I need a response to this posting to add to the forum: Operating according to ru

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I need a response to this posting to add to the forum:

Operating according to rules set by various counties where it operates is really an important rule for every MNC. Most countries employ local legal counsels to avoid breaking the laws of the countries where they chose to set up a branch. Legal system and policy enviroment related to public service has become a great concern for most of MNC. What they focus on including: good market access,a low level of tariffs and nontariff import barriers, flexible fund procurements, certain tax incentives, the stability of the legal and judicial system, efficient government services. All these factors are varied from countries. If they ignore any of them, problems may appear in a way that never be considered. That is reason why MNC must attach much importance to the territoriality principle. At the time,choosing the most suitable place to run a business has a great impact on interest of MNCs.Thus,territoriality principle should be paid great attention for MNCs.

Explanation / Answer

With the increasing globalization, territoriality principle finds increasing importance in MNCs decision making process of setting up branches or subsidiaries overseas. Companies go global to take advantage of the attractive market opportunities, flexible funding, favorable economic and political environment, cheap labor resources, low tariffs and tax incentives. Getting into legal problems by ignoring the local laws and regulations can be very costly for companies operating in multiple geographies. In this age of ultra-fast communication, companies would not want to generate any bad publicity, as it may dent their global reputation, in addition to legal and other costs. In addition to the cost and damage to reputation, companies may have to expend a lot of time and energy in fighting long drawn legal battles, and may end up paying hefty fine, which may wipe out their entire profits accumulated over the years in particular market, or may even lead to bankruptcies in some situations. So the stakes are very high for MNCs and hence the enhance focus on compliance to local legal and regulatory system.

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