Positive and Negative Aspects of Multinational Corporations

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GLOBALISATION & THE ROLE OF MULTINATIONAL CORPORATIONS 1 Multinational Corporations - Definitions  MNCs MNEs, MNOs & TNCs  The ‘armies of globalization’  ‘Enterprises operating in a number of countries who have production or service facilities outside their country of origin’  Responsible to shareholders not nation states  Vertically integrated MNCs:  Different stages of the same productive process taking place in different countries  Example: BP  Horizontally integrated MNCs:  Performing the same basic product operation in each country in which they operate  Example: Unilever 2 The Three Ages of Globalization Multinational Corporations: 1960s  ‘First Age’ of MNCs  Controlled operations from home  Manufactured in home country  Exploited domestic economies of scale  Utilised domestic R&D  Sold abroad:  “The emergence of global markets for standardized consumer products on a previously unimagined scale or magnitude”  Theodore Levitt 3 The Three Ages of Globalization Multinational Corporations: 1970s/1980s  The ‘Second Age’ of MNCs:  Control remains at ‘parents’ head office  Invariably located in the ‘triad’ of the USA, Japan and Western Europe  Sales and marketing functions moved around the globe  Desire to reduce Total Costs:  Chunks of production moved to countries where wages and property costs were lower.  This led to a rapid increase in world FDI Tokyo 4 The Three Ages of Globalization Multinational Corporations: 1970s/1980s  Expansion in the Second Age led to two opposing forces:  LDCs competed aggressively to attract MNCs  Growing hostility by antiglobalist groups:  MNCs accused of being ‘imperialists’ – a mindset that had to be broken in the post (political) imperialist era  A fear of a repeat of the Growth of the East India Company? British East India Company 5

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