MULTINATIONAL COMPANIES

Multinational Companies



Multinational Companies

Essay plan:

What are multinational companies?

When it started

Positive impact overall

Negative impact created

Conclusion

What are multinational companies?

A multinational corporation is an enterprise which operates its products and services in one country or more. It places its headquarters in its home country, but manages in several countries, called host countries. The headquarters operates all its branches, and offices and other location in host countries. Multinational corporations can be as large as exceeding some countries GDP amounts and therefore these large corporations as influencing economies, international relations and governments (Sherman, 2001, 44).

The first world's multinational corporation was East India Company which generated stock and held partial government authorities such as printing money, agreements on treaties, participating in wars and building colonies (Brooks, 2000, 385).

When it started

In the period of 16th to 18th century the multinational company had its influence on both East and West side. Sea became a major source of trade, and expanding it. The manufacturers seek new markets to increase the output. Sea transportation and free trade supported Multinational Corporation from political and economic side. In the start the MNCs only had the limited access towards their management, capital and ownership. Government helped them directly or indirectly through tariffs, finance and investment.

The end of 20th century saw MNCs getting stronger, increased expansion and more domination globally. MNCs had 70% of total foreign trade from $7 trillion. The services and products of MNCs varied from mining to manufacturing and energy, communication and financial services (Sherman, 2001, 44).

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Positive impact overall

MNCs bring foreign direct investment in the country which is a key tool for development of any economy. Jobs are increased; more vacancy is created because of new factories building up. This would also increase purchasing power of a person as more money would be available for consumption. MNCs help in provision of skilled labour force which is transferred to host countries as well to improvise human capital. If MNCs perform purchasing activities from host countries then the government earns from tax revenue (Brooks, 2000, 385).

If the MNCs find a particular country attractive and profitable then it decides to make it as its host country. The major points looked upon are growth of the company and increasing efficiency and effectiveness. The benefits preferred are less costly location, availability if skilled labour, infrastructure of the country, supporting suppliers and contractors, labour productivity, security and safety, economic and political stability, tax incentives, reasonable cost supplies, ...