer more benefits to their vendors that result in the best quality products. MNCs do not stick to an unreliable vendor for long and change their supplier immediately if a problem occurs. It allows them to manufacture the best quality products in bulk without increased costs.

Room for Innovation

If you have always worked in an environment where you had to work restlessly on the same patterns, you will feel a significant difference in an MNC. Multinational corporations always look for ways to improve their products and services. They not only appreciate ideas within a department, their research, and development domain works throughout the year to introduce new products.

Most multinational corporations invest huge amounts in research to introduce novel services and products. These innovations contribute to a more technologically advanced society with better solutions.

Wide Consumer Base

Multinationals have a wide consumer base as they operate in multiple countries. Some products of an MNC might be best-selling regardless of the selling region. Yet, sometimes a particular commodity faces a downfall in a country. Multinational corporations benefit from selling that product in other parts of the world if it fails in one. For example, fairness creams are not celebrated and are widely used in the Western world. However, their demand in Asia and the Middle East is incredibly high. So, despite not selling it worldwide, MNCs capture a wide customer base.

Diversification

Multinational corporations create more options for people in all domains. Besides selling one product in a specific region to large people, they also offer diversification and better variety. It reduces the customer’s reliance on one particular product, allowing them to move to another per need. Multiple choices also enable people to choose according to their budget and desired quality.

Employment of Skilled Labor

Multinationals recruit the best individuals that add value to the company. Apart from highly qualified professionals, they take in skilled labor to improve and maintain the quality of products. It also enhances the living standards in countries with multiple MNCs. The employment rate in those regions increases, offering high wages and providing a better living to the labor.

Cultural Awareness

Multinationals working in a different area from their origin employ people from different cultural backgrounds. For example, a US multinational working in Nigeria or Bhutan will employ the local people. People employed from the United States will get to know the locals and vice versa. It lets people learn the differences without being offended and harmonizes. It not only increases employment opportunities for them but also enables people to experience cultural awareness.

Import-Export

Underdeveloped companies are usually less economically developed because of the lack of resources. While they can overcome some of their economic challenges, many are not possible. Multinationals help improve the economy of countries by enabling them to access the import-export market. Through this, the locals can also access products made in other countries and try to expand their market internationally. The increased opportunities for trade raise the living standard wholly.

Reduced Need for Foreign Aid

Several underdeveloped countries need foreign aid to balance their domestic budget every year. The presence of multinational companies eases the processes and improves conditions nationally. Studies show that multinational corporations can increase the output of companies in South Africa by up to 50%. It will enable the local African market to compete and be similar to the Middle East.

Recognition

Working in a multinational comes with numerous individual benefits besides community and country-level advantages. Multinationals do not drain their employees to get the most out of them in the least wages. They recognize the efforts and input of their employees, who work hard to contribute to company success. You get better recognition than local companies as MNCs consider their valuable employees an asset to the company, and want to make sure you don’t leave them.

Recreation

The best part about being a part of an MNC is that they do not want their employees to burn out.

Multinational corporations offer recreation to their workers, so they want to come to work happily every day. Though the kind of recreation typically depends on the size of the organization, you won’t be disappointed. From recreational trips to workshops within the company, working in a multinational is never boring.

The Bottom Line

Apart from drawbacks, the benefits of multinational corporations are multiple, including improved national economy, reduced need for foreign aid, improved quality standards, innovation, and opportunities for import-export. MNCs also offer diversity and cultural awareness to produce harmony among people from different cultural backgrounds. Multinational corporations have their own advantages and disadvantages, yet they provide better working opportunities to the locals and improve living standards.

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Benefits of an Analytics Platform

Last Updated on May 5, 2022 By Methew Harbor Leave a Comment

An analytics platform is a software application that enables organizations to collect, organize, analyze and report on data to help them make better business decisions. The platform allows users to track and monitor data in real-time and access past data for retrospective analysis.

Most analytics platforms use a drag-and-drop interface, making it easy for users to create custom reports and dashboards. The platform also provides users with tools to help them understand and interpret the data. These tools may include data visualization, statistical analysis, and machine learning algorithms.

Organizations typically use an analytics platform to analyze data from various sources, including customer, website, and financial data. The platform can track website traffic, understand customer behavior, identify business improvement areas, and forecast future sales. Today, we’ll examine some of the benefits of an analytics platform.

