Is trade through an MNC an engine for growth that promotes peace and
sustainability?
A multinational corporation (MNC) is a company that has facilities, and a quarter of their revenues
outside of at least one country other than its home country (Chen, “Multinational Corporation
(MNC)”). Mobile phone companies have become one of the biggest MNCs in the world. This is
because phones have become the perfect way to communicate effectively. It has changed the way we
entertain ourselves, meet each other, consume all types of media, and connect with the entire world at
any point of time and place. Mobile phones have moved from being a luxury, into a basic necessity,
and therefore, the demand for mobile phones has increased.
The market for mobile phones has widened, and MNCs like Samsung, Apple, and One Plus, are
taking the maximum advantage of this growing market. These corporations have been competing with
each other to dominate the market, by penetrating into various market segments, and by producing
various types of mobile phones, bringing in huge international trade transactions to keep up the
supply. As a result, there are phones for the rich and the deep-pocketed, and for the middle class and
poor. However, while trade creates a higher purchasing power parity, it can cause a direct impact on
the environment by increasing pollution and degrading natural resources (Economics Online, “Why
do countries trade?”, OECD, “Trade and the environment”).
Therefore, how does the worldwide trade of MNCs act as a force for good or for ill, especially for
Samsung? Can we evaluate that trade through an MNC is an engine for growth that promotes
peace and sustainability?
The Samsung Group is a South Korean electronic manufacturing company, originating from Seoul.
It has a huge history with electronics, and is one of the first and biggest electronic companies to
globalize. Samsung deals with various electronic products such as phones, refrigerators,
televisions, etc.
During the past 5 decades, Samsung has brought in a huge economic value. They had a 9% growth
in brand value, up to US$102.6 billion in 2021. (Brand Finance, “Samsung breaks US$100 billion
brand value mark”). Their trade strategy, in the form of providing significant employment, in home
and abroad countries, played a vital role for their growth, as an MNC.
Samsung is known to be very employee-oriented, with a main mission and purpose to devote
human resources and technology to create superior products and services. (White, “How core values
shape these 5 tech giants”, Martin, “Samsung’s Mission Statement & Vision Statement (An
Analysis)”). This has allowed a transfer of skills and expertise, and efficient ways of increasing
domestic production for a variety of exports. As a result of this strategy, Samsung contributes around
15% of the growth in GDP for South Korea, its home nation. This evidence shows that there can
be a lot of trade through an MNC, with the right trade strategy, and thus be an engine for
economic and social growth that promotes peace and sustainability.
A graph of the
increase in South
Korea GDP, in
billions, from
1960-2015 (BSIC,
“South Korea and
Samsung: an
Overview”).
However, in 2014, Samsung was exposed. After the iPhone 6 was launched, it was evident that
Samsung did not commit to 100% renewable energy for its operations. People started to question
the policies maintained behind making these phones, and soon, data showed that the company was
using an average of 16000 GWh per year, out of which 1% came from renewables. (tinhat, “It’s not
easy being green: Apple vs. Samsung”). As Apple renewed more energy, the demand shifted to
Apple phones, and soon, countries opted to trade with Apple. Collectively, this was the major failure
for Samsung.
They could have implemented a fair trade policy, which would have improved working conditions,
and helped abide by the environmental-friendly laws. This would have helped them to create more
eco-friendly phones, serve a new type of demand, and most importantly maintain their net worth.
They could have also focused on their other electronic products like televisions and refrigerators. This
opportunity cost is evidence that shows how it is vital to have the right policies, for trade
through an MNC, to become an engine for environmental and political growth as well.
A grading scale for
major companies,
according to how green
they are for the
environment (tinhat, “It’s
not easy being green:
Apple vs. Samsung”)
While becoming an MNC, Samsung took big risks by opening up facilities in two developing
countries, Vietnam and in India. When none trusted the consumers of Vietnam, South Korea created a
political partnership with Vietnam to use their electronic resources. The deal was that Samsung
would use Vietnam’s resources to make 50 percent of all electronics, giving away 30% of the revenue
made to the Vietnamese government. This created a positive impact, and it can be studied through a
SEEP analysis.
In terms of the social impact on Vietnam, Samsung Group laid out an expansion plan worth $205
billion aimed at creating 40,000 people with employment (BusinessToday.in, “Samsung plans to
invest $205 bn over 3 years, create 40,000 jobs”). Currently, Samsung employs 65000 people in
Vietnam, showing that there is already a positive social impact on people. More employment will lead
to a higher disposable income and thus, a higher purchasing power. This will increase demand ,
resulting in huge production, and thereby cause the GDP to increase, leading to a better standard of
living, and a positive social impact.
In terms of the positive economic impact on Vietnam, Samsung Vietnam posted $65.7 billion in
sales, accounting for 28 percent of the country’s GDP (Eun-jin, “Samsung Electronics Accounts
for 28% of Vietnam’s GDP”). Vietnam exports a large amount of electronics to South Korea for the
production of phones. This results in huge export revenue, increasing the inflow of capital that led to
many infrastructural, educational, and political improvements and changes in the country. These
changes led to a positive economic impact for Vietnam.
