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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]

1

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 different 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 fixed-point production, fixedby the parent companies.[5]
point sales products, in order to seek maximum profit;
• 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 significant investments in a foreign country
• Buying and selling licenses in foreign markets

5. Many large multinational companies due to eco• Engaging in contract manufacturing—permitting 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 benefit 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 first 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 effectively “stateless” actors, is one of several urgent
global socioeconomic problems that emerged during the
late twentieth century.[7]

One of the first 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 field of academic
1

Slave Trade. but whose regis. and Barrick Gold. a majority European colonies not held by the Spanish and Portuguese crowns were administered by chartered multinational corporations.[19] These early corporations facilitated colonialism by engaging in international trade and exploration.[15] based in the developed world that operate resource exAnother example is Royal Dutch Shell. regulation and wage concessions while threatening to move. unemployment.[18] the Swedish Africa Company.[26] with some commentators asserting that this impact is among the chief causes of contemporary global income inequality.[20][24] 3 During the process of decolonization the European colonial charter companies were disbanded.2 5 CRITICISM OF MULTINATIONALS research.[24][25] however corporate control over colonial economic affairs persisted in a majority of colonies.[20] Without exception these early corporations created differential economic outcomes between their home country and their colonies via a process of exploiting colonial resources and labour. increasingly impacting the global economy.[22] Some multinational corporations. Economic theories of the multinational corporation include internalization theory and the eclectic paradigm. Netherlands. and nations off against one another as they demand tax. whose headquar.[21] The end result of this process was the enrichment of the colonizer and the impoverishment of the colonized.[20] Many of these corporations.[30] In the world economy facilitated by multinational corporations. dissolving in 1972.traction enterprises in the developing world.[13] transnational corporations spread out their operations in many countries to sustain high levels Contemporary critics of multinational corporations have of local responsiveness.[28] 4 Multinational corporation and colonialism See also: Charter company and Neocolonialism The history of multinational corporations is closely intertwined the history of colonialism. During the 19th century formal corporate rule over colonial holdings largely gave way to state-controlled colonies. particularly with regards to corporations one centralized headquarters. In other words. communities. and creating colonial trading posts. While traditional multinational corporations are national companies with foreign subsidiaries. and the Hudson’s Bay Company.[14] charged that some present day multinational corporations An example of a transnational corporation is Nestlé who follow the pattern of exploitation and differential 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.[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. multinational corporations from emerging markets are playing an ever greater role.[33] The 5 Cons of Multinational Corporations . The latter is also known as the OLI framework.[22] Transnational corporations A transnational corporation differs from a traditional multinational corporation in that it does not identify itself with one national home. and investing the resultant profits and net gain in the home country.[16] Prior to the era of New Imperialism.[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.[31] The aggressive use of tax avoidance schemes allows multinational corporations to gain competitive advantages over small and medium-sized enterprises. were also responsible for the logistical component of the Atlantic However.[20] with the final colonial corporation. United Kingdom.Royal Dutch Shell. increased mobility of multinational corporations benefit capital while workers and communities lose.[23] maintaining the ships and ports required for this vast enterprise. the Mozambique Company. such as the Royal African Company. played a direct role in formal colonization by creating and maintaining settler colonies. and wage stagnation. in the developing world take place within the broader context of neocolonialism. Some of these crittered office and main executive body are headquartered ics argue that the operations of multinational corporations in London. with the first multinational corporations founded to undertake colonial expeditions at the behest of their European monarchical patrons. However the economic impact of corporate colonial exploitation has proved to be lasting and far reaching. capital will increasingly be able to play workers. such as the South Australia Company and the Virginia Company. Some negative outcomes generated by multinational corporations include increased inequality.[27] such as ters are in The Hague.[17] Examples of such corporations include the British East India Company.

