International Expansion and Transition to the Network Structure of the Multinational Companies and Their Social Consequences

Daniela Ettaleb and Bohumil Vítek
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Daniela Ettaleb: Department of Territorial Studies, Faculty of Regional Development and International Studies, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic
Bohumil Vítek: Department of Law and Social Sciences, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2015, vol. 63, issue 1, 201-205

Abstract: Economic globalization is associated with growing interconnectedness, interdependence and the integration of businesses into a single economic system, improving the competitiveness of businesses, and places new demands and requirements on firms. Companies that wanted to survive in a new, dynamic and competitive environment had to apply new development strategies, whose main motto was to reduce costs and to create greater flexibility on the global market. Many large companies managed huge cost reductions in the globalized economy through international expansion to the industrial periphery and semi-periphery countries (developing countries and Central and Eastern Europe) and through the transition from a pyramidal organizational structure to a network structure. The control centre of companies in a network organization deprives hierarchical and pyramidal corporate structures, rather temporarily joins a network of small suppliers, subcontractors and service providers. In the business environment networks are more flexible and adaptable than firms with a hierarchical structure. They are highly effective because they allow significant reductions in the operating costs of the company. On the other hand, the network structure of relations has a number of social consequences, such as the reduction in the number of employees, the rise in non-standard employment contracts and the abolition of responsibility.

Keywords: economic globalization; multinational companies (MNCs); international expansion; network structure; new international division of labour; flexibility of work (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2015063010201

DOI: 10.11118/actaun201563010201

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