Streamlined Reporting Processes

An analytics platform can streamline the reporting processes for a business. By consolidating all of the data into one place, it becomes easier to identify trends and patterns. This can help to improve decision-making, as well as to optimize business strategies. Additionally, this streamlined reporting process can help identify areas for improvement and assess the effectiveness of marketing campaigns.

Greater Agility

A data analytics platform provides greater agility and flexibility to quickly adapt to change and take advantage of new opportunities.

With the ability to quickly access and analyze data, organizations can make better, more informed decisions, resulting in improved performance.

An analytics platform does this by enabling users to easily access data across the organization, regardless of the data’s location or format. Additionally, a data analytics platform includes features that allow users to quickly analyze and visualize data, making it easy to respond to changes in the market or customer demand and take advantage of new opportunities.

Improved Customer Experience

An analytics platform can provide a business with a competitive edge by improving the customer experience. The platform can help identify customer needs and preferences and improve the effectiveness of marketing and sales campaigns. It can also help identify opportunities for product improvement and new product development. Additionally, the platform can help businesses optimize their website and online presence to improve customer engagement and loyalty.

Easier Integration with Other Systems

An analytics platform can provide many benefits for a company. One of the most important benefits is making it easier for a company to integrate with other systems. An analytics platform can provide a common interface for all of a company’s data, easing the integration process. With an integrated data analytics platform, a company can also better understand how its different systems work together. This can help a company better optimize its systems and troubleshoot any problems that may arise.

Improved Efficiency and Accuracy

A data analytics platform can improve efficiency and accuracy while reducing the time to insights. The platform can aggregate data from various data sources and allow for data-driven decision-making. It also helps to improve collaboration between teams and foster a data-driven culture. The platform achieves this by providing a self-service data-discovery environment, data catalog, data preparation, and data management capabilities.

The data discovery environment allows users to explore and analyze data without help from IT. They can easily identify and connect to the data they need, regardless of where it resides. The data catalog makes it easy to find and understand the data collected. The data preparation and data management capabilities make it easy to clean and prepare data for analysis while managing and governing data as it changes.

Implementing a Data Analytics Platform

Together, these benefits help users quickly find and use the data they need to make better decisions while making it easier for teams to work together and share insights. As you can see, a data analytics platform is a vital tool for any organization that wants to make data-driven decisions. So, if you want to take advantage of these numerous benefits, consider implementing this platform in your organization.

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How to Mitigate Reputational Risk

Last Updated on April 20, 2022 By Methew Harbor Leave a Comment

As the name suggests, reputational risk is a major risk to the reputation of a company. When working in a community, you have to be immensely careful about your company’s reputation. Any harm to the reputation acts as a trust breach, and you lose customers. If you do not identify reputational risks and manage them per need, it may cause reputational damage. While you can try to recover the damaged reputation, it comes at a cost.

As it is said, “Precaution is better than cure.”

How to Mitigate Reputational Risk

Let’s look at all the possible strategies that you may apply to mitigate reputational risk.

Quality Check

One of the major reputational risk causes is quality downfalls. When the quality of your product is not up to the mark according to the customer’s expectations, it may cause damage to your reputation. The consumer may ignore the mishap a few times. Yet, you might lose a loyal customer base if it is not regulated properly. It also reduces the possibility of engaging more customers with the brand when another company makes a better place in the business.

Happy Employees

Another important internal aspect of mitigating reputational risk is happy employees. A company is known for how it treats its employees. And with people standing up for the rights of employees more than ever before, it isn’t easy to keep your name high if you do not treat your employees right. An employee is the first-hand reviewer of the company. If you wish to maintain a reputation and decrease the risk, do not forget to keep your employees happy.

A happy employee is the best testimonial for your business!

Improve Customer Service

According to Nextiva, around 56% of people globally do not buy from a brand because of a previous poor customer service experience.

Good customer service can hide many of your company’s flaws as people want their complaints to be heard and validated. Similarly, bad customer service can seriously harm your business. The best way to avoid this is to recruit people who are the best for your company. If you are an apparel brand, it would not be the best idea to have customer service representatives who have only worked for software. Your representatives must not only have customer service experience but also of the particular niche you work in. One simple way is to offer a short training session before the employees begin their job to give them enough knowledge about your brand. It helps avoid blunders that may happen otherwise.

