The Contemporary World Unit 3 Activity 1: Blogging

 


 Multinational Corporation (MNC)

A multinational corporation (MNC) is a company that operates in its home country, as well as in other countries around the world. It maintains a central office located in one country, which coordinates the management of all its other offices, such as administrative branches or factories.


Characteristics of a Multinational Corporation

1. Very high assets and turnover

To become a multinational corporation, the business must be large and must own a huge amount of assets, both physical and financial. The company’s targets are high, and they are able to generate substantial profits.


2. Network of branches

Multinational companies maintain production and marketing operations in different countries. In each country, the business may oversee multiple offices that function through several branches and subsidiaries.


3.Continued growth

Multinational corporations keep growing. Even as they operate in other countries, they strive to grow their economic size by constantly upgrading and by conducting mergers and acquisitions.


4.Right skills

Multinational companies aim to employ only the best managers, those who are capable of handling large amounts of funds, using advanced technology, managing workers, and running a huge business entity.


5.Good quality products

Because they use capital-intensive technology, they are able to produce top-of-the-line products.



Multinational Corporations Pros and Cons


Benefits of Multinational Corporations

• Create wealth and jobs around the world. Inward investment by multinationals creates much needed foreign currency for developing economies. They also create jobs and help raise expectations of what is possible.

• Large profits can be used for research & development. For example, oil exploration is costly and risky; this could only be undertaken by a large firm with significant profit and resources. It is similar for drug manufacturers who need to take risks in developing new drugs.

• Outsourcing of production by multinationals – enables lower prices; this increases disposable incomes of households in the developed world and enables them to buy more goods and services – creating new sources of employment to offset the lost jobs from outsourcing manufacturing jobs.

• Ensure minimum standards. The success of multinationals is often because consumers like to buy goods and services where they can rely on minimum standards. i.e. if you visit any country you know that the Starbucks coffee shop will give something you are fairly familiar with. It may not be the best coffee in the district, but it won’t be the worst. People like the security of knowing what to expect.



Criticisms of Multinational Corporations

• Companies are often interested in profit at the expense of the consumer. Multinational companies often have monopoly power which enables them to make an excess profit. For example, Shell made profits of £14bn last year.

• Tax avoidance. Many multinationals set up companies in countries with the lowest tax rate. They funnel profit through the countries with the lowest corporation tax rates – e.g. Bermuda, Ireland, Luxemburg. For example: in 2011, Google had £2.5bn of UK sales, but only paid £3.4 million UK tax. A tax rate of 00.1% despite having a global-wide profit margin of 33%. (tax avoiding companies) This means the multinationals are ‘free-riding on smaller companies who cannot attain the same creative tax accounts.

• Outsourcing to cheaper labour-cost economies has caused loss of jobs in the developed world. This is an issue in the US where many multinationals have outsourced production around the world.

• In developing economies, big multinationals can use their economies of scale to push local firms out of business.

• In the pursuit of profit, multinational companies often contribute to pollution and use of non-renewable resources which is putting the environment under threat. For example, some MNCs have been criticised of outsourcing pollution and environmental degradation to developing economies where pollution standards are lower.







Resources: https://corporatefinanceinstitute.com/resources/knowledge/strategy/multinational-corporation/ 

https://www.economicshelp.org/blog/538/economics/multinational-corporations-good-or-bad/


Mga Komento

Mag-post ng isang Komento

Mga sikat na post sa blog na ito

The Contemporary World Unit 2 Activity 3 (Discussion)

Imahe
  I. In the case of the Philippines, how much do you think are we involved in the Modern World-System? What do you think are the advantages and disadvantages of being part of such.  In the case of our Pilininas today, I think the Modern World-System has also reached the Philippines because our country is gradually developing. Many modern technologies have arrived in the Philippines such as train devices used by people, but not all areas in the Philippines have modern technologies. I think the benefits of being part of the Modern World-System are better transportation, better health, and making people’s tasks easier. And the disadvantages of being a part of it are environmental problems and Lack of social interaction and laziness because children now prioritize cell phone games more than parental commands. II. How can we "upgrade" our economy given the, strength of the global economy, especially the giant economies like the United States and Japan? We can upgrade our economy b...
Magbasa nang higit pa

Contemporary World Activity 1

Imahe
                          Globalization   Globalization is the process by which ideas, knowledge, information, goods and services spread around the world. In business, the term is used in an economic context to describe integrated economies marked by free trade, the free flow of capital among countries and easy access to foreign resources, including labor markets, to maximize returns and benefit for the common good. Globalization, or globalisation as it is known in some parts of the world, is driven by the convergence of cultural and economic systems. A. Broad and Inclusive Definition The Advantages and Disadvantages of                    Globalization The Advantages of Globalization  • Increases econo mic growth . By increasing the international exchange of goods, technological advances, and information, globalization increases economic development for any count...
Magbasa nang higit pa

The Contemporary World Unit 2 Activity 2 Reflection Paper Writing and Publishing

Imahe
  Global stratification refers to this unequal distribution among nations. There are two dimensions to this stratification: gaps between nations and gaps within nations.  Global stratification compares the wealth, economic stability, status, and power of countries as a whole. By comparing income and productivity between nations, researchers can better identify global inequalities. Trace how global stratification affects the life cycle of each state in the globe. Effects of Global Stratification. Global stratification greatly affects the life chances of people around the world. As noted earlier, people in the poorest nations live in some of the worst conditions possible. AIDS, malaria, starvation, and other deadly diseases are common. Cause of global stratification The view that global stratification results from a failure of poor nations to have the beliefs, values, and practices necessary for industrialization and rapid economic growth. The view that global stratification re...
Magbasa nang higit pa