77-80. London: SAGE. The nature of the transnational firm. 393-92195-3. [7] Koenig-Archibugi. “Imperialism and Post colonialism.Companies are usually interested at the consumer’s expense. 5. Gary 2004: 106. there are arguments stating that the larger supermarkets squeeze out a notable margin of the local corner stores that lead to lesser diversity. Oxford: Oxford UP. Paul (20 March 1997). John R. [17] Robins. Environment Threat . (2013).5 (2007): 1155176. Norton & Company.kb. Slate. Pushing Local Firms Out Of Business . Retrieved 2 February 2015. 387. 2006. John. Nick. ISBN 1-56584-727-X”.For the sake of profit. The multinational companies commonly have the power of monopoly that gives them the chance of making excess profit. ISBN 978-0businesses. Exploring Management. Oxford University Press. Print.B. (2014). Stephen A.” Empire: A Very Short Introduction. “This Imperious Company. Essentials of international relations. p. 2002. Coppett.6th Edition. Retrieved 2 February 2015. Print. Karen A. [9] http://www. 24-25. 2003. Consumer’s Expenses . New York: Modern Library. International Organization.” Transportation Practitioners Journal 59. Tauris. 393-92195-3. Seim.In the developing economies. International Financial Management. Roger Sugden (2000). Criticized For Using Slave Labor . [21] Howe. Voorhees. Stephen. “Transnational Corporations and Public Accountability” (PDF). Karen A. (2013). W. 2009. [14] Case study: The Relationship between the Structure/Strategy of Multinational Corporations and Patterns of Knowledge Sharing within them (PDF). The company: A short history of a revolutionary idea. 67. European Economic Review 51.The market dominance of multinational corporations makes it hard for the local small firms to succeed and thrive. [20] Micklethwait. Social Inequality and Social Stratification in US Society. 2002. [22] Angeles. 167. Alex. ISBN 0-41516787-6. Beijing Chengxin Weiye Printing Inc. Print. Bruce G. Essentials of international relations. Cheol S. 2006. Company. 174-75. [13] Drucker. [2] “Multinational Corporations”. Stephen. Three models of the future. [16] Jeffrey. Council on Foreign Relations. New York: The New Press . London: Pluto. and Adrian Wooldridge.” The Corporation That Changed the World How the East India Company Shaped the Modern Multinational. Routledge. Print. [19] Royle. [4] Doob. [5] Empty citation (help) [6] Eun. ISBN 0-470-16964-8. [8] “GlobalInc. (2014).” Empire: A Very Short Introduction.3 1. p. [15] Schermerhorn. Norton & Company. Oxford: Oxford UP. these giant multinationals use the economies of scale for pushing the local firms out of their [10] Mingst. Resnick. Nick. 2003. and John I. these global companies commonly contribute to pollution as [12] Gilpin. . Pearson Education Inc. Christos. p. 311. Christopher M. H72.Multinational corporations are being criticized for using the so-called slave [11] Mingst. The Corporation That Changed the World How the East India Company Shaped the Modern Multinational. 2011. well as make use of the non-renewable resources that can be a threat to the environment.nl/themas/geschiedenis-en-cultuur/ koloniaal-verleden/voc-1602-1799 3. The Market Dominance of Multinational Corporations . (1997). and Joe Painter. W. Mathias. ISBN 978-0labor wherein the workers are paid with very small wages. p. 2009. “Global Logistics and Stateless Corporations.. The Global Economy and the Nation State (PDF). W. Crown and Colony: The Hudson’s Bay Company and Territorial Endeavor in Western Canada. London: I. 2. London: Pluto. [3] Roy D. 39. An Atlas of The Multinational Corporation” Medard Gabel & Henry Bruner. Print. Robert (1975). For instance. p. John Wiley and Sons. p. “Income Inequality and Colonialism” (PDF). [23] Howe.” Political Geography: An Introduction to Space and Power. “Empire by Sea. 4. (2009). Emerson L. W. 6 See also • Corporation • Economic liberalism • Free market • Globalization • Global workforce • List of multinational corporations • World economy 7 References [1] Pitelis. Print. 2 (Winter 1992): 14451. Peter F. “In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better than No Jobs at All”. Luis. [18] Robins. Krugman. “Empire by Sea. 310.

145.4 8 [24] Jeffrey. 2004. p. Print. The Corporation That Changed the World How the East India Company Shaped the Modern Multinational. [28] Azikiwe. The Corporation: The Pathological Pursuit of Profit and Power. Power. “Burkina Faso: Masses Rise Up Against Neo-Colonial Rule. [32] Library of the European Parliament Corporate tax avoidance by multinational firms [33] Tax Justice Network Taxing corporations 8 External links • Data on transnational corporations • UNCTAD publications on multinational corporations EXTERNAL LINKS . Nick. Abayomi. Centre for Research on Globalization. Multinational corps in neo-liberal regime. and Joe Painter. 175. Web. 78-83. Joel. 2015. 04 Nov. 2014. “Empire by Sea. pg 484–486. [25] Robins. Stephen. 3. [30] Marc 'Globalization. No. D+C. [29] “Dossier about emerging-market multinationals”.79.” Empire: A Very Short Introduction. London: Pluto. “Imperialism and Postcolonialism. 2. December 2015. New York: Free. 2006 [31] Crotty. Cambridge University Press. Anthropological Quarterly Vol. Print. Print. Alex. Retrieved 21 December 2015. development and cooperation. 2009.” Political Geography: An Introduction to Space and Power. and Survival: an Anthropological Perspective'. 2006. Institute for Ethnographic Research. Epstein & Kelly (1998).” Global Research. [27] Bakan. Print. [26] Howe. 07 Feb. London: SAGE. Oxford: Oxford UP. 2002.

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