Multinational Corporations Essay

international conjunctions dupe existed since the beginning of abroad divvy up. They make water remained a part of the blood scene throughout history, pass water outing their modern descriptor in the 17th and 18th centuries with the creation of large, European-based monopolistic disturbances such as the British einsteinium India Comp all during the age of colonization. transnational concerns were viewed at that judgment of conviction as agents of civilization and played a pivotal role in the commercial and industrial development of Asia, South America, and Africa.By the end of the ni net incomeeenth century, advances in communications had to a greater extent closely linked world mart places, and transnational corporations retained their favorable image as instruments of improved global transaction through commercial ties. The existence of close world(prenominal) trading relations did not prevent the outbreak of two world wars in the showtime half of the twentieth cen tury, un little an even more closely strand world economy emerged in the aftermath of the period of conflict. In more recent times, international corporations have gr avow in business office and visibility, but have come to be viewed more ambivalently by both g everywherenments and consumers worldwide.Indeed, internationals at once atomic add 18 viewed with increased suspicion given their perceived lack of concern for the sparing welf atomic number 18 of particular geographical regions and the public impression that multinationals be gaining power in relation to national government agencies, international trade federations and organizations, and topical anaesthetic, national, and international fag out organizations. Despite such concerns, multinational corporations appear collected to expand their power and influence as barriers to international trade preserve to be removed.Furthermore, the actual nature and methods of multinationals atomic number 18 in large foot print misunders overlyd by the public, and their considerable-term influence is likely to be less sinister than imagined. Multinational corporations sh are many common traits, including the methods they theatrical role to penetrate new grocerys, the manner in which their overseas subsidiaries are tied to their home trading operations, and their interaction with national governmental agencies and national and international advertize organizations. WHAT IS A MULTINATIONAL CORPORATION? As the name implies, a multinational corporation is a business concern with operations in more than oneness country.These operations outside the associations home country may be linked to the parent by merger, operated as subsidiaries, or have considerable autonomy. Multinational corporations are sometimes perceived as large, utile enterprises with little or no regard for the social and sparing well-being of the countries in which they operate, but the reality of their situation is more com plicated. There are over 40,000 multinational corporations currently operating in the global economy, in addition to approximately 250,000 overseas affiliates running cross-continental businesses.In 1995, the top cc multinational corporations had combined sales of $7. 1 trillion, which is equivalent to 28. 3 share of the worlds gross domestic crossway. The top multinational corporations are headquartered in the United States, Western Europe, and Japan they have the capacity to bring into being global trade, production, and financial transactions. Multinational corporations are viewed by many as favoring their home operations when qualification difficult economic decisions, but this determination is declining as companies are forced to respond to increasing global competition.The earth Trade Organization (WTO), the international Monetary Fund (IMF), and the World wedge are the three institutions that underwrite the basic rules and regulations of economic, monetary, and trade relations betwixt countries. Many create nations have loosened trade rules under blackjack from the IMF and the World Bank. The domestic financial foodstuffs in these countries have not been authentic and do not have appropriate laws in place to alter domestic financial institutions to stand up to extraneous competition.The administrative setup, juridic systems, and law-enforcing agencies generally cannot guarantee the social discipline and political stability that are necessary in order to support a growth-friendly atmosphere. As a result, virtually multinational corporations are investing in certain geographic locations plainly. In the 1990s, most opposed investment was in high-income countries and a some geographic locations in the South like East Asia and Latin America. consort to the World Banks 2002 World Development Indicators, there are 63 countries considered to be low-income countries.The share of these low-income countries in which foreign countries are making direct investments is really depressed it rose from 0. 5 percent 1990 to only 1. 