UNIVERSITY OF HERTFORDSHIRE

Report Assignment

Impact of Multinational Corporations (MNCs) on Host

Countries: a case study of Samsung Corps in United States
and China

Author : Rana Azizah Ramadhani

(22022161)

Major：Business of Administration

April 12th 2023

EXECUTIVE SUMMARY

New ways of communication, as the impact of modern globalization, have

changed how people do activities daily. Advanced technology has both cause
and effect on international trade involved in establishing and developing
multinational companies like Samsung Group. In addition, the global trade
barrier encourages the company's business activity to be productive and
evolve. Many tangible advantages that can take from modern globalization,
yet we need to remember to notice the negative impact of globalization. In this
report, the author discusses and analyzes how a multinational company like
Samsung plays a role in globalization and impacts its host countries in the
category of a developed country (United States) and a developing country
(China).

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TABLE OF CONTENT

RECENT CHANGES IN GLOBALIZATION SINCE 1970s ..............................................................3

GLOBALIZATION AND MULTINATIONAL CORPORATIONS .....................................................6
CASE STUDY ON MULTINATIONAL CORPORATIONS - SAMSUNG .....................................11
SAMSUNG IN THE UNITED STATES .............................................................................................12
SAMSUNG IN CHINA .........................................................................................................................16
CONCLUSION & RECOMMENDATION ..........................................................................................18

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RECENT CHANGES IN GLOBALIZATION SINCE 1970s

Modern globalization and advanced technology have been linked and growing
together for decades. Advanced technology eases our productivity and
encourages globalization develop across the globe. Stronger international
economic and financial ties have resulted from considerable innovation made
possible by the rapid growth of communication and transportation
technologies (IMF, 2014). If we look back from the 1970s, globalization has
occurred significantly in many fields and in many aspects of our lives. IMF
(2014) reported that new technologies provide new ways of communication
(chart 1), and transportation, trade, and global trade have increased
tremendously from 1965s to 2014s (chart 2). In addition to technology, trade
openness in many nations contributed to the development of globalization. As
more countries acknowledged the advantages of allowing the free flow of
capital, international financial flows have significantly expanded, increasing
global financial assets from $250 billion in 1970 to about $70 trillion in 2010
(box 1).

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Trade openness has contributed to globalization's rise for decades. Still, it has
been following the global crisis, including the post-pandemic and ongoing war
between Ukraine and Russia, that slowed globalization down. IMF (2023)
named the phase 'Slowbalization,' which explained that trade reform has
slowed down significantly following the global financial crisis, and political
support for open trade has weakened amid mounting geopolitical tensions.

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GLOBALIZATION AND MULTINATIONAL CORPORATIONS

In the 1970s, many national companies in the world expanded their business
to become multinational companies reiterating technology and trade
openness connect the world, causing countries to become interdependent.
Despite the higher risk and additional costs associated with coordinating
production activities over vast geographic distances and across political
boundaries, national firms become internationalized because they have
certain assets, such as superior production technology, a distinctive product
design, superior managerial and marketing skills, and other intangible capital
(UNCTAD, 2022). Modern globalization leads FDI to ultimately be involved in
national companies becoming international companies.

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MNE formation is viewed as an extension of the mechanisms that gave rise to
national corporations (Hymer, 1960). Recognizing that large firms can and do
shape market outcomes and are often the first to move production abroad
requires abandoning the fiction of price-taking firms in perfectly competitive
markets and considering a global economy. Incorporating these elements into
the argument adds a historical dimension to the FDI tale by acknowledging
the growth of international production and recognizing first-mover advantages
(UNCTAD, 2022). The development of multinational companies boosts the
growth of foreign direct investment and vice versa. Figure 7.9 shows one of

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the data which summarizes the amount of investment few MNCs in the world
hold.

Globalization has been proven to positively impact many nations and

companies. But there are indeed consequences of the rapid economic growth
over centuries causing our earth in damage - climate change, polluted air,
deforestation, and much more environmental damage. Thus, the world has
the new ambition to achieve net zero emissions. Ed Hawkins, a climatologist,
has summarized the change in earth’s temperature from 1850 until 2021; as
shown in Figure 3, the current temperature is not ideal for human, animals,
and plantations.