In terms of the positive political impact, Vietnam is a very big partner for South Korea, because of its
electronic resources that help international companies in South Korea to compete in the market,
especially Samsung (Kim, “How South Korea Can Upgrade its Strategic Partnership with
Vietnam”). The skilled variety of labour in Vietnam allows Samsung to serve the expected demand at
a fast rate, and therefore, in return, South Korea helps Vietnam’s companies to compete in the market,
with 30% revenue made by Samsung going to the Vietnamese government. This balance has created a
strong political partnership, and one that will keep growing.
However, there is a negative environmental impact. Electronics contain toxic substances, and
therefore, they must be handled with care when no longer needed (Elytus, “E-Waste & its Negative
Effects on the Environment”). When electronics are littered (e-waste), it can end up in landfills
where toxic chemicals are released. This directly impacts the earth's air, soil, and water, ultimately
affecting human health. Samsung Vietnam is forced to trade quickly, due to the increasing demand,
and the lack of e-waste policies resulted in environmental damage.
Thus, to evaluate, we can see that trade through Samsung for Vietnam is an engine for social,
economic, and political growth, but keeping track of the environment is important to make sure that
it promotes peace and sustainability.
A Summary of the SEEP Analysis for Samsung Vietnam.
Similarly, when no country wanted to believe in India’s growth and youth, South Korea opened up its
largest mobile factory and R&D centre in India (MakeUseOf, “Where Are Samsung Phones
Made?”). The deal was that Samsung would build a R&D centre, and create employment
opportunities exploiting the available labour skill. This resulted in huge production of new model
smart phones, increasing the supply to meet the demand. The phones produced ranged between Rs
6000/- to Rs 100000/- considering the extreme affordability in India. This created a positive impact,
and to show this, another SEEP analysis for the same is below.
In terms of the positive social impact on India, Samsung India’s revenues grew positively, from $6
million (1996) to $10 billion (2019), helping the Indian GDP to grow as well (Chowdhary,
“Samsung@25: How Samsung is powering Digital India”). This growth was mainly due to
Samsung's growth, which enticed a large number of consumers in India to buy the phones, and also, to
help in creating jobs. This led to more employment and consumer choice, resulting in a positive social
impact.
In terms of the positive economic impact on India, Samsung India has become the first consumer
electronics company to achieve $10 billion in revenues in 1 country (Business Standard, “Samsung
becomes first smartphone company to hit $10 bn revenue in India”). The efficient skilled labour
in India has resulted in huge production of electronics, and setting up of their R&D centres here,
which paved the way for huge exports too. Thus, it led to a positive economic impact.
In terms of the positive political impact on India, relations between South Korea and India are
spurred by a significant convergence of interests, mutual goodwill and high level exchanges (MEA,
“India – Republic of Korea Bilateral Relations”). India’s R&D centres and facilities provide
Samsung with the desired innovations and production, creating a good amount of exports and imports,
and therefore, a good amount of revenue for both governments. This has created a strong political
partnership with South Korea, and one that no side is willing to break.
In terms of the positive environmental impact on India, India has helped Samsung to implement
policies, with the main one being 2005's Kyoto Protocol, which was brought about to reduce global
greenhouse gas emissions (Samsung Newsroom, “How Samsung Has Evolved Its Environmental
Stewardship”). Samsung India’s R&D department makes sure that e-waste is well disposed of, and
makes sure that components are recycled. Furthermore, since this protocol was enforced, Samsung as
a whole, has been accelerating its environmentally friendly endeavors to help reduce emissions. This
has brought an overall positive environmental impact, and is helping Samsung to compete in the
market with Apple, once again.
Thus, to evaluate, we can say that trade through Samsung for India is an engine for social, economic,
environmental, and political growth, and shows that with the right intentions and policies, an MNC
can be very beneficial to promote peace and sustainability.
A Summary of the SEEP Analysis for Samsung India.
After the success in these 2 countries, a lot of other countries wanted multinational ties with Samsung,
and they are now strategically placed in Brazil, Indonesia, and Taiwan, countries with huge
technological equipment. Therefore, we can say that globalizing helped Samsung to succeed, and
develop into a great company. Regardless of its failure in 2014, they are still a big multinational
corporation, with increasing profit margins every year, and it is very evident that with the market
growing, Samsung will grow even further.
Therefore, by using Samsung as a case study, we can say that multinational corporations are a great
source of income out of foreign investment, that act as a force for good, which not only provides
employment opportunities, but also brings in diverse technological innovations, increasing the
consumer choice, and paving way for infrastructural development within the nations. Thus, trading
with MNCs is a clear engine for growth, that can promote peace through political partnerships,
and sustainability, due to the increase in supply of goods and services. However, MNCs exploit the
skill, labour, and the natural resources of the countries abroad, to make great profits. This leads to
environmental damage, which is risky for the company’s growth. Furthermore, encouraging foreign
investments could result in discouraging domestic production. The major portion of the MNCs profits
go to their home countries, though a certain percentage is given to the host government in the form of
corporate tax. Thus, a balanced approach by the government with respect to domestic
production, and foreign investment, is vital, to say that trade is an engine for growth that
promotes peace and sustainability.
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