{"id":267,"date":"2014-09-05T16:30:14","date_gmt":"2014-09-05T16:30:14","guid":{"rendered":"https:\/\/courses.candelalearning.com\/internationalbusiness1xmaster\/?post_type=chapter&p=267"},"modified":"2015-02-17T20:37:19","modified_gmt":"2015-02-17T20:37:19","slug":"reading-multinational-firms","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-internationalbusiness\/chapter\/reading-multinational-firms\/","title":{"raw":"Reading: Multinational Firms","rendered":"Reading: Multinational Firms"},"content":{"raw":"
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With the advent of improved communication and technology, corporations have been able to expand into multiple countries.<\/h2>\r\n<\/div>\r\n
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KEY\u00a0Points<\/h3>\r\n
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  • Multinational\u00a0corporations\u00a0operate in multiple countries.<\/li>\r\n\t
  • MNCs have considerable bargaining power and may negotiate business or trade policies with success.<\/li>\r\n\t
  • A corporation may choose to locate in a special economic zone, a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/div>\r\n<\/div>\r\n
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    Term<\/strong><\/h4>\r\n
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    • Multinational corporation<\/em>:\u00a0 A corporation or\u00a0enterprise\u00a0that operates in multiple countries.<\/li>\r\n<\/ul>\r\n
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      Example<\/strong><\/h4>\r\n
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      • McDonalds operates in over 119 different countries, making it a fairly large MNC by any\u00a0standard<\/li>\r\n<\/ul>\r\n<\/div>\r\n<\/div>\r\n
        <\/div>\r\n
        \r\n\r\nA multinational corporation (MNC) or multinational enterprise (MNE) is a corporation registered in more than one country or has operations in more than one country. It is a large corporation which both produces and sells\u00a0goods\u00a0or services\u00a0in various countries . It can also be referred to as an international corporation. The first multinational corporation was the Dutch East India Company, founded March 20, 1602.\r\n\r\n
        \"\"\r\n
        Ford Motor Corp.<\/div>\r\n
        Ford is a MNC with\u00a0operations\u00a0throughout the world.<\/figcaption><\/figure> \r\n\r\nCorporations may make a\u00a0foreign direct investment. Foreign direct investment is direct investment into one country by a company located in another country. Investors buy a company in the country or expand operations of an existing business in the country.\r\n\r\nA corporation may choose to locate in a special economic zone, a geographical region with economic and other laws that are more free-market-oriented than a country's typical or national laws.\r\n\r\nMultinational corporations are important factors in the processes of globalization. National and local governments often compete against one another to attract MNC facilities, with the expectation of increased tax revenue, employment and economic activity. To compete, political powers push toward greater\u00a0autonomy\u00a0for corporations. MNCs play an important role in\u00a0developing\u00a0economies\u00a0of developing countries.\r\n\r\nMany economists argue that in countries with comparatively low labor costs and weak environmental and social protection, multinationals actually bring about a \"race to the top.\" While multinationals will see a low tax burden or low labor costs as an element of\u00a0comparative advantage, MNC profits are tied to operationalefficiency, which includes a high degree of standardization. Thus, MNCs are likely to adapt production processes in many of their operations to conform to the standards of the most rigorous\u00a0jurisdiction\u00a0in which they operate.\r\n\r\nAs for labor costs, while MNCs pay workers in developing countries far below levels in countries where labor productivity is high (and accordingly, will adopt more labor-intensive production processes), they also tend to pay a\u00a0premium\u00a0over local labor rates of 10% to 100%.\r\n\r\nFinally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing a plant, training workers and so on can be costly. Therefore, once established in a jurisdiction, MNCs are potentially vulnerable to arbitrary government intervention like expropriation, sudden contract renegotiation and the arbitrary withdrawal or compulsory purchase of licenses. Thus both the negotiating power of MNCs and the \"race to the bottom\" critique may be overstated while understating the\u00a0benefits\u00a0(besides tax revenue) of MNCs becoming established in a jurisdiction.\r\n\r\n<\/div>\r\n<\/div>\r\n
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        <\/h3>\r\n
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        GLOSSARY<\/h3>\r\n
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        \r\n\r\nAutonomy<\/strong>\r\n\r\nThe capacity to make an informed, uncoerced decision.\u00a0Self-government; freedom to act or function independently.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nBenefit<\/strong>\r\n\r\nAn advantage, help or aid from something\u00a0Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries.\u00a0An advantage, help, or aid from something.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nCommunication<\/strong>\r\n\r\nThe concept or state of exchanging information between entities.\u00a0an instance of information transfer; a conversation or discourse\u00a0the concept or state of exchanging data or information between entities.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nComparative advantage<\/strong>\r\n\r\nThe ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.\u00a0The concept that a certain good can be produced more efficiently than others due to a number of factors, including productive skills, climate, natural resource availability, and so forth.\u00a0The ability of a party to produce a particular good or service at a lower margin and opportunity cost over another.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nCorporation<\/strong>\r\n\r\nA group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members.\u00a0a group of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct from those of its members.