MNC Types:
Multinational corporations (MNC) are often divided into three broad groups:
Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds)
Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas)
Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated. (example: Microsoft)
Very large multinationals have budgets that exceed those of many countries. Popular claim is that out of the 100 largest economies in the world, 51 are multinational corporations.[1] Actually the claim is based on miscalculation, where two numbers descriphing totally different things are compared: the GDP of nations to gross sales of corporations. Problem with the comparison is ofcourse, that GDP takes in account only the final value, whereas gross sales don't measure how much was produced outside the company. According to Swedish economist Johan Norberg, if we were to compare nations and corporations, we should be comparing GDP to goods only produced within the particular company (gross sales do not take in account goods purchased from 3rd party vendors and resold, just as GDP doesn't take to account imported goods). That correction would make only 37 of 100 largest economies corporations and all of them would be in bottom box: only 5 corporations would be in top 50.
Multinational corporations can nevertheless have a powerful influence in international relations, given their large economic influence in politicians' representative districts, as well as their extensive financial resources available for public relations and political lobbying.
Multinationals have played an important role in globalization. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within. To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards. This process of becoming more attractive to foreign investment can be characterized as either a race to the bottom, a push towards greater freedom for corporate bodies, or both.
Multinational corporations (MNC) are often divided into three broad groups:
Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds)
Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas)
Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated. (example: Microsoft)
Very large multinationals have budgets that exceed those of many countries. Popular claim is that out of the 100 largest economies in the world, 51 are multinational corporations.[1] Actually the claim is based on miscalculation, where two numbers descriphing totally different things are compared: the GDP of nations to gross sales of corporations. Problem with the comparison is ofcourse, that GDP takes in account only the final value, whereas gross sales don't measure how much was produced outside the company. According to Swedish economist Johan Norberg, if we were to compare nations and corporations, we should be comparing GDP to goods only produced within the particular company (gross sales do not take in account goods purchased from 3rd party vendors and resold, just as GDP doesn't take to account imported goods). That correction would make only 37 of 100 largest economies corporations and all of them would be in bottom box: only 5 corporations would be in top 50.
Multinational corporations can nevertheless have a powerful influence in international relations, given their large economic influence in politicians' representative districts, as well as their extensive financial resources available for public relations and political lobbying.
Multinationals have played an important role in globalization. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within. To compete, countries and regional political districts offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards. This process of becoming more attractive to foreign investment can be characterized as either a race to the bottom, a push towards greater freedom for corporate bodies, or both.
World's First MNC Corporation
There is a dispute as to which was the first MNC. Some have argued that the Knights Templar, founded in 1118, became a multinational when it stumbled into banking in 1135. However, others claim that the British East India Company or the Dutch East India Company were in fact the first proper multinationals. More Details..
There is a dispute as to which was the first MNC. Some have argued that the Knights Templar, founded in 1118, became a multinational when it stumbled into banking in 1135. However, others claim that the British East India Company or the Dutch East India Company were in fact the first proper multinationals. More Details..
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