The Benefits of MNC's and Globalization David Doleman INT 301

What is a MNC?

A corporation or business operating in several countries while managed from one (home) country

What does a MNC look like? Big size A lot of intellectual capital Operates in many countries Large customer base Many competitors Ex. Nike, Google, Apple, Starbucks

Why MNCs Choose to be Global? Cheaper Labor More resources Access to new markets More direct investment Allows more people to access services Strengthens and stabilizes the business structure as a whole

How MNCs affect the developing countries

Downsides for Developing Countries Selling Junk Foods May acquire monopoