GEOG 1 Economic Geography report Multinational Companies Also referred to as multinational/transnational/international corporations/companies Definition: enterprises that control economic

mic assets in other countries (http://www.grips.ac.jp/csids/perspect ives/perspective03.pdf) A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries. huge company that does business in several countries; richer than entire countries in the less developed world A multinational company has branches in may countries. Characterized by having main facilities/offices/headquarters in their respective home countries (often developed), with smaller offices and factories in host countries (usually developing countries, where labor is cheap and production costs are low) More often than not, these corporations command enormous financial resources, possess vast technical resources Multinational companies occupy a powerful position in the global economy (accounting for around 2/3 of international trade) in 1999, 51 of the worlds 100 largest companies were corporations ex. In 2001, General Electrics (GE) revenues reached 126 billion dollars, more than the combined national incomes of sub-Saharan Africa (except the Republic of South Africa) A majority of major multinationals are American, Japanese or Western European (eg. Coca-Cola, Nike, Toshiba, Honda,

BMW) ( Considered to be one of the most important actors in the global economy, due to its implications to several developing countries (Advantages and Disadvantages) Advantages: provide jobs to its host countries, utilization of local labor as an effect, they indirectly improve education and work skills, provide technology, improve roads, airports, etc. and energy production bring inward investment to their host countries (often developing nations) = most important advantage -> Foreign Direct Investment (FDI) in developing countries has increased dramatically more recently -> FDI considered to be the biggest source of external funds to such nations, mostly coming from MNCs/TNCs -> in 2002, 162 billion dollars of FDI went to developing countries, as opposed to official development assistance (ODA) which contributed only $58 billion Disadvantages: most jobs created from MNCs tend to be low-paying and requiring only a minimum amount of skill; employment might not be as extensive as hoped -> hence, the laborers hired by MNCs are reduced to mere insignificant parts of a multinational machine -> better, high-paying jobs tend to go to more skilled workers from other countries MNCs tend not to consult locals about their plans -> even the MNC-affiliate in the host country does not have a say as to how the corporation goes about in their operations their size and power could be used to exploit weak and/or corrupt governments to get them better deals some MNCs exploit the resources of

their host country to the point that the environmental despoilment takes place (eg. case of some mining companies throughout the world, ChevronTexaco being sued by indigenous Amazon rainforest people for environmental damage) MNC/TNC investment is not permanent, as such corporations can leave at anytime, off to places more beneficial/advantageous for their company -> their departure could lead to the loss of benefits they gave their previous host country These companies are first and foremost profit-seeking organizations, not development agencies -> often, the loyalty of MNCs/TNCs are to their own best interests (most profitable)

SOURCES: http://news.bbc.co.uk/cbbcnews/hi/find_out/guides/ world/trade/newsid_3099000/3099680.stm http://www.scalloway.org.uk/trad4.htm http://www.investopedia.com/terms/m/multinationalc orporation.asp#ixzz1otVwE5Bd http://www.investopedia.com/terms/m/multinationalc orporation.asp#axzz1onxZyAVl http://ec.europa.eu/development/body/publications/c ourier/courier196/en/en_036_ni.pdf http://www.grips.ac.jp/csids/perspectives/perspectiv e03.pdf