Multinational corporation

A multinational corporation or worldwide enterprise[1] is an organization that owns or controls production of goods or services in one or more countries other
than their home country.[2] It can also be referred as an international corporation, a transnational corporation",
or a stateless corporation.[3]

March 20, 1602, which would become the largest company in the world for nearly 200 years.[9]
The main characteristics of multinational companies are:
1.In generally, there is a national strength of large companies as the main body, through the way of foreign direct
investment or acquire local enterprises, established subsidiaries or branches in many countries;

Overview

2. It usually has a complete decision-making system

and the highest decision-making center, each subsidiary
or branch has its own decision-making body, according
A multinational corporation(MNC)is usually a large corto their dierent features and operating to make deciporation incorporated in one country which produces or
sions, but its decision must be subordinated to the highest
[4]
sells goods or services in various countries. The two
decision-making center;
main characteristics of MNCs are their large size and the
fact that their worldwide activities are centrally controlled 3. MNCs seeks markets in worldwide and rational production layout, professional xed-point production, xedby the parent companies.[5]
point sales products, in order to seek maximum prot;
Importing and exporting goods and services

4. Due to strong economic and technical strength, with

fast information transmission, as well as funding rapid
cross-border transfer, multinational companies have, so
it has stronger competitiveness in the world;

Making signicant investments in a foreign country

Buying and selling licenses in foreign markets

5. Many large multinational companies due to eco Engaging in contract manufacturingpermitting a nomic, technical strength or production advantages that
local manufacturer in a foreign country to produce may cause varying degrees of monopoly in some area.
their products
Opening manufacturing facilities or assembly operations in foreign countries

2 Theoretical background

MNCs may gain from their global presence in a variety of

ways. First of all, MNCs can benet from the economy of
scale by (1) spreading R&D expenditures and advertising
costs over their global sales,(2) pooling global purchasing power over suppliers,(3) utilizing their technological
and managerial know-how globally with minimum additional costs, and so forth. Furthermore, MNCs can use
their global presence to take advantage of underpriced
labor services available in certain developing countries,
and gain access to special R&D capabilities residing in
advanced foreign countries. [6]

The actions of multinational corporations are strongly

supported by economic liberalism and free market system in a globalized international society. According to
the economic realist view, individuals act in rational ways
to maximize their self-interest and therefore, when individuals act rationally, markets are created and they function best in free market system where there is little government interference. As a result, international wealth is
maximized with free exchange of goods and services.[10]
To many economic liberals, multinational corporations
are the vanguard of the liberal order.[11] They are the embodiment par excellence of the liberal ideal of an interdependent world economy. They have taken the integration of national economies beyond trade and money to
the internationalization of production. For the rst time
in history, production, marketing, and investment are being organized on a global scale rather than in terms of
isolated national economies.[12]

The problem of moral and legal constraints upon the

behavior of multinational corporations, given that they
are eectively stateless actors, is one of several urgent
global socioeconomic problems that emerged during the
late twentieth century.[7]

One of the rst multinational business organizations, the

East India Company, arose in 1600.[8] After East India
Company, came the Dutch East India Company, founded International business is also a specialist eld of academic
1

CRITICISM OF MULTINATIONALS

research. Economic theories of the multinational corporation include internalization theory and the eclectic
paradigm. The latter is also known as the OLI framework.

Slave Trade,[23] maintaining the ships and ports required

for this vast enterprise. During the 19th century formal
corporate rule over colonial holdings largely gave way to
state-controlled colonies,[24][25] however corporate control over colonial economic aairs persisted in a majority
of colonies.[20][24]

During the process of decolonization the European colonial charter companies were disbanded,[20] with the nal colonial corporation, the Mozambique Company, dissolving in 1972. However the economic impact of corporate colonial exploitation has proved to be lasting and far
reaching,[26] with some commentators asserting that this
impact is among the chief causes of contemporary global
income inequality.[22]

