MNCs in the News-2014-01-03

As a result of declining sales, Revlon, a US cosmetics company, announced that it planned to terminate its China operations and eliminate more than 1,000 positions. While the US $22 billion China cosmetics’ market has been growing impressively, foreign firms have faced a variety of difficulties ranging from bribery scandals to problems with product distribution and retailing. Of note, some companies have faced challenges because the Chinese government requires them to test products on animals, which does not sit well with animal rights groups. The Chinese government, though, is planning to eliminate animal testing requirements for certain types of cosmetics (“Revlon to exit China and axe 1,100 jobs,” South China Morning Post, Jan. 2, 2014; “China’s FDA to Remove Animal Testing,” AmCham Insight, Dec. 2013, p. 8).

Hon Hai Precision (Foxconn), which does contract manufacturing for some of the world’s most prominent electronic firms including Apple and Dell, announced it would set up manufacturing operations in the US despite the US’s generally higher operating costs. Commentators attributed the move to pressure from image conscious clients, incentives from US local governments, and the company’s woes in China where it has had numerous labor problems. Manufacturing in the US also has the potential to aid Hon Hai tap into new lines of business such as aerospace, to solidify some of its partnerships, and to tap higher skilled American workers (Ralph Jennings, “Hon Hai Pivots to America after Mainland Problems,” South China Morning Post, Jan. 2, 2014).

Sangyo Kakushin Kiko, a Japanese firm, recently invested $153 million in a Cambodian company, which already has a major investment from a Japanese architectural, consulting, and medical service firm, to construct and operate an emergency medical care center in Phnom Penh. The firms intend to provide Japanese doctors, nurses, and high-end medical services in order to train Cambodian medical staff and to promote advanced health-care technology. This fits with the Japanese government’s plan to bolster the export of medical services. It also could substantially enhance Cambodia’s medical infrastructure, which due to years of civil war, is in very poor condition (“Nikki, Sangyo Kakushin Kiko, Hospital business in Cambodia,” Newsclip, Dec. 25, 2013, http://www.newsclip.be/article/2013/12/25/20232.html

At the same time as the Korean government controls the growth of local Korean food outlets in order to regulate competition, an increasing number of foreign food companies are moving into the Korean market. For instance, TWG Tea Company, a Singaporean tea store with 35 branches globally just opened its first store in Gangnam and announced plans to establish more stores in the near future. Similarly, the Japanese hamburger franchise, Mos Burger, just opened its sixth branch in Seoul last December and intends to open 50 more stores by 2016. Critics contend the government’s policy discriminates against Korean food companies (Park Ji-won, “Foreign food firms tap Korean Market,” The Korea Times, Dec. 31, 2013)

Government financial regulators soon will commence an investigation of Standard Charted Bank Korea and Citibank Korea for leaking customer information. Both banks are suspected of providing customers’ names, phone numbers, and outstanding loan balance information to private service providers without obtaining permission from the relevant customers. These financial institutions also have been criticized for making large dividends payments to their overseas headquarters despite relatively poor results locally. Korean financial regulatory authorities have been increasingly cracking down on large dividend payments by foreign subsidiaries out of concern that this may be harmful to their financial health (Kim Tae-jong, “SC, Citibank face regulator’s Probe,” The Korea Times, Dec. 22, 2013)