Data Protection

Reputational risk does not only arise from internal factors. But also external types of reputational risk like a breach of privacy can be harmful. Sometimes, the competitors try to steal your data by breaching your privacy. Leak data can result in serious damage to your business in terms of reputation and finances. Thus, it is important to keep your data protected. A few steps that you may take to prevent reputational damage include:

Allowing data access to only authorized and highly trusted people
Appointing cyber experts to encrypt your data and save it from being stolen
Using tools that can inform you of any suspicious activity to save your business from data breach harm
Lastly, you must have a team of professionals ready to fight such situations and recover data
While it is essential to protect your data and save it from theft, it is also important to have a Plan B if anything such happens.

Observe Social Media

In an era where over 3.5 billion people use social media globally, news spreads like wildfire.

Whether a brand makes a huge hit or a mistake, everyone talks about it in a space accessible to hundreds and thousands of people at once. Keenly observing social media is a critical part of mitigating reputational risk. If the first negative review is not managed properly, you might find many more floating on social media platforms in just a few days. A business must have a social media or community manager who makes sure that everything that goes on social media about your brand is “good” from happy customers. You must try to keep your brand name dissociated from words like “poor” and “bad.”

The Bottom Line

Reputational risks can be significantly harmful if not managed in time. You can prevent reputational damage by identifying reputational risks, keeping a keen eye on social media, improving customer service, and ensuring the quality of your products, among other measures. Now that you know how to mitigate reputational risk, utilize the given strategies to reduce the risk as much as possible and improve your brand’s reputation.

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How to Identify Reputational Risks

Last Updated on April 20, 2022 By Methew Harbor Leave a Comment

Reputational risks may lead to reputational damage if you ignore the consequences of not considering reputational risks in time. However, to avoid or manage reputational risks, it is important to identify and measure them. Reputational risks and damage are specific to each business, yet you may find the primary ones associated with your brand through some means mentioned below. Read this article till the end to see how to identify reputational risks and measure them to prevent serious damage.

Social Media

You may think that social media is one of the largest supporting reasons for reputational damage; how can it help us identify reputational risks?

Most customers take to social media to express their frustration and disappointment about a brand. Usually, it starts from a post on their profile where they express their resentment about a particular product or service. This first review can help save your business from long-term damage if you nip it in the bud. It is smart to have a community manager for the company who can keep an eye on what people think of the brand. You must try to keep words like “bad,” “poor,” and “uncooperative” away from your business on social media.

Study the Products or Service

Sometimes, you see multiple bad reviews about a company from multiple sources regarding the same product. As a business, you must find out the root cause of the issue and fix it as soon as possible. There may be a quality problem with the product mistakenly ignored by the Quality Control during manufacturing. You may also stop the production of that particular product for a while till the issue is resolved.

Consider Stakeholder Sentiments

Considering the stakeholder’s sentiments is essential for identifying and measuring reputational risks. Different stakeholders have a particular impact on your company’s reputation. For example, issues with the customers are considered a moderate risk. But when media is involved, it becomes a serious reputational risk.

Understanding the nature of the risk associated with the stakeholders and their perception of the company can help identify and minimize the risk.

Track Negative Events

Sometimes, as business owners, we understand the negative events of a potential reputational risk but let go of them. This may be fine sometimes if the benefit ratio is high. However, if the event can be seriously negative for your brand’s reputation, it is better to avoid it. Prevent further negative events by tracking and studying previous events that impact your business negatively.

Frequently Asked Questions

What happens if you do not identify and consider reputational risks?

If you do not identify the risks in time, you may have to face the consequences of reputational risks like business loss, tarnished image, failure to meet business objectives, loss in market share, etc.

What is the hidden cost of reputational damage?

The Hidden Cost of Reputation Risk by Oliver Wyman offers a new methodology to help identify and quantify reputational risks. It is based on four steps; defining the reputational risk, analyzing the available data, quantifying the reputational risk, and linking the risk to the reputational risk management framework.

What are the types of reputational risk?

Reputational risks are of various types depending on the cause and their impact. Common reputational risks include the vendor’s misconduct, low-quality products or services, failure to keep the stakeholders satisfied, and bad online reviews.

Conclusion

Identifying the reputational risks can save you from reputational damage caused by any likely factors. It helps you measure and find a better way to manage the risks. You can identify the reputational risks through social media, studying your products, understanding the stakeholders’ sentiments, and tracking negative events.

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Causes of Reputational Risk

Last Updated on April 20, 2022 By Methew Harbor Leave a Comment

Reputational risks are among the most crucial types of risks for a business. This is why risk management has considerable importance in businesses. They can cause significant harm to your company if not measured and managed. However, the good part is that you can mitigate the risks by making the right business choices. The causes also contribute to the identification based on the types of reputational risks to measure and prevent them.

