Multinational Corporations

Topics: Multinational corporation, Corporation, Globalization Pages: 14 (4539 words) Published: December 21, 2008
Multinational Corporation - business enterprise with manufacturing, sales, or service subsidiaries in one or more foreign countries, also known as a transnational or international corporation. These corporations originated early in the 20th century and proliferated after World War II. Typically, a multinational corporation develops new products in its native country and manufactures them abroad, often in Third World nations, thus gaining trade advantages and economies of labor and materials. Almost all the largest multinational firms are American, Japanese, or West European. Such corporations have had worldwide influence—over other business entities and even over governments, many of which have imposed controls on them. During the last two decades of the 20th century many smaller corporations also became multinational, some of them in developing nations. Proponents of such enterprises maintain that they create employment, create wealth, and improve technology in countries that are in dire need of such development. Critics, however, point to their inordinate political influence, their exploitation of developing nations, and the loss of jobs that results in the corporations' home countries. Multinational corporations (MNCs) play a critical role in the global economy. By most estimates, production by multinational enterprises now accounts for over one-fourth of the world's output and one-third of world trade. Moreover, many scholars believe that the investments of multinationals, commonly known as foreign direct investment (FDI), have beneficial effects on economic growth, transferring technology and managerial expertise as well as providing capital. As consumers in today’s world, some of us have a wide choice of goods and services before us. The latest models of digital cameras, mobile phones and televisions made by the leading manufacturers of the world are within our reach. Every season, new models of automobiles can be seen on Indian roads. Gone are the days Ambassador and Fiat were the only cars on Indian roads. Today, Indians are buying cars produced by nearly all the top companies in the world. A similar explosion of brands can be seen for many other goods: from shirts to televisions to processed fruit juices.

Such wide-ranging choice of goods in our markets is a relatively recent phenomenon. You wouldn’t have found such a wide variety of goods in Indian markets even two decades back. In a matter of years, our markets have been transformed! Multinational Corporation (MNC) or transnational corporation (TNC) is a corporation or enterprise that manages production or delivers services in more than one country. The first modern MNC is generally thought to be the Dutch East India Company, established in 1602. Very large multinationals have budgets that exceed some national GDPs. Multinational corporations can have a powerful influence in local economies as well as the world economy. Multinational corporations play an important role in international relations and globalization. Ethically, many MNCs are large in relation to the national income of the countries in which they are located. This means that it is not as easy for the host governments to enforce national laws on MNCs. Generally speaking, governments want investment from these MNCs because they generate jobs and incomes. Other benefits include training of local workers in new and potentially transferable skills. Technology transfer is also an incentive. The local community would benefit since land would develop, e.g. new roads. In a highly competitive world, companies seek to reduce their costs as much as possible. The prospect of a foreign company setting up in a country where labour is cheap is attractive...
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