Multination corporations

Multinational corporations (MNC’s) have grown in importance as globalisation proceeded and they are a factor in encouraging the globalisation process. An MNC is typically a huge corporation spanning several continents with one home base, which might be in the UK, the USA, Holland, France, Japan…. it can be anywhere but is almost always in the country in which it first began. Some are the result of mergers, horizontal or vertical, as a company in country A takes over an existing company in a different country. Others are the result of the original company in country A investing money in country B to build a factory or firm there.

You will certainly have heard about a lot of MNC’s, even if you did not know that this is what they were! Well-known examples are Ford (motor vehicles), Unilever, Sony, IBM, Philips, and Reckitt and Colman.

These large companies have huge sums to invest and the world is their oyster. They often try to locate production where the manufacturing costs will be low, so recipient countries include places like China, India, Indonesia, Pakistan and Thailand. Various service centres will normally be established to cover the different parts of the world.

In the last half of the twentieth century, globalisation was rapid. It was assisted by a huge fall in the costs of communication and finding information, as well as by tariff cuts and quota reductions or elimination. MNC’s took advantage and grew rapidly as part of this; in addition they were responsible for pressuring governments to take action, such as tariff cuts, which helped the MNC’s to expand. By the end of the last century, trade between multi-nationals themselves has been estimated to account for one third of world trade, and another third is made up of trade by MNC’s with non- affiliates. They are indeed major players!

We return to look at MNC’s, what they do and the arguments for and against them in Unit 'Globalisation and Protection'.