What are the Causes of Reputational Risk?

The reputational risk may arise from multiple causes, primary of which are social media and poor customer service. Let’s have a look at all of them briefly.

Social Media Presence

The foremost reputational risk arises from the social media presence of the customers. Social media provides a free space for people to share their experiences and sentiments. Many times, you may not realize, that a small mistake can lead to serious consequences. Nowadays, people take to social media to address concerns and reservations about any business; it is worse when your customer service is bad.

When the customers do not get satisfaction from the brand, they vent out on social media for someone to facilitate them. It not only associates negativity with your name but also diminishes the trust of the existing customer base.

Poor Customer Service

In an era when the customer is called the God of the business, if you do not focus on your customer service, you’re not doing it right. Customer service representatives are the face of a business and they must be equipped with the knowledge and skills to manage the customer’s issues gracefully. Surveys show that more than half of customers who face an issue do not do business with the brand again when their problems are not resolved.

Imagine losing half of the customer base and the reputation built over years; serious damage it is!

Insufficient Cyber Security

Data breaches are a major cause of reputational risk that is not so common, yet may create huge problems for you. A company strives to work better according to the data it collects from its customers through software and surveys. This data along with the personal credentials of the business can be of massive harm if lost. Many times you may experience a data breach that could be a risk to the company. However, it is essential to have a full-proof cyber security plan to mitigate reputational risks.

Leadership Issues

Another reputation risk cause that does not appear on the surface but causes deep-rooted problems are leadership problems within the company. Sometimes businesses fail to choose leaders that add value to their name, leading to reputational damage.

Studies show that the CEO’s reputation accounts for 45% of the market value of the business.

So, if you want to save your business from damage to market value and reputation, it is important to choose people who add value. Avoid people in the top managerial positions with controversial histories.

Unclear Business Objectives

The business plan of a company contributes majorly to its success and reputation in the market. When everyone in the company works together to achieve business goals, you are less likely to suffer from reputational risks. However, if your business objectives are unclear and the employees do not have a mutual goal to work towards, it may cause reputational harm. Unclear Business risks do not offer a proper direction to the people, adding to reputational risk.

Neglecting Employees

People who work with you in taking your business to the top expect you to take care of them as well. Many companies globally give immense importance to their employees by remembering and celebrating their professional and personal achievements. On the other hand, some corporations want to get the best out of their employees without giving anything apart from the minimum salary.

Remember that you get what you give. If you are not interested in keeping your employees happy, it will cause a hike in turnover and damage your reputation. Happy employees make a huge difference from unsatisfied ones.

Not Meeting Expectations

All of the above-mentioned causes collectively attribute to the inability to meet the customer’s and stakeholder’s expectations. Whether your products are low quality, the cybersecurity is insufficient or your employees are neglected, it all exhibits that you are meeting expectations. If you are not able to meet the expectations of people associated with your business in one way or the other, it will cause you to lose your reputation in the market.

The Bottom Line

Reputational risk can result in major reputational damage and financial loss if you do not realize the importance to mitigate it in time. You must identify risks and understand the causes of reputational risk and make your best effort to reduce the risk.

Neglecting the causes can exhibit consequences of not considering reputational risks in the long term. While you may think that managing these risks will take time and money, it is a must-knowing that covering reputational damages costs between $8,000 and $200,000. So, the time and effort to monitor and restrict the causes is essential to keep your business going high.

Methew Harbor

Types of Reputational Risk

Last Updated on April 20, 2022 By Methew Harbor Leave a Comment

Having a business is always associated with risk, including financial, strategic, compliance, and reputational risk. Reputational risk is different from other business risks like strategic risk as it is quite unpredictable.

With the increased social media usage to digitally market your business, the reputational risks have also increased. Social media platforms are accessible to everyone and you may have to face criticism. The impact is huge, and you may face reputational damage. Besides social media, there are plenty of other types of reputational risks that may cause harm to your company if not managed properly.

7 Types of Reputational Risk

According to Reputation Management, 25% of a company’s market value is directly attributable to its reputation.

Thus, it is highly important to consider all risks and study reputational risks properly. Here are the different types of reputational risks based on their causes and influence.