6 percent in 2000. Although foreign direct investment in development countries rose considerably in the 1990s, not all developing countries benefited from these investments. Most of the foreign direct investment went to a very small number of lower and upper middle income developing countries in East Asia and Latin America. In these countries, the rate of economic growth is increasing and the number of people living at poverty level is falling.However, there are allay nearly 140 developing countries that are showing very slow growth rates while the 24 richest, developed countries (plus other 10 to 12 newly industrialized countries) are benefiting from most of the economic growth and prosperity. Therefore, many people in the developing countries are still living in poverty. Similarly, multinational corporations are viewed as being exploitatory of both their hammerers and the local anesthetic enviro nment, given their relative lack of association with any given locality.This criticism of multinationals is valid to a point, but it must be remembered that no corporation can successfully operate without regard to local social, labor, and environmental standards, and that multinationals in large measure do conform to local standards in these regards. Multinational corporations are also seen as acquiring too much political and economic power in the modern business environment. Indeed, corporations are able to influence public policy to some story by threatening to move jobs overseas, but companies are practically prevented from employing this manoeuvre given the need for highly trained workers to produce many products. much(prenominal) workers can seldom be found in low-wage countries. Furthermore, once they enter a market, multinationals are bound by the same constraints as domestically owned concerns, and find it difficult to abandon the infrastructure they produced to enter th e market in the first place. The modern multinational corporation is not of necessity headquartered in a wealthy nation. Many countries that were recently classified as part of the developing world, including Brazil, Taiwan, Kuwait, and Venezuela, are now home to large multinational concerns. The days of corporate colonization seem to be nearing an end.Multinational corporations come with three general procedures when seeking to access new markets merger with or direct acquisition of existing concerns sequential market entry and join ventures. Merger or direct acquisition of existing companies in a new market is the most straightforward method of new market penetration employed by multinational corporations. Such an entry, known as foreign direct investment, allows multinationals, especially the larger ones, to take full value of their size and the economies of scale that this provides.The rash of mergers within the global automotive industries during the new 1990s are illustra tive of this method of gaining access to new markets and, significantly, were fox in response to increased global competition. Multinational corporations also make use of a procedure known as sequential market entry when seeking to penetrate a new market. Sequential market entry often also includes foreign direct investment, and involves the establishment or acquisition of concerns operating in niche markets think to the parent companys product lines in the new country of operation.Japans Sony Corporation made use of sequential market entry in the United States, beginning with the establishment of a small television conclave ready in San Diego, California, in 1972. For the adjoining two years, Sonys U. S. operations remained confined to the manufacture of televisions, the parent companys leading product line. Sony branched out in 1974 with the creation of a magnetic attach plant in Dothan, Alabama, and expanded further by opening an audio frequency equipment plant in Delano, Pennsylvania, in 1977.After a period of desegregation brought on by an unfavorable exchange rate between the pine away and dollar, Sony continued to expand and diversify its U. S. operations, adding facilities for the production of computer displays and data memory systems during the 1980s. In the 1990s, Sony further diversified it U. S. facilities and now also produces semiconductors and personal telecommunications products in the United States. Sonys example is a classic case of a multinational using its core product line to defeat native competition and lay the foundation for the sequential expansion of corporate activities into related areas.Finally, multinational corporations often access new markets by creating joint ventures with firms already operating in these markets. This has particularly been the case in countries formerly or presently under communist rule, including those of the former Soviet Union, eastern Europe, and the great deals Republic of China. In such join t ventures, the venture attendant in the market to be entered retains considerable or even solvent autonomy, while realizing the advantages of technology transfer and management and production expertise from the parent concern.The establishment of joint ventures has often proved awkward in the long run for multinational corporations, which are likely to find their venture partners are formidable competitors when a more direct penetration of the new market is attempted. Multinational corporations are thus able to penetrate new markets in a variety of ways, which allow existing concerns in the market to be accessed a varying degree of autonomy and control over operations. bit no one doubts the economic success and pervasiveness of multinational corporations, their motives and actions have been called into interrogative mood by social welfare, environmental protection, and labor organizations and government agencies worldwide. National and international labor unions have expressed concern that multinational corporations in economically developed countries can avoid labor negotiations by simply despicable their jobs to developing countries where labor costs are markedly less.Labor organizations in developing countries face the converse of the same problem, as they are unremarkably obliged to negotiate with the national subsidiary of the multinational corporation in their country, which is usually willing to negotiate contract terms