Reasons for the growth of multinational corporations (AO3) (2024)

FAQs

Reasons for the growth of multinational corporations (AO3)? ›

Multinational companies' increasing significance and influence can be attributed to several factors in recent years. Global economic integration, the pervasive influence of the market economy, and the liberalization of international trade and financial activities have all contributed to this trend.

Multinational companies' increasing significance and influence can be attributed to several factors in recent years. Global economic integration, the pervasive influence of the market economy, and the liberalization of international trade and financial activities have all contributed to this trend.

A multinational corporation has business activities occurring in at least two countries. Some may consider any company with a foreign branch a multinational corporation. Others may limit the definition to only those companies that derive at least a quarter of their revenue outside their home country.

Influence on Local and National Economies

National and local governments often compete with one another to attract MNC facilities, with the expectation of increased tax revenue, employment, and economic activity.

Financial Superiorities : Multinationals are financially superior to domestic companies in the following respects : a) Huge financial resources. b) More effective and economical utilisation of funds through transfer of excess funds from one country to another. c) Easy access to foreign capital markets.

A multinational corporation is a company that does business in a select few countries around the world and operates facilities such as warehouses or distribution centres in at least one foreign country. Although the company does business in other countries, its primary focus is the domestic market.

Multinational companies create employment opportunities. They also tend to pay more than local firms in host countries. Training programmes will also improve the quality and efficiency of local workforce. Therefore, more of the local workforce will be employed to work in the multinational companies.

One benefit of multinational corporations (MNCs) is that they will contribute to the country's increased trade. It will aid in boosting a country's economy. It will give more individuals in a country job chances. One of the MNCs' drawbacks is that they can endanger small and local firms.

Market Expansion

Perhaps the most obvious reason companies engage in international business is to expand their market. If a company's products or services are successful in its domestic market, it's only natural to consider expanding into foreign markets to reach a larger customer base.

Why do multinational firms engage in international business? ›

Some of the most common reasons behind a move to internationalisation and expansion into foreign markets include: extending the life cycle of a product or technology. reducing business costs by outsourcing larger-scale production at lower costs, for example in developing countries (driving economies of scale)

Benefits of Multinational Corporations

Create wealth and jobs around the world. Inward investment by multinationals offer much needed foreign currency for developing economies. They also create jobs raises expectations of what is possible.

The rise and spread of the MNC:

In the latter half of the twentieth century, the rise and spread of the MNC has been one of the most conspicuous developments in the global economy. From just a few hundred in 1945 the population of MNCs grew rapidly to reach over 9,000 by 1973, 30,000 by 1990.

This is generally accomplished by means of establishing a parent corporation and then establishing subsidiary corporations in other countries that are majority or wholly owned by the parent corporation.