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MM 4342 – Global Business ManagementIndividual Assessments Student Name:LIU YumengStudent ID:14110852dGroup ID:LTL001The social responsibility of transnational companies in developing countriesAbstractSince 1990s, transnational companies have occupied an unprecedented importantposition in the world. However, the public power of government in developingcountries which promotes the development of economy and society is weakenedgreatly. To check and balance the market power of transnational companies,transnational companies should focus on fulfilling social responsibility in developingcountries, which could coordinate development between desire for wealth and socialjustice (Bondy & Starkey,2014). Because transnational companies and developingcountries both have their particularity and complex interest relationship, it is especial
for transnational companies to fulfill social responsibility in developing countries,which is different from developed countries.Introduction In the era of globalization, transnational companies operate all over the world, whiledeveloping countries still limit territorial boundaries. When transnational companies’operation space and resource capability go beyond developing countries’ control,there exists complicated conflict of interest and cooperation relationship. In thissituation, one of the core challenges developing countries government faces is how toadjust host country’s institutional system and supervision method. Then, the localresident and social development could get more efficient protection and avoid thepotential harm from transnational companies’ unscrupulous investment expansion.Therefore, intensifying transnational companies’ social responsibility consciousnesscould be an efficient way to cope with the situation mentioned above.1.The conflict of interest and cooperation relationship between transnationalcompanies and developing countries. Under the background of globalization, transnational companies use technology,captain and management experience to transfer and spread to developing countries,which influences all aspects of developing countries economic development. Thereare four main reasons why transnational companies have outward foreign directinvestment. First, market driven investment pursues larger-capacity new market withgrowth potential in order to enlarge the global market share. Secondly, efficiencydriven investment pursues to lower production cost to increase production efficiency.Thirdly, natural resources driven investment pursues to benefit from natural resourcesdevelopment. Lastly, strategic assets driven investment pursues to occupy strategicresources which could promote future competitiveness. Transnational companiesstand for strong market power. Its outward direct investment is driven by marketcompetitiveness, access resources, increase of efficiency and cost reduction. Fordeveloping countries, what attract transnational companies to investment is acquiring