A multinational corporation can also be referred to as an international corporation. This is the type of company with production outlets in different countries or that sells their products and services in different countries. In the last few decades we have witnessed a huge rise in the number of multinational corporations.
How do Multinational Corporations Work?
Although a multinational corporation may have offices, factories, or outlets all around the world, they will usually have a headquarters in one particular country. Each of the countries may have their own main offices and management structure, but they will be under the direction of the headquarters.
Another common way for multinational corporations to work is to have a parent company in one country and subsidiaries elsewhere in the world. These subsidiaries can have quite a large degree of autonomy from the parent company. A good example of this would be Ford motors. This company has offices and car plants all around the globe. The fact that they have local offices and production in different countries means that they are better able to tailor their products for the local market. Thus Ford in Europe or the Middle East will offer a different product range than what is available in North America.
Other multinational corporations will use a mix of direct management and subsidiaries for their operations around the world. As well as having subsidiaries the company might also have affiliates. This type of company can be involved in a wide range of different businesses that are somehow related.
There are many advantages to the multinational corporation model and this can account for their success. They enjoy great economies of scale and of course they get to enjoy the advantage of having customers all around the globe. These entities will also have a lot more political clout than smaller businesses and this power can be used to their advantages. There is also the sense that by having their business interests in different countries it may spread risk.
The History of Multinational Corporations
Sometimes people will talk about multinational corporations as if it was a relatively new development but this is not the case. International companies have existed for centuries. One of the first such companies was the Dutch East India Company and this was in business in the seventeenth century. There were also many other similar companies created over the last few centuries.
Over the years there have been lots of concerns expressed about multinational corporations. Some people feel that they are a bad thing because of the amount of power that these companies may have. There are also fears that multinational corporations may have negative consequences for civil liberties and the privacy of the individual. These huge companies have historically been seen as forces with a huge amount of political power and so able to lobby hard to ensure that their needs are given priority. These international corporations will often give huge contributions to political parties and this is viewed with suspicion by many.