Sources and Limits of Mnc Power

Topics: Authority, Globalization, International relations Pages: 4 (1577 words) Published: November 10, 2011
What are the sources and limits of MNC power?

1. Introduction

The purpose of this essay is to give a (more or less) detailed overview over the sources and limits of the power of multinational corporations (MNCs), as MNCs are getting increasingly important as actors in political bargaining. Many other important aspects, such as the history or the financial management of MNCs, would by far exceed the scope of this paper. To make the topic clearer I want to start with some definitions in the first section. Thereafter, the most important sources and forms of business power shall be examined, before taking the limits and the vulnerability of MNC power into account. 2. Definitions

In this essay the term MNC refers to “a firm, which owns assets and controls activities in different countries.” This means that a corporation needs at least one subsidiary in a non-domestic country to be classified as an MNC (just foreign trade is not sufficient). The second term, which needs to be defined, is power. Hereafter, power will refer to “the ability of actors to pursue successfully a desired political objective.” As we will learn in the next section, there are different sources and forms of power, which can all be subsumed under this very broad definition of power. 3. Sources of Power

It is uncontested that MNCs are powerful political actors in the globalising world. Nevertheless, the sources of this power are not always obvious because of the intransparent structure of global politics. I want to concentrate on three of the most unchallenged sources/forms of business power for this reason. Firstly, one source of MNC power is their size. As they can benefit from substantial economies of scale/scope, they do not face too much competition. As a result, they operate in oligopolistic markets. For this reason one could say that states or international organisations should intervene because a market that is dominated by an MNC is not Pareto efficient and therefore causes...
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