International Expansion and Transition to the Network Structure of the Multinational Companies and Their Social Consequences

Abstract

Economic globalization is associated with growing interconnectedness, interdependence and the integration of businesses into a single economic system, improving the competitiveness of businesses, and places new demands and requirements on firms. Companies that wanted to survive in a new, dynamic and competitive environment had to apply new development strategies, whose main motto was to reduce costs and to create greater flexibility on the global market. Many large companies managed huge cost reductions in the globalized economy through international expansion to the industrial periphery and semi-periphery countries (developing countries and Central and Eastern Europe) and through the transition from a pyramidal organizational structure to a network structure. The control centre of companies in a network organization deprives hierarchical and pyramidal corporate structures, rather temporarily joins a network of small suppliers, subcontractors and service providers. In the business environment networks are more flexible and adaptable than firms with a hierarchical structure. They are highly effective because they allow significant reductions in the operating costs of the company. On the other hand, the network structure of relations has a number of social consequences, such as the reduction in the number of employees, the rise in non-standard employment contracts and the abolition of responsibility.