Multinational company

Y-Negocios

2022

We explain what a multinational company is, its characteristics and examples. Also, why are they criticized and defended?

Multinational companies have become a global economic actor of great importance.

What is a multinational company?

A business multinational is a large corporation, created and registered in a country main, but with subsidiaries spread throughout the world, which allow it to trade internationally and globally. This implies that they can buy the raw material in one country, process it industrially in another and sell its final products in a third location, as convenient.

Although multinational companies are typical of the globalization from the second half of the 20th century and the first half of the 21st, its direct antecedents come from the 16th and 17th centuries, when the mercantilism European promoted the powers imperial powers to compete for world resources and to install colonial regimes on other continents.

Thus, it can be considered as an important antecedent to the Muscovy Trading Company (“Muscovy Company”) founded in London in 1555 to trade between Russia and England. However, multinational companies proper appeared in the 19th century, and were the first to set up their factories in foreign countries where workforce it was cheaper.

Multinational companies proliferated after the Second World War, especially those from the United States, and since then have become a global economic actor of the utmost importance.

Characteristics of a multinational company

Multinational companies are characterized by the following:

  • They are global economic players, that is, they have a presence in different regions of the world, and they trade their goods in international markets, having a global vision of their business at all times.
  • They produce goods in large quantities and the place where they are made is usually not the same where they are marketed.
  • They are major investors in research, technology, advertising Y marketing, and industrial organization, and their activities usually have an impact on the development of the populations where they settle.
  • They handle capitals huge, even higher than the GDP of certain countries, which makes them very influential financial entities.
  • Their headquarters are usually located in the home country or in highly industrialized nations. The entire company is controlled from them.

According to their productive structure, they can be classified into three types:

  • Horizontally integrated multinational companies. When their production facilities are in different countries, but they produce the same goods or very similar goods there.
  • Vertically integrated multinational companies. When they focus on the production of intermediate goods that then serve as a supply for final production in other countries.
  • Diversified multinational companies. When they have international production centers in which very dissimilar elements are produced.

Importance of multinational companies

Multinational companies represent an important sector of the economy and have in many cases become an unstoppable industrial force. Many of them handle enormous investment capital that allows them to control international markets and even influence the politics local or regional, but at the same time sponsor large social, ecological and cultural campaigns.So they largely embody many of the virtues and great dangers of the globalized economy.

Examples of multinational companies

Some examples of multinational companies are:

  • McDonalds. It is one of the largest and most successful fast food companies in the world. Originally from the United States, it has a presence in 118 countries, under the franchise model.
  • Google. It is one of the great corporate giants born in the United States at the end of the 20th century. Google provides a diverse series of digital services and technological gadgets through multiple computer products, with thousands of servers and data centers on the planet.
  • Samsung. It is the largest conglomerate of South Korean multinational companies in the technological, financial, construction and biotechnology. It was founded in 1938 as an import-export company and its global success in the 1990s was driven by mobile phones and telematics technologies.
  • Microsoft Corporation. It is one of the great American computer companies of the 20th century. Microsoft is headquartered in Redmond, Washington, but has a large presence and impact in the global marketplace, thanks to its many divisions dedicated to creating and marketing computer products and services.
  • Walmart. It is an American chain of discount stores and warehouse clubs started in 1962, which currently has 11,000 stores under 65 brands in 28 different countries, and more than 2 million employees in total.
  • Nike. It is an American company dedicated to the manufacture and marketing of sports clothing, which has more than 70,000 employees in different countries. It is among the main sports sponsors in the world.
  • Adidas. It is a German company founded in 1949 that is dedicated to the manufacture and marketing of textiles, specifically footwear and sportswear.It has offices all over the world (and more than 57 million employees) and its products are among the most consumed on the planet.
  • Toyota. It is a Japanese automobile manufacturing company that was founded in 1993 and is headquartered in Japan, but has branches and factories in different countries. It is one of the most famous car brands in the world, considered in 2019 as the second largest existing car manufacturer.
  • The Coca-Cola Company. It is a company based in Atlanta, Georgia, which is dedicated to the production and sale of sugary soft drinks, and its most important product is Coca-Cola. Founded in 1886, it is a sponsor of the Olympic Games, the FIFA World Cup and has subsidiaries in numerous countries on all continents.

Criticisms and arguments in favor of multinational companies

Multinational companies are the object of many criticisms and also of arguments in favor. The main of them are:

critics arguments in favor
They are exploiters of cheap labor from the poorest countries, where decent labor laws often do not even exist. They generate large amounts of employment for the locals of the country where they settle.
They promote the concentration of global wealth by unfairly competing with local companies and producers, and directing profits back to their country of origin. They invest large amounts of resources in research and international advertising, which in turn fosters development and competitiveness.
They are often responsible for catastrophic damage to the ecosystem, without being held accountable. They are major sponsors of sporting, cultural or social events on an international and global scale.
They promote global inequality, by marketing their products in the first world and not in the country where they are manufactured. They promote the transfer of technology and industrial knowledge to the poorest countries.

Difference between multinational and transnational company

There is no universal academic consensus regarding the difference between a multinational company and a transnational company. In some sources it is stated that both terms refer to the same thing, but that "multinational" is used as a more friendly word and that it suggests that the company belongs to the entire planet, when the only truly multinational thing is the market in which the company markets its products.

However, in other sources it is stated that the difference between one and the other has to do with the model of international expansion: transnational companies appeal to the franchisee and to the creation of local and autonomous "copies" of itself, while the multinational company It consists of an orchestra of productive elements distributed throughout the world.

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