A multinational corporation or MNC is a corporation that has its facilities and other assets in at least one country other than its own home country. Such companies have branches and factories in different countries and usually have a centralized head office where they co-ordinate global management. MNC is the most widely used abbreviation, while TNC and MNE are terms used in the United Nations system and international business studies respectively.
John Dunning defines it as an enterprise that engages in foreign direct investment and one that controls value-adding activities in more than one country with the distinguishing factor being that it coordinates value adding activities across borders.
There are different views as to why and how multinational corporations operate. The mercantile approach would suggest the companies are examples of homogenous actors that are structurally determined by the global distribution of power and wealth while the international business perspective would argue they are differentiated actors with diverse strategies.
Technological advancement: Transfer of technology, capital and entrepreneurship. This increases the investment level and thus the income and employment in the country.
Balance of trade: Increase in exports and decrease in imports, thereby improving the balance of payment for the host country.
Economies of scale: Achieving this would help in equalizing the cost of factors of production around the world and also allow for an Inflow of income from overseas profits and management contracts.
Job Creation: Jobs and career opportunities are created at home and abroad in connection with more opportunities to upgrade skill and improve the labour force.
Their market dominance makes it almost impossible for smaller local firms to survive. This is due to the fact that most multinational companies are interested in profit at the expense of the consumer.
Externalities: In the pursuit of profit, Multinational companies often contribute to pollution and use of non-renewable resources which is constantly putting the environment under threat.
Cheap Labour: MNCs have been criticised for using labour workers who are paid poorly by Western standards
More by this Author
The idea of a coming of age or a Bildungsroman stems from the effect that growth has on individuals, someone's growth from childhood to maturity or from a boy to a man is a journey that is pivotal and more times than...
No comments yet.