Increasing Competition

Contrary to the unpredictability of reputational risk, any foreseeing businessman understands that increasing competition is an indirect risk to the business. As more similar options are available, some may have better products and services than yours. When a customer buys a better product from another brand, your reputation subsides from their memory. They tend to buy more from your competitor, improving their reputation. While it may not directly harm your reputation, increasing competition means that you need to improve your services for the best.

Company Negligence

Company negligence reputational risks are related to increasing competition. Your reputation is at high risk if your employees do not understand the need for work to stay in the market. Whether the competition is high or not, your customers can always find a substitute. If your company does not deliver high-quality products or services as promised, the clientele does not hesitate to move to another brand. Some of the major reputational risks associated with company negligence include:

Low-quality products or inadequate service
Data breaches that enable others to look into your confidential information cause damage
Below-par customer service that does not validate the customer’s concerns

Improper Working Conditions

Reputational risks are attributed not only to the customers’ words but also to the employee. You may be surprised to know that a negative word from an employee about the company causes more harm than a bad review from the customer. So, if you want to avoid reputational damage, it is a must to take care of your employees and their needs. Internal scandals are also bad publicity that a company must try to avoid. The short-lived limelight can lead to a dark, long-term pothole that you may not be able to come out of.

Non-Compliance with Local/ International Regulations

Non-compliance to regulations is also a critical reputational risk that can harm your business seriously. If you do not comply with the local or international rules and regulations regarding your business, you can get into big trouble. Like internal scandals, this kind of reputational damage is also challenging to reverse. The regulatory bodies typically issue you notice. If not taken care of, the news can go online to stop people from buying your product or service.

Stakeholder’s Actions

A business’s reputation is also related to the stakeholders. Sometimes all stakeholders are not on one page, and one of them might not like any of your policies. And if they take it to the media and talk about the policies they do not agree with, it can backfire badly. While this is quite unlikely to happen, it is not impossible. It’s better to make sure all your stakeholders are happy with your decisions to avoid reputational damage.

Supplier’s Misconduct

When customers trust your product, they believe that you inquire properly about your suppliers and choose the best one. However, if they encounter any misconduct regarding the supplier, they doubt your previous products as well. One way to avoid this kind of damage is to keep up to date on the quality of your vendor’s material. A supplier’s misconduct or bad reputation can cause damage to your company’s reputation as well.

Negative Reviews

Negative reviews are the most common and most influential type of reputational risk. Typically, consumers present their concerns through social media posts, but newspapers or digital publishing agencies may also cover more serious matters. Digital media platforms have provided the customers with a safe space to voice their concerns about a brand.

FAQs

What is reputational risk in banks?

Reputational risk in banks is primarily related to the risk of not being able to meet the expectations of the stakeholders due to any action, event, or behavior. It may occur by the bank as an institution, the employees, or other associated entities.

What is reputational damage?

Reputational damage occurs when you do not manage the possible reputational risk in time. Reputational damage can lead to long-term issues or eventually losing a loyal customer base.

What is the cost of reputational damage?

The cost of reputational damage mainly depends on the extent of the damage. Yet, according to Kaspersky, the average cost of brand damage by one incident came around $8,000 for medium-sized businesses and up to $200,000 for large enterprises.

What are the types of risk operational reputational?

Operational risks are system risks, people risks, process risks, external event risks, and compliance risks. Conversely, reputational risks are related to acts by the company, employees, stakeholders, or customers that affect the business’s reputation.

What are the types of pure risk?

Pure risks are those you cannot control and may result in loss. Typically, pure risks are attributed to natural disasters and unforeseen incidents. They are of three types; personal, liability, and property.

The Bottom Line

Reputational risks are significant for a business, especially when you are trying to make a name in the market. If you do not consider the reputational risks, your competitors may use them against you. Common types of reputational risk include negative reviews on social media and publications, misconduct by the vendor, and public disagreement by the stakeholders. You can save your company from reputational damage by considering these types of reputational risks. Do not forget to mitigate and manage them adequately.

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Disadvantages of Multinational Corporations

Last Updated on April 25, 2022 By Methew Harbor Leave a Comment

What are Multinational Corporations? Multinational corporations are those companies that set up their plants in different countries giving better job opportunities to the public. They typically have their headquarters in one country and are registered in numerous others. MNCs can manufacture, market, and sell their products in the host country. Everyone loves to be a part of multinational corporations considering the working environment and benefits offered. But, did you know that they also carry some disadvantages?

