Multinationals

Multinationals

Introduction

Multinational corporations are those corporations that operate in a number of other countries, other then the home country. In more general terms, any company or a group that derives even one fourth of its revenues from other countries other then the home country, is a multinational company. Multinational corporations have their assets and offer their products and services in at least one country other then in its home country. The offices and factories of such corporations are set up in different countries and a centralized head office to coordinate global management. There are even a few very large multinationals, whose budgets exceed those of small countries. Few examples of multinational corporations are Sony, Coca cola, Honda, Unilever, P&G, Nestle, etc. (Bill, 2009)

Many multinational companies only have interest in the country and are not really interested in putting up their production facilities in that country. For example, Nike. Instead of putting up their own factories to make training shoes and clothes, they make agreements with the local producers in the host country to manufacture a particular range of products for them. This has in a way attracted controversy for the company because this means that the immediate control of the production of Nike products is not really in the hands of the management of Nike. But ofcourse this does not mean that Nike would not be responsible for the actions of the factories that that Nike has chosen to produce their products.

The reasons that many companies choose to go international is that they want to reduce distribution and transport costs, avoid barriers that come in their way of trade, secure supplies of raw materials or secure market, going international also in a way gives the cost advantage, for example low labor costs in some countries.

Discussion

Multinational companies have contributed a lot for the progress of the world, such as successful distribution of different goods and services all around the world, increase in employment opportunities, and economic growth through foreign direct investments especially for growing economies, etc. Their size of operations gives them the advantage of the concept of economies of scale which in turn lowers the average costs and prices for consumers. Their large profits are helpful for major research and development projects. For example, oil exploration is costly, as well as risky, so it can only be undertaken by large corporations with huge profits and resources. It is also true that a even a small group of large multinationals, mainly consisting of banks can control around 80 percent of the global economy. (Bowie, 1988, pp 08). 

But these multinational companies also face problems in operating different countries. Because they operate under different cultures and conditions in different countries, their productivity and profits are affected by international matters a lot, since they have to serve different customers in different countries and have to abide by the laws of that particular country.

Not only this, but multinational companies face internal management issues of their own for working in different ...