only on the basis of domestic wage standards, which may be well to a lower place those in the parent companys country. Offshore outsourcing, or offshoring, is a term used to describe the practice of using cheap foreign labor to manufacture goods or provide services only to contend them back into the domestic marketplace.Today, many Americans are concern about the issue of whether American multinational companies will continue to export jobs to cheap overseas labor markets. In the fall of 2003, the University of California-Berke ley showed that as many as 14 million American jobs were potentially at risk over the next decade. In 2004, the United States faced a half-trillion-dollar trade deficit, with a redundancy in services. Opponents of offshoring claim that it takes jobs away from Americans, while also increasing the unstableness of trade.When foreign companies set up operations in America, they usually portion out the products manufactured in the U. S. to American consumers. However, when U. S. companies outsource jobs to cheap overseas labor markets, they usually sell the goods they produce to Americans, rather than to the consumers in the country in which they are made. In 2004, the states of Illinois and Tennessee passed legislation aimed at limiting offshoring in 2005, some other 16 states considered bills that would limit state aid and tax breaks to firms that outsource abroad.Insourcing, on the other hand, is a term used to describe the practice of foreign companies employing U. S. workers. Fo reign automakers are among the largest insourcers. Many non-U. S. auto manufacturers have built plants in the United States, thus ensuring access to American consumers. Auto manufacturers such as Toyota now make approximately one third of its profits from U. S. automobile sales. Social welfare organizations are similarly concerned about the actions of multinationals, which are presumably less interested in social matters in countries in which they maintain subsidiary operations.environmental protection agencies are equally concerned about the activities of multinationals, which often maintain environmentally hazardous operations in countries with minimal environmental protection statutes. Finally, government agencies fear the growing power of multinationals, which once again can use the threat of removing their operations from a country to secure favorable regulation and legislation. All of these concerns are valid, and abuses have undoubtedly occurred, but many forces are also at work to keep multinational corporations from wielding unlimited power over even their own operations.Increased consumer sentiency of environmental and social issues and the impact of commercial practise on social welfare and environmental quality have greatly influenced the actions of all corporations in recent years, and this trend shows every sign of continuing. Multinational corporations are constrained from moving their operations into areas with excessively low labor costs given the relative lack of skilled laborers available for work in such areas.Furthermore, the sensitivity of the modern consumer to the plight of individuals in countries with repressing governments mitigates the removal of multinational business operations to areas where legal protection of workers is minimal. Examples of consumer response to unpopular action by multinationals are plentiful, and include the outcry against the use of sweatshop labor by Nike and activism against operations by the Shell Oil order in Nigeria and PepsiCo in Myanmar (formerly Burma) due to the repressive nature of the governments in those countries.Multinational corporations are also constrained by consumer attitudes in environmental matters. Environmental disasters such as those which occurred in Bhopal, India (the explosion of an unsafe chemical plant operated by Union Carbide, resulting in great loss of life in surrounding areas) and Prince William Sound, Alaska (the rupture of a single-hulled tanker, the Exxon Valdez, causing an environmental catastrophe) led to continual bad publicity for the corporations involved and continue to serve as a reminder of the long-term cost in consumer approval of ignoring environmental, labor, and safety concerns.Similarly, consumer awareness of global issues lessens the power of multinational corporations in their dealings with government agencies. International conventions of governments are also able to regulate the activities of multinational corporations withou t fear of economic reprisal, with examples including the 1987 Montreal Protocol limiting global production and use of chlorofluorocarbons and the 1989 Basel Convention adjust the treatment of and trade in chemical wastes.In fact, despite worries over the impact of multinational corporations in environmentally sensitive and economically developing areas, the corporate social performance of multinationals has been surprisingly favorable to date. The activities of multinational corporations pass on technology transfer from the developed to the developing world, and the wages paid to multinational employees in developing countries are generally above the national average.When the actions of multinationals do cause a loss of jobs in a given country, it is often the case that another multinational will move into the resulting vacuum, with little net loss of jobs in the long run. Subsidiaries of multinationals are also likely to obligate to the corporate standard of environmental protec tion even if this is more plastered than the regulations in place in their country of operation, and so in most cases create less pollution than similar indigenous industries.