Multinational corporation, the abbreviation MNC is used, is an enterprise or company based in one country, which operates its activities in several countries or countries through foreign owned or controlled subsidiaries. Multinational corporations are engaged in foreign direct investment in the target countries, it operates across several countries / states where it produces products or services (not only sells them).
The oldest modern multinational corporation is considered colonial East India Company (such as the British East India Company), which originated in the 17th century through trade with Asian commodities like tea, spices, fabrics or jewelry.
Multinational corporations in practice: The reason for the existence of the multinational corporations is seeking new markets for the sale of goods or services, finding the location for more efficient and economical production (usually in countries with lower production costs). Multinational corporations can benefit from economies of scale through mass production and can also benefit in the local markets of monopoly. Sometimes they use unfair practices such as price dumping. Other controversial issues associated with MNC are lobbying, the use of child labor, use of tax optimization in tax havens, the threat of withdrawal from the market, or abuse of intellectual property protection to protect its own market.
Multinational corporations control one third of world trade, most of the multinational corporations is based in industrialized countries. Most multinational corporations are located in the following sectors:
- Raw materials (primary sector) - for example, oil company Royal Dutch Shell, Exxon Mobil, BP, Chevron, Total
- Financial services (banks, insurance companies - such as ING Group, Japan Post Holdings, General Electrics, Dexia Group, Allianz, HSBC Holdings
- Food processing and sale of goods - such as Wal-Mart Stores, Coca-Cola, Nestle, Pepsico, Kellogs, Mars
- Manufacturing and industry (secondary sector) companies - Toyota Motor, Volkswagen, State Grid, General Motors, Ford Motor, Daimler, AccelorMittal
- Other services with particularly Internet companies, telephone companies - such as AT&T, IBM, Google, Microsoft
Management of multinational organizations is usually central. Global decisions are made by the parent company, as well as research and development is usually located in the parent company. Subsidiaries in different countries implement more production. Similarly, earnings and dividends are mostly transferred to the parent company.