Yes, like everything has its pros and cons, multinational corporations also have disadvantages. Some of the disadvantages of multinational corporations are

Damage to the Environment

While multinationals come off as more informed and environmentally conscious, they contribute a lot to environmental waste. Waste control in developing countries is not well regulated, and the governments are not mindful of the consequences considering the benefits of multinational corporations. The companies manufacture products in bulk with low-quality material sometimes, increasing water and air pollution. Many MNCs reduce costs by ignoring the need to reduce pollution caused by them.

Affect Other Businesses

MNC usually produce their products on a large scale with a more efficient plant involved and skilled labor. Despite giving the best results, the cost of their products comes out to be less than local companies trying to compete with them in their capacity. By spending more money improving their production and marketing strategies, MNCs win the competition and gain a monopoly. It hurts the business of domestic industries, and some companies also die due to a lack of resources.

Exploitation of Government

Some MNCs are big names and bring a lot of money to a country when setting a plant there. Besides engaging people to work for them at low wages often, they also tend to make changes in the country that the government may agree on for short-term benefit. However, in the long run, these policies or changes do not benefit the people.

Economic Exploitation

Many multinational companies are good at exploiting people and the host countries to their benefit. From internal and external sources of recruiting employees and labor at low costs to exploiting that country’s natural resources, they do it all. Despite paying low wages and producing products at low costs, their branding allows them to sell their products at high prices. When these companies push others out of business and create a monopoly, consumers have to pay a high price to buy their star products.

Uncertainty

Most multinationals stay in a country for their monetary benefits only and do not care about the welfare of the people of that country. “Hire and fire” culture is quite common in multinational corporations, and many people lose their jobs for one reason or the other. One of the most common causes of job loss is the shifting or shutting down operations in a particular country. It usually happens when that region faces economic uncertainty. Working in a multinational is amazing, but you never know when they will stop operating in your country.

Unsuitable Technology

Most multinational corporations move to developing countries, and some expand their business in developed countries. A technology designed for working in the home country of the MNC might not be suitable for the host country. It could either be outdated, too advanced, or difficult for people to understand. This also contributes to the import of employees from countries who know about that technology and can work well on it.

Labor Import

Apart from the common perspective of MNCs employing local people and providing better job opportunities, multinationals also import skilled labor and personnel from other places. MNCs typically want to reach high efficiency quickly and make their name in the market, yet this is difficult if the operational area lacks skilled professionals. To cut down on time and training costs, they often import staff from other parts of the world. So, eventually, the jobs meant for the locals are taken by others, and only low-level jobs are available.

Export Profits

MNCs mostly work in multiple countries yet provide minimal benefit to the host country. They use raw materials, natural resources, and low-level labor from the host country but do not give back enough. The profits for the host country are nothing compared to what the MNCs make. The money made by the MNCs is exported to their home countries in the form of royalties, interest payments, profit dividends, and service charges. Thus they do not help improve the host’s economic condition much.

Sociocultural Issues

When multinational companies set up their business in other countries, they bring their cultural and social values. With passing time, the people working with MNCs begin adopting their culture, leading to cultural issues in the region. Other local people feel a distance from them because of the social and cultural changes they adapt to through the MNC.

Less Jobs For Home Country

Multinationals shift from their home country to other countries, offer jobs to the locals, and sometimes import labor from other areas. While it increases work opportunities for others, setting up MNCs in various countries results in fewer jobs in the home country. The people who could have been employed and improved their lives if the company expanded the business in the host country lack the chance.

The Bottom Line

Multinational corporations are registered and operate in many countries. Apart from the headquarters in the home country, they set up their plants in multiple countries to produce and sell their product. While MNCs have benefits, MNCs also have some disadvantages like fewer jobs for the job-seekers in the home country, unsuitable technology, and uncertainty of job.

Multinational corporations use resources from the host country yet take away the profits to the home country. Locals of developing countries experience sociocultural changes when working in MNCs. Multinationals also possess the power to pressure the government into altering policies and making changes that do not benefit the locals in the long run.

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Advantages And Disadvantages Of Online Marketing

Last Updated on March 24, 2022 By Methew Harbor Leave a Comment

Online marketing, commonly known as Digital marketing or e-marketing, has become the most rewarding marketing method as more and more people are making online purchases. According to Statista, 1.66 billion people shop online each year.

Considering the fast-paced life, a large number of people avoid going to stores to make purchases and instead like to buy online. To attract your online customers, you have to make the best use of online marketing. It not only increases online sales, but many people also walk to your stores to find more variety of the products.

