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Multi-national corporations have an important role in foreign markets. Their decisions, therefore, are based on the theory that success in the home market indicates high likelihood of success in other countries. This is guided by the notion that humans have similar needs. Instead of focusing on specific country’s needs, multi-national companies’ exploitative strategies ignore differences in local national needs by having standard prices and quality across all nations. Though this ideology may cause conflicts between these companies and the foreign governments, it influences local market players and governments to make changes that accommodate foreign investors.
This proposal looks at how multinational companies can change constitutions. In this case, the reference point is Saudi Arabia, a country that has seen a dramatic increase in the number of foreign investors. This increase has increased demands for changes in some laws. This proposal explains the need for studying these changes and the factors that drive them.
Multi-national Corporations, otherwise known as transnational corporations, are undoubtedly the principal actors and determinants of global economies. These companies base their headquarters in parent countries and focus their efforts and operations in several other countries (especially developing countries). Their business strategy is based on the view that the entire world is a single entity rather than small regions with specific preferences.
Oil was first discovered in the Gulf region in 1908 and the number of foreign, multi-national companies increased tremendously. Today, these multi-national corporations are the center of global economic growth in both the developed as well as the developing countries. Community-driven societies such as Saudi Arabia face challenges in achieving their economic goals due to the interference and influence of multi-national companies. As global trade continues to depend on multi-national corporations, the companies dictate market prices and quality of products world-wide (Campbell & Heapes, 2008).
Traditionally, Saudi Arabians held major misconceptions about Western multi-national corporations. One such notion was that the companies were tools used by developed nations to exploit poor nations and maximize profits at the expense of the locals. For a long time, Saudis believed that developed nations intended to enslave third-world nations, by having them depend fully on the powerful nations. Previous research indicated that most Saudi Arabians felt that the American companies were unfair in their training programs by providing low level training to locals as opposed to American citizens. Majority of the respondents in studies claimed that the companies should replace the foreign workers (mostly American) with local women despite the existence of a law which prohibited this (De Jonge, 2011).
The government of Saudi Arabia protects its workforce from foreign competition by limiting the issuance of visas to unqualified employees who wish to work in the country. However, in some cases, the rules used to disqualify employees in Saudi Arabia do not match those implemented in some foreign jurisdictions. This conflict requires legal amendments and synchronization between the Saudi government and other foreign governments so as to arrive at common agreements. For example, to prevent the escalation of cultural and religious conflicts between local and American workers, the American Courts formulated a presumption against extraterritorial application of the United States law (Lippman, 2012). Similarly, the Saudi government has been forced to alter some clauses in its constitution in order to accommodate foreign companies and their immigrant workers. These decisions are informed by the fact that the current work force in Saudi Arabia consists of people with diverse ethnicities. Considering that cultural differences are bound to arise in such a diverse society, precautionary measures to prevent conflicts must be put in place. This proposal seeks to emphasize the need to study the influence of multinational companies in Saudi Arabia and their contribution to changes in the nation’s constitution.
1.2 Problem Statement
Multi-national corporations operating in Saudi Arabia encounter challenges in imposing Saudi rules on their American workers. Sometimes, these rules differ from those commonly followed back home. The companies are not comfortable with the imposing of strict foreign rules on its employees just because they work in a foreign land. The Saudi government has rules that differ from U.S regulations on issues such as personnel qualifications. The U.S nationals view the Saudi rules as discriminatory and unfair (Adeyeye, 2012). On the other hand, the Saudi government believes it sets and maintains good morals and high ethical standards in providing the country with the most adequate environment to work.
Although the Arabian economy and the developed human capital formation owe their success to multi-national corporations, the clash in rules undermines the operational efficiency of companies. The conflict threatens to destroy international ties and sow discord and negative stereotypes of western countries. Therefore, there is a need to study the problems faced by both local and foreign workers employed in the Saudi-based, multinational companies. Additionally, it is important to study the impact of foreign companies on Saudi Arabia, especially in terms of changes in work ethics, organizational culture and labor laws. The proposed research will also look at ways in which the Saudi Arabian government is amending its constitution in order to improve trade ties with foreign nations and attract foreign investors.