Transnational corporations

A transnational corporation diers from a traditional

multinational corporation in that it does not identify itself with one national home. While traditional multinational corporations are national companies with foreign subsidiaries,[13] transnational corporations spread out
their operations in many countries to sustain high levels
Contemporary critics of multinational corporations have
of local responsiveness.[14]
charged that some present day multinational corporations
An example of a transnational corporation is Nestl who
follow the pattern of exploitation and dierential wealth
employ senior executives from many countries and try to
distribution established by the now defunct colonial charmake decisions from a global perspective rather than from
ter corporations, particularly with regards to corporations
one centralized headquarters.[15]
based in the developed world that operate resource exAnother example is Royal Dutch Shell, whose headquar- traction enterprises in the developing world,[27] such as
ters are in The Hague, Netherlands, but whose regis- Royal Dutch Shell, and Barrick Gold. Some of these crittered oce and main executive body are headquartered ics argue that the operations of multinational corporations
in London, United Kingdom.
in the developing world take place within the broader context of neocolonialism.[28]

Multinational corporation and

colonialism

See also: Charter company and Neocolonialism

The history of multinational corporations is closely intertwined the history of colonialism, with the rst multinational corporations founded to undertake colonial expeditions at the behest of their European monarchical
patrons.[16] Prior to the era of New Imperialism, a majority European colonies not held by the Spanish and Portuguese crowns were administered by chartered multinational corporations.[17] Examples of such corporations include the British East India Company,[18] the Swedish
Africa Company, and the Hudsons Bay Company.[19]
These early corporations facilitated colonialism by engaging in international trade and exploration, and creating colonial trading posts.[20] Many of these corporations,
such as the South Australia Company and the Virginia
Company, played a direct role in formal colonization by
creating and maintaining settler colonies.[20] Without exception these early corporations created dierential economic outcomes between their home country and their
colonies via a process of exploiting colonial resources and
labour, and investing the resultant prots and net gain
in the home country.[21] The end result of this process
was the enrichment of the colonizer and the impoverishment of the colonized.[22] Some multinational corporations, such as the Royal African Company, were also
responsible for the logistical component of the Atlantic

However, multinational corporations from emerging markets are playing an ever greater role, increasingly impacting the global economy.[29]

5 Criticism of multinationals
Main articles: Anti-globalization movement and Anticorporate activism
Anti-corporate advocates criticize multinational corporations for entering countries that have low human rights
or environmental standards.[30] In the world economy facilitated by multinational corporations, capital will increasingly be able to play workers, communities, and nations o against one another as they demand tax, regulation and wage concessions while threatening to move. In
other words, increased mobility of multinational corporations benet capital while workers and communities lose.
Some negative outcomes generated by multinational corporations include increased inequality, unemployment,
and wage stagnation.[31]
The aggressive use of tax avoidance schemes allows
multinational corporations to gain competitive advantages over small and medium-sized enterprises.[32] Organizations such as the Tax Justice Network criticize
governments for allowing multinational organizations to
escape tax since less money can be spent for public
services.[33]
The 5 Cons of Multinational Corporations

3
1. The Market Dominance of Multinational Corporations
- The market dominance of multinational corporations
makes it hard for the local small rms to succeed and
thrive. For instance, there are arguments stating that the
larger supermarkets squeeze out a notable margin of the
local corner stores that lead to lesser diversity.

[7] Koenig-Archibugi, Mathias. Transnational Corporations

and Public Accountability (PDF). Gary 2004: 106. Retrieved 2 February 2015. Krugman, Paul (20 March
1997). In Praise of Cheap Labor: Bad Jobs at Bad Wages
Are Better than No Jobs at All. Slate. Retrieved 2 February 2015.

2. Consumers Expenses - Companies are usually interested at the consumers expense. The multinational companies commonly have the power of monopoly that gives
them the chance of making excess prot.

[8] GlobalInc. An Atlas of The Multinational Corporation

Medard Gabel & Henry Bruner, New York: The New
Press , 2003. ISBN 1-56584-727-X.
[9] http://www.kb.nl/themas/geschiedenis-en-cultuur/

koloniaal-verleden/voc-1602-1799
3. Pushing Local Firms Out Of Business - In the developing economies, these giant multinationals use the
economies of scale for pushing the local rms out of their [10] Mingst, Karen A. (2014). Essentials of international relations. W. W. Norton & Company. p. 310. ISBN 978-0businesses.
393-92195-3.

4. Criticized For Using Slave Labor - Multinational corporations are being criticized for using the so-called slave [11] Mingst, Karen A. (2014). Essentials of international relations. W. W. Norton & Company. p. 311. ISBN 978-0labor wherein the workers are paid with very small wages.
393-92195-3.