Digital marketing has numerous benefits and helps boost lead generation, yet it also has some disadvantages. Let’s discuss the advantages and disadvantages of online marketing in today’s world.

What is Digital Marketing?

Digital marketing refers to promoting your business through online platforms to connect to potential customers. It includes various online channels like social media, web advertising, SEO, email marketing, etc. Digital marketing typically means text, audio, pictures, or videos generated digitally and surfaced on digital platforms to reach customers.

Advantages of Digital Marketing

Digital marketing is a swiftly growing form of marketing with innovative strategies being introduced now and then. It initially started with email but has now reached social media and websites to market businesses. But, do you wonder why companies choose digital marketing?

Global Reach

The most important benefit of digital marketing is reaching a global audience. Another report by Statista shows that 3.6 billion people use social media globally.

Let’s assume you install two billboards in the most populated city areas with one million residents. There are chances that around half a million people will see your board, and you will succeed in attracting a considerable number of customers. On the other hand, reaching people through digital media allows you to reach millions of people at once.

Using the right online marketing methods can help you familiarize millions with your brand.

Brand Development

Reaching more people and presenting a compelling image of your product makes you a credible brand. Online reviews by customers and blogs help other people recognize your brand, and you can develop a brand swiftly compared to traditional means of marketing.

Less Cost

All forms of marketing come with a cost (except word of mouth), yet the costs vary from one method to another. Installing billboards around the city costs a lot more than running an ad on Facebook and billboards are not considered safe in many parts of the world. You can connect to a large customer base by running Facebook advertisements for people with similar interests at less cost.

Easy to Setup

While you usually have to go to an advertiser’s office to get brochures printed or have vehicles run around the city with your brand’s representation, you can market your brand online without having to step out of the house. Set up accounts easily on social media or Google to start advertising your brand right away.

Measurable Progress

Online web analytics tools allow you to track your progress in terms of impressions, clicks and leads generated. Despite this, you cannot get exact numbers to estimate the progress of physical marketing methods.

Disadvantages of Online Marketing

Besides the numerous advantages of digital marketing, there are still some disadvantages.

High Competition

It is important to remember that online marketing is not only available for you, but people globally have access to digital marketing. They can use the same strategies and attract the same audience as yours. This leads to high competition in the market.

Time Consuming

Though digital marketing saves you the trouble of going out and meeting with advertisers, other aspects take more time than traditional marketing. Setting up advertisements and looking for strategies that stand out is not an easy task and requires effort. It requires extensive research to ensure that your online marketing works better than your competitors, which is time-consuming.

Reviews

Reviews can make or break a business. While positive reviews make you popular among the consumers, negative reviews have an opposite impact with a higher intensity. A potential customer might not trust a positive review completely, but a negative review on your social media page or website can make you lose a big client.

Skills Needed

If you are thinking of basic marketing for your brand to reach the audience and are not focused on making a big name, you can do it all by yourself. However, if you want to make your brand an eminent name in the market, you will need to acquire digital marketing skills or hire a digital marketing professional to boost sales fast.

Keeping up to Date

Technology is ever-changing, and you may wake up to a new trend every day. Online marketing relies highly on current trends as it allows you to make the best out of a hot topic and use it to your benefit. You might not be able to get significant results out of your marketing budget if you are not up to date with trends.

People shop online each year — Source: Statista

Why do people choose digital marketing?

You might wonder why people opt for digital marketing despite all these disadvantages and the need to be tech-savvy. Digital marketing has emerged as a quick solution to marketing needs when orthodox methods take more time. While it is time-consuming and you have to fight high competition, digital marketing enables you to reach more potential customers and is comparatively light on your pocket.

The Bottom Line

Like everything else, there are some advantages and disadvantages of online marketing. It enables you to take your product to a wider market but also restricts you if you do not have much knowledge of technology. Some people consider the advantages to dominate the disadvantages, while some feel otherwise. Depending on the nature of your business and the marketing techniques convenient for you, you can explore different digital marketing options and choose the one that suits you the best. Or, just stick to traditional marketing methods if you find them more beneficial.

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Functions of Merchant Banking

Last Updated on March 24, 2022 By Methew Harbor Leave a Comment

Merchant banks are different from retail and investment banks and target a customer base between the two. While retail banks cater to the needs of the general public and investment banks work with big sharks and the government sometimes, merchant banks facilitate medium to large-sized businesses. Now, if you wonder what a merchant bank is and what it does, here’s everything you need to know.