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nDeveloping<\/strong>\r\n\r\nOf a country: becoming economically more mature or advanced; becoming industrialized.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEconomy<\/strong>\r\n\r\nCollective focus of the study of money, currency and trade, and the efficient use of resources. The system of production and distribution and consumption. The overall measure of a currency system; as the national economy.\u00a0The system of production and distribution and consumption. The overall measure of a currency system.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEfficiency<\/strong>\r\n\r\nThe extent to which a resource, such as electricity, is used for the intended purpose; the ratio of useful work to energy expended.\u00a0The extent to which time is well used for the intended task. Improved efficiency was a principle goal of progressives, one they thought attainable by the application of scientific and rational thought to social problems.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEmployment<\/strong>\r\n\r\nThe work or occupation for which one is used, and often paid.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nEnterprise<\/strong>\r\n\r\nA company, business, organization, or other purposeful endeavor.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nFacility<\/strong>\r\n\r\nThe physical means or contrivances to make something (especially a service) possible; the required equipment, infrastructure, location etc.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n
        \r\n\r\nForeign direct investment\u00a0<\/strong>\r\n\r\nInvestment into production or business in a country by an individual or company of another country.\u00a0Foreign direct investment is investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nGlobalization<\/strong>\r\n\r\nA common term for processes of international integration arising from increasing human connectivity and interchange of worldviews, products, ideas, and other cultural phenomena. In particular, advances in transportation and telecommunications infrastructure, including the rise of the Internet, represent major driving factors in globalization and precipitate the further interdependence of economic and cultural activities.\r\n\r\n<\/div>\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nGood<\/strong>\r\n\r\nAn object produced for market.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nInvestment<\/strong>\r\n\r\nA placement of capital in expectation of deriving income or profit from its use.\u00a0The expenditure of capital in expectation of deriving income or profit from its use.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nJurisdiction<\/strong>\r\n\r\nThe limits or territory within which authority may be exercised\u00a0The limits or territory within which authority may be exercised.\u00a0the power, right, or authority to interpret and apply the law.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nLicense<\/strong>\r\n\r\nThe legal terms under which a person is allowed to use a product.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nOperation<\/strong>\r\n\r\nThe method or practice by which actions are done.\u00a0A procedure for generating a value from one or more other values.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nPremium<\/strong>\r\n\r\nA bonus paid in addition to normal payments.\u00a0the price above par value at which a security is sold\u00a0Something offered at a reduced price as an inducement to buy something else.\u00a0something offered at a reduced price as an incentive to buy something else.\u00a0The premium is the amount a policy-holder or his sponsor must pay to a health plan to purchase health coverage.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nProcess<\/strong>\r\n\r\nA series of events to produce a result, especially as contrasted to product.\u00a0in reference to capabilities, a process is how the capability is executed.\u00a0An outgrowth of tissue or cell.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nProductivity<\/strong>\r\n\r\nProductivity is a measure of the efficiency of production and is defined as total output per one unit of a total input.\u00a0The rate at which goods or services are produced by a standard population of workers.\u00a0A ratio of production output to what is required to produce it (inputs).\u00a0The state of being productive, fertile, or efficient; the rate at which goods or services are produced by a standard population of workers.\u00a0the rate at which goods or services are produced by a standard population of workers.\u00a0The rate at which products and services are produced relative to a particular workforce.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nProfits<\/strong>\r\n\r\nCollective form of profit.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nRevenue<\/strong>\r\n\r\nIncome that a company receives from its normal business activities, usually from the sale of goods and services to customers.\u00a0The total income received from a given source.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nRevenues<\/strong>\r\n\r\nIn business, revenue or turnover is income that a company receives from its normal business activities, usually from the sale of goods and services to customers.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nServices<\/strong>\r\n\r\nThat which is produced, then traded, bought or sold, then finally consumed and consists of an action or work.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nStandard<\/strong>\r\n\r\nSomething used as a measure for comparative evaluations. A level of quality or attainment. Standardization\u00a0the process of setting certain norms or standards for a product with regard to shape, size, color, quantity, quality, weight etc.\r\n
        <\/div>\r\n<\/div>\r\n
        \r\n\r\nStandardization<\/strong>\r\n\r\nThe process of setting certain norms or standards for a product with regard to shape, size, color, quantity, quality, weight etc.\r\n
        <\/div>\r\n<\/div>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/div>","rendered":"
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        With the advent of improved communication and technology, corporations have been able to expand into multiple countries.<\/h2>\n<\/div>\n
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        KEY\u00a0Points<\/h3>\n
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