What factors affect the performance of multi-national companies?

Answer 1

There are various factors affected company performance, particularly for multi national company. One classical answer is the company competitive forces as explained by Prof. Michael Porter Ph.D. The competitive forces includes the threat of new entrants, threat of substitution, bargaining power of suppliers and customers, as well as the intra industry competitiveness. This theory basically determines the market and industry environment setting in which the firm operates. The more recent literatures suggests that intra industry performance variations are due to recourse heterogeneity within the firms, which is also known as resource based view. Some resources uniqueness such as valuable, rare, imperfect immitability, and non substituteable gives competitive edge of the company. When the environment become more unpredictable, the company's ability to adapt determines the sustainability of company performance. Dynamic capability, that is the ability of company to learn and adapt to any situation, becomes key factors. Performance of multinational company are basically affected by both type of perspective: market and its own resources. Global industry environment will likely be the most important aspect for any MNC. The ability for MNC to stay global and yet be competitive locally will be the differentiating factor that makes the MNC to sustain in hard competition. Competitiveness locally, will be much determined by its resource specificity following the RBV. The MNC's ability to adapt is crucial. MNC headquater may become the driver for the dynamic capability, but also can be the source of rigidity. Headquarter, which normally thousands of miles away, most of the time forget that local environment has more significant impact to the business than the global one, as viewed by the headquarter.