What are Merchant Banks?

Merchant banks are financial institutions that help big businesses with loans and funds along with giving financial advice. You may call them a combination of consultancy service and banking. They facilitate the growth of companies that do not receive loans or investments from other financial institutions. Merchant banks offer portfolio management, underwriting, loan syndication, and financial advice. Some such banks also provide financial assistance on an equity basis.

Merchant banking helps businesses in multiple ways:

They help modernize the business.
Merchant banks help boost businesses by raising funds.
You may take merchant banking services to revive your dead business through their strategies.
They facilitate buying and selling of stocks in the stock market.

Functions of Merchant Banking

Besides the few mentioned above, merchant banks perform numerous functions for their client organizations:

Portfolio Management

Merchant banks help their clients manage their portfolios and buy securities on their behalf. Merchant banks offer consultancy services and improve the value of underlying investments. They assist their clients in making deals and purchases and enable the sale of securities. By managing their portfolios, these banks facilitate businesses with making decisions for safe investment. Simply, they buy and sell shares alongside managing fund investment for companies. They also make fundraising possible for their clients.

Project Management

As merchant banks are counseling institutes besides offering financial assistance, they help their clients regarding different aspects of a project. From researching the project’s success possibility to assisting you in making a decision and managing the project, they are there throughout. Project counseling or management covers all aspects of the project, including idea generation, research, budgeting, designing plans for financing the project, and advising about possible increments and concessions.

If you ask your bank for further help, they also extend their expert advice on the location of the plant, feasibility reports, policy benefits, and sources of support. Having a merchant bank on board with you on a project means that you do not have to worry about anything and relax while taking care of investments and solutions to associated problems.

Credit Syndication

One of the major reasons businesses approach merchant banks is their credit syndication services. If you have not been able to get a loan from any of the big names that might help your business reach heights, a merchant bank can always help you.

Merchant bankers are qualified and experienced in the domain and know how to get money from a specific institution. They understand the matters in-depth, making it comparatively easy to get credit from another company or financial institution. They provide loan syndication services to their clients to smoothen and speed up project planning and loan applications to get short-term and long-term loans.

Merchant banks do so by estimating the costs and creating a professionally correct financial plan not to miss any important, relevant details. They also help select the right institution for you to request credit and comply with all the terms on the application with the investors.

Merchant banks provide multiple services collectively known as credit syndication. These include

Estimating the overall cost of the project
Designing a financial plan that covers all loans and investments you need while putting down all important information
Suggesting ideal financial institutions for short-term and long-term loans
Helping the clients with the loan application, complying with the financing company’s terms, and monitoring the progress
Taking care of legal documentation formalities of the investing companies

Apart from all this, the counseling feature of merchant banking helps you estimate the capital requirements and help negotiate.

Facilitate Small Businesses

While merchant banks are primarily considered good friends of medium-sized to big companies, they also offer entrepreneurs and small companies services. They usually counsel small businesses about bigger opportunities, incentives, concessions, and government policies to boost their business. By taking advantage of these policies and incentives, they can grow and become an eminent name in the market.

Revive Dead Units

Experts at merchant banks are not only adept at helping businesses get loans from companies or project management, but they are also good at reviving and restructuring units or dead businesses. Merchant bankers connect with long-term financial institutions and assure them about the potential in your business. It requires proper documentation, negotiation, and taking care of the legal needs of the investor.

Stock Market Brokerage

Merchant banks are also an excellent choice for stock market brokerage to buy and sell stocks on your behalf. To make sure that they make the right choice for you, merchant banks carry surveys and suggest to you about which shares to purchase, for how long, and at what rate. Having a merchant banker to do all this for you lets you know that your money is in safe hands with experienced people. Merchant bankers also counsel their clients about when to buy the shares and sell them for the best profits.

Manage Public Issue

For companies that are not aware of the public issue of their business, merchant banks help them with the timing of the issue, form, and enable them to be specific to customers.

Merchant banks manage the public issue by:

Advising the price and size of public issue
Counseling at the time of filling up
Acting as a manager in the whole process
Listing the shares purchased
Allotting securities and helping in accepting applications
Helping with the appointment of brokers

The Bottom Line

If you are a medium-sized business, you can let go of all your funding and stock-exchange-related worries by connecting to a merchant bank. They are genies that help you with all issues, from counseling to getting loans and credit for your company. Merchant banks also buy and sell stocks on your behalf and manage portfolios and the public issue.

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