For example, consider a country like Pakistan or Afghanistan. Big organizations will think twice or thrice before investing in these countries because of the unstable political climate, and the resultant internal agitations and widespread prevalence of terrorism. Such countries are incapable of attracting foreign direct investment because of the negative environment they possess for the business build up. In short, a healthy environment is essential for organizations to cement their bases and strategies. On the other hand, among the developing countries with a huge market, China and India are to be the investor-friendly countries, with a stable political setup, which is facilitating and indulging in economic reforms, liberalization of rules, etc.
Globalization is one key environmental factor, which has brought many opportunities to the organizations, particularly Multinational Companies (MNC) to invest in an effective manner and importantly has a profitable venture. (Knowledge Management 2007). That is, the environmental factor of politics will mainly impact and shape MNCs because as they enter foreign firms, they will be optimally regulated by the government. When this external environment acts, the organization for part has to incorporate certain practices, thus shaping itself in a particular way.
One of the key practices, which ‘ shapes’ the organization and thereby psychological association for the organization in the minds of the people in the recruitment function of the organization. In MNCs particularly during foreign operations, employees will be recruited mainly from the local population. This recruitment process, apart from complying with the unwritten rule of giving maximum employment to the local population and also getting cheap labor, will benefit the MNC in many ways, particularly psychological (Scullion & Collings 2006). That is, this functioning of the organization will elevate the organization’ s image in the eyes of the local population.
The local population will have a ‘ psychological high’ that the MNC is recruiting them and providing them a career and livelihood.
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