Globalization & Mne

Chapter 1: Globalization and Society

General Electric (or GE) is a multinational enterprise (or MNE) that has foreign direct investment (or FDI) around the globe. With half of its revenues coming from over 100 nations outside the United States, GE competes in several societies that are more vigilant than the United States on environmental issues. After being on the radar of environmental activists, in 2005, GE launched an Ecoimagination Initiative using the motto “Green is Green”. Increased R&D investments in clean technologies, including renewable-energy, water-purification processes, and fuel-efficient products, have allowed rapid growth in the revenues from Ecoimagination products. GE has been able to enter lucrative “energy services” consulting worldwide. Yet, several GE customers worry about the costs of eco-friendly products and technologies, and several investors want GE to document expected benefits and costs. In addition, several societies are concerned about their ability to afford the prices that GE charges its US customers.

Risks of Globalization

Societies perceive five major risks from the globalization of MNEs. These 5 risks are: sovereignty, growth, inequality, environmental, and cultural.

• #1 - sovereignty risks: Sovereignty is the ability of a nation to govern its own affairs. Some MNEs, such as GE, are now bigger than the economies of most nations and can exert considerable influence on the local politics, economics, legislative process, and technological investments. For instance, when Spain passed new laws that raised labor costs, MNEs such as Colgate-Palmolive and S.C. Johnson closed some factories and/or slashed payrolls – pushing unemployment rates to nearly 25% in the mid-1990s. However, as globalization also brings new competitors from around the world, societies may be able to choose to avoid manipulating MNEs. Also, transparency and lack of corruption in the government and judiciary limits the influence of...