Multinational corporations and globalization

Multinational corporations and globalization

1. Multinational Corporations and Globalization Sir Malit

2. A multinational corporation (MNC) or enterprise (MNE),is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. The International Labor Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries.

3. History The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock. It was also arguably the world's first megacorporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies.

4. How a Multinational Corporation (MNC) Works A multinational corporation, or multinational enterprise, is an international corporation that derives at least a quarter of its revenues outside its home country. Many multinational enterprises are based in developed nations. Multinational advocates say they create high-paying jobs and technologically advanced goods in countries that otherwise would not have access to such opportunities or goods. However, critics of these enterprises believe these corporations have undue political influence over governments, exploit developing nations, and create job losses in their own home countries.

5. Types of Multinationals There are four categories of multinationals that exist. They include: A decentralized corporation with a strong presence in its home country. A global, centralized corporation that acquires cost advantage where cheap resources are available. A global company that builds on the parent corporation’s R&D. A transnational enterprise that uses all three categories.

6. Advantages and Disadvantages of Multinationals There are a number of advantages to establishing international operations. Having a presence in a foreign country such as India allows a corporation to meet Indian demand for its product without the transaction costs associated with long-distance shipping.

7. Corporations tend to establish operations in markets where their capital is most efficient or wages are lowest. By producing the same quality of goods at lower costs, multinationals reduce prices and increase the purchasing power of consumers worldwide. Establishing operations in many different countries, a multinational is able to take advantage of tax variations by putting in its business officially in a nation where the tax rate is low—even if its operations are conducted elsewhere. The other benefits include spurring job growth in the local economies, potential increases in the company's tax revenues, and increased variety of goods.

8. A trade-off of globalization—the price of lower prices, as it were—is that domestic jobs are susceptible to moving overseas. This suggests that it’s important for an economy to have a mobile or flexible labor force so that fluctuations in economic temperament aren't the cause of long-term unemployment. In this respect, education and the cultivation of new skills that correspond to emerging technologies are integral to maintaining a flexible, adaptable workforce.

9. Those opposed to multinationals say they are ways for corporations to develop a monopoly (for certain products), driving up prices for consumers, stifling competition, and inhibiting innovation. They are also said to have a detrimental effect on the environment because their operations may encourage land development and the depletion of local (natural) resources.

10. The introduction of multinationals into a host country's economy may also lead to the downfall of smaller, local businesses. Activists have also claimed that multinationals breach ethical standards, accusing them of evading ethical laws and leveraging their business agenda with capital.

11. How do multinational corporations contribute to the globalization of the world economy? Globalization refers to the integration of markets within the world economy, which consequently increases the interconnectedness of national economies. Multinational corporations are a function of this interconnectedness, as they can form and utilize the connections between national economies, to operate within multiple countries.

12. The operation of a multinational corporation within these countries will require significant investments, often called foreign direct investment, which will act as an injection into the host economy. With the operation of multiple multinational corporations in one nation, each investing in the region, for example, Maharashtra in India which receives significant foreign direct investment, the economy will be boosted, given that investment is a primary component of the aggregate demand of a nation.

13. These global financial flows between economies epitomize the interconnectedness and thus globalization of the world economy. The production of goods in one nation, and the sale of those goods to another nation also epitomizes the increasing interconnectedness of economies that can be achieved through the operation of multinational corporations. Additionally, multinational corporations may also outsource their production processes, often to lesser developed nations to reduce costs.

14. This means that economies must remain highly interconnected in order to smoothly import and export goods produced between different stages of the production line, which often operates across multiple countries. This represents the flows of physical goods between economies, such as raw materials, energy, food, parts and consumption goods. Flows of information are also vital in connecting economies, as the effective communication between operating centers in different nations is a prerequisite for a successful multinational corporation. Such flows combine to form a global economic network, which is comprised of multiple national economies.

15. Activity: NAME THIS BRAND (Category 1: Technology)

16. Category 2: Automotive

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20. Category 3: Food

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23. Category 4: Mixed 31

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