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 Source: Ed Hawkins

Along with natural environmental damage, globalization also caused damage

to the social environment. Many companies are forced to be transparent with
their treatment of their workers, as the fast global economy leads to people’s
exploitation relating to their working environment, hours, tasks, and underpaid
wage. ILO (2022) has reported that there is modern slavery going as an
impact on rapid global economic growth, which is detailed in the table below.

Source: International Labor Organization, 2022

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Source: International Labor Organization, 2022

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CASE STUDY ON MULTINATIONAL CORPORATIONS - SAMSUNG

Samsung Corps, better known as Samsung Group, is a multinational

company holding certain subsidiaries, including one of the rising electronics
companies in the world, Samsung Electronics. Samsung Group started as a
trading company of primary goods such as food demands, and it expanded to
produce many products especially in technology devices and provide many
services. Samsung Electronics, tangible proof of modern globalization,
establishing in South Korea with most of its stock owners are foreigners
(Ownership Structure Chart). Samsung Group and Samsung Electronics have
branches in several host countries, including the United States and China.

Source: Samsung.com, 2023

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SAMSUNG IN THE UNITED STATES

Samsung has been one of providers for United States infrastructure and
economy development. As a big technology company, Samsung Group has
investment billion us dollars in the United States, providing job opportunities
for the nation. A foreign-based corporation in the United States, such as
Samsung Companies, is not a competitor. Instead, the country wishes to
encourage more of it to boost economic growth (McLerron, 2013).

Table A: Samsung Group Investments in USA

Company Investment Employees Location Revenue
Samsung $13 billions > 5000 workers Austin, Texas $1.5
Semiconductor billions/year
Samsung 1100 workers Richardson,
Telecommunication Texas
America
Source: Forbes.com, 2014

In the United States, Samsung has evolved from a small sales office in New
York to a 20,000-person business spanning 46 states over four decades
(Becher, 2019).Samsung represented the partnership between US and South
Korea as the company has contributed to the trade. The trade openness of
the United States towards South Korea maintain the Samsung Group
business activities in the United States. From 2003 until 2018 United States
and South Korea has increased by 117% of their two-way trade (Korea
Matters for America, 2018).

Picture 1: Korea Matters for America Reports on Increasment of two-ways Trade

Regarding to globalization, Samsung Group and Electronic as advance

technology provider According to Samsung Group annual report (2017), they

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have contributed to the US economy by investing funds, technology and
innovation ideas, and employing local workers as shown in the picture below.

Picture 2: Samsung Footprints in America Poster, 2017

Source: Samsung.com

Picture 3: Samsung Footprints in America in 2016 Highlight, 2017

Source: Samsung.com

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 Picture 4: Samsung Operations in America in 2016 Highlight, 2017
Source: Samsung.com

Picture 5: Samsung Visions in America in 2016 Highlight, 2017

Source: Samsung.com

From an economic perspective, it is proven that as a multinational company,

Samsung Group has benefited the United States, which shows that
globalization provides advantages for the countries involved. However, along

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with its positive impacts, globalization has adverse effects too. There were
environmental and health damage cause by Samsung Group business in the
United States. Samsung's chip plant was the second-largest carbon emitter in
the semiconductor sector in 2020, emitting 12.9 million tons of CO2
equivalents (Shead, 2021). In addition, in 2022, a probe showed Samsung
Electronics Co's semiconductor manufacturing in Austin, Texas, discharged
acidic waste for months, harming aquatic life in a nearby river. There might be
a few unrecorded or undiscovered cases in that Samsung Group has
damaged the United States.

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SAMSUNG IN CHINA

Samsung's contribution to China has been recognized numerous times over

the years. Samsung has played a significant role in the growth of China's
electronic manufacturing base by engaging not only in electronics assembly
but also in advanced componentry, substantial research and development,
and bringing a significant amount of its most cutting-edge technologies to
China (Enright, 2017). Through global corporations such as Samsung,
international trade between South Korea and China has benefited both
parties.

Achievement/award Year Source

The Best Foreign Investor in 2005
China
Best Contributor 2006 Zhang and Pearce, 2012,
p.77
Public Welfare Prize 2006 and 2007 Lee, 2013
for Outstanding Contribution
to Chinese Society
First 2013 and 2014 Samsung, 2014b
among Foreign Companies
for CSR
The Most Respected 2015 China
Enterprises in News, 2015
China
Source: Hinrich Foundation, 2017

According to its June sustainability report, Samsung had 13 production

locations and seven research laboratories in China in 2013, making up more
than 19 percent of Samsung's global workforce and the largest source of labor
outside of South Korea. Soon after, Samsung Electronics Co relocated
production to Vietnam to obtain even lower costs and protect profit margins as
sales of high-end handsets dropped (Taipei Times, 2013). In 2019, Samsung
Electronics ended its phone manufacturer in China (Reuters, 2019). Samsung
left China to produce phone parts due to growing labor costs, a slowing
economy, and phone tariffs (Humphries, 2019). The issue may reduce China's

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potential profit from Samsung, but it may be an attempt safeguarding its
workers from an unsafe working environment caused by Samsung. The rapid
economic growth of Samsung has been proven to indirectly cause damage to
China's labor and natural environment. In labor aspects, China Labor Watch
claimed that throughout June and July 2012, it conducted three investigations
and discovered child and student labor exploitation at Samsung's supplier
HEG Electronics (Arthur, 2012). The further investigation discovered more of
chil labor happened on the business. Majority of Samsung Chinese suppliers
are found to not comply with China's legally permitted overtime hours (Arthur,
2014). Workers are paid below minimum standard and had to work exceed
work hours based on Chinese regulations. In environmental aspect,
Greenpeace (2008) found that Samsung has violated Chinese environmental
regulations. Samsung has conducted activities involving dangerous chemicals
without following proper safety measures. Chinese regulations have protected
people's right to work in a safe environment. Still, the control of
implementation is only sometimes done regularly, allowing workers'
exploitation to continue and manufacturers' pollution to continue.

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CONCLUSION & RECOMMENDATION

Every nation in the globe is affected by globalization in both positive and

negative ways. Since the 1970s, it has contributed to a rise in the world
economy and the development of cutting-edge technology that lets people
solve issues faster than they could in the past. Multinational corporations have
grown and been established throughout the world in different nations as a
result of globalization. The effects of globalization have made the world
interdependent. Because of this, many countries have reduced their barriers
to trade and cooperation with other nations. In the grand scheme of things,
numerous nations form a trade union. Numerous international regulations
have been developed to secure and preserve favorable conditions for
international trade.
As a multi-national company from South Korea with branches in developed
and developing countries, Samsung Group has benefited its host countries. In
the United States, a developed country, Samsung has contributed to its
economic growth for around 40 years, providing innovations, ideas, job
opportunities, and financial investments for the country. Along with its benefit,
Samsung, as a technology company, has conducted harm to the United
States' natural environment because of its hazardous chemical leak. In China,
a developing country, Samsung has also had a positive and negative impact
on the land. Samsung has been one of the major investors in the Chinese
economy, encouraging locals business like Chinese suppliers, improving the
country's technology and education, and supporting financial investments. On
the parallel side, Samsung has failed to commit to laborers' regulations,
violating the Chinese laborer's right to work within reasonable working hours
and safety. In addition, Samsung has caused its manufacturer to damage
China's air condition, water, and workers' health.

Samsung Group's case study can represent that a multinational company,

especially in technology fields, can contribute to its host countries' economic
growth and potentially damage its host countries' environment and labor
exploitation, which is, ironically, the common phenomenon caused by the

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rapid growth of globalization. To prevent more damage to the natural
environment and labor exploitation, strict application of government
regulation, regulation implementation control, and third-party audit is needed.

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