5. Environment Threat - For the sake of prot, these

global companies commonly contribute to pollution as [12] Gilpin, Robert (1975). Three models of the future. International Organization. p. 39.
well as make use of the non-renewable resources that can
be a threat to the environment.
[13] Drucker, Peter F. (1997). The Global Economy and the
Nation State (PDF). Council on Foreign Relations. p. 167.

See also
Corporation
Economic liberalism
Free market
Globalization
Global workforce
List of multinational corporations
World economy

References

[1] Pitelis, Christos; Roger Sugden (2000). The nature of the

transnational rm. Routledge. p. H72. ISBN 0-41516787-6.
[2] Multinational Corporations.
[3] Roy D. Voorhees, Emerson L. Seim, and John I. Coppett,
Global Logistics and Stateless Corporations, Transportation Practitioners Journal 59, 2 (Winter 1992): 14451.
[4] Doob, Christopher M. (2013). Social Inequality and Social Stratication in US Society. Pearson Education Inc.
[5] Empty citation (help)
[6] Eun, Cheol S.; Resnick, Bruce G. (2013). International
Financial Management,6th Edition. Beijing Chengxin
Weiye Printing Inc.

[14] Case study: The Relationship between the Structure/Strategy of Multinational Corporations and Patterns
of Knowledge Sharing within them (PDF). Oxford
University Press. 2009.
[15] Schermerhorn, John R. (2009). Exploring Management.
John Wiley and Sons. p. 387. ISBN 0-470-16964-8.
[16] Jerey, Alex, and Joe Painter. Imperialism and Post
colonialism. Political Geography: An Introduction to
Space and Power. London: SAGE, 2009. 174-75. Print.
[17] Robins, Nick. This Imperious Company. The Corporation That Changed the World How the East India Company Shaped the Modern Multinational. London: Pluto,
2006. 24-25. Print.
[18] Robins, Nick. The Corporation That Changed the World
How the East India Company Shaped the Modern Multinational. London: Pluto, 2006. Print.
[19] Royle, Stephen A. Company, Crown and Colony: The
Hudsons Bay Company and Territorial Endeavor in Western Canada. London: I.B. Tauris, 2011. Print.
[20] Micklethwait, John, and Adrian Wooldridge. 2003. The
company: A short history of a revolutionary idea. New
York: Modern Library.
[21] Howe, Stephen. Empire by Sea. Empire: A Very Short
Introduction. Oxford: Oxford UP, 2002. 77-80. Print.
[22] Angeles, Luis. Income Inequality and Colonialism
(PDF). European Economic Review 51.5 (2007): 1155176.
[23] Howe, Stephen. Empire by Sea. Empire: A Very Short
Introduction. Oxford: Oxford UP, 2002. 67. Print.

[24] Jerey, Alex, and Joe Painter. Imperialism and Postcolonialism. Political Geography: An Introduction to Space
and Power. London: SAGE, 2009. 175. Print.
[25] Robins, Nick. The Corporation That Changed the World
How the East India Company Shaped the Modern Multinational. London: Pluto, 2006. 145. Print.
[26] Howe, Stephen. Empire by Sea. Empire: A Very Short
Introduction. Oxford: Oxford UP, 2002. 78-83. Print.
[27] Bakan, Joel. The Corporation: The Pathological Pursuit
of Prot and Power. New York: Free, 2004. Print.
[28] Azikiwe, Abayomi. Burkina Faso: Masses Rise Up
Against Neo-Colonial Rule. Global Research. Centre for
Research on Globalization, 04 Nov. 2014. Web. 07 Feb.
2015.
[29] Dossier about emerging-market multinationals. D+C,
development and cooperation. December 2015. Retrieved 21 December 2015.
[30] Marc 'Globalization, Power, and Survival: an Anthropological Perspective', pg 484486. Anthropological Quarterly Vol.79, No. 3. Institute for Ethnographic Research,
2006
[31] Crotty, Epstein & Kelly (1998). Multinational corps in
neo-liberal regime. Cambridge University Press. p. 2.
[32] Library of the European Parliament Corporate tax avoidance by multinational rms
[33] Tax Justice Network Taxing corporations

External links
Data on transnational corporations
UNCTAD publications on multinational corporations

EXTERNAL LINKS

Text and image sources, contributors, and licenses

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