Are virtual organisations Multinational Enterprises (MNE) Assignment

Are virtual organisations Multinational Enterprises (MNE) - Assignment Example According to Preston (n.d), there are four key characteristics of virtual organizations as a process. Virtual organisations involve developing relationships with a wide range of partners each having a core competence that complements the others. It capitalises on the ability of telecommunications technology to overcome distance and time related problems. Furthermore, it involves trust between parties. Virtual organisations are also motivated by specific opportunities. As soon as these opportunities are exploited enterprises move on to form new partnerships and alliances. 2.0 Description of MNEs A multinational enterprise (MNE) or corporation (MNC) is an entity that operates in more than one tax jurisdiction whether as a single tax payer entity or as a group of such entities (Fernandez and Pope 2002). MNEs have their headquarters in one country (the parent/home country) and operate subsidiaries in several other countries known as host countries. There are a number of enterprises world wide that operate in this way. MNEs continue to grow and expand their operations because of WTO trade rules which facilitate globalisation as well as the growth of electronic commerce and information technology. Some MNEs have budgets that are larger than some countries and this indicates the extent of their power and influence as it relates to the setting of trade rules and regulations by international bodies. Multinational enterprises have many dimensions to them and can be viewed from several perspectives. These dimensions include and are not limited to management, ownership, strategy and structure. In terms of ownership, it may be argued that an enterprise is multinational if it is owned by nationals of more than one country. Companies that fit this particular criterion include Shell and Unilever which is owned by both British and Dutch interests. Many multinational enterprises do not meet this test as most of them originated in one country. In terms of the management criterion the managers are from different nationalities according to the countries in which they operate. However, as a starting point most multinational enterprises use persons from their home country to lead the management team in the initial stages of their operations in host countries. In terms of strategy, multinational enterprises seek to maximise their profits globally by entering new markets. The structure of these companies is such that the head office which is located in the home country controls the operations of the subsidiaries and assists in the direction and coordination of their activities. According to Moran (2007) MNE investments in the developing world occurs in four distinct forms. They are Foreign Direct Investment (FDI) in extractive industries, FDI in infrastructure, FDI in manufacturing and assembly, and FDI in services. However, multinationals operate in not just developing countries but also developed countries. In addition to FDIs they also provide licenses and mana gement agreements in the fast food and hotel sectors. Therefore, FDI and licensing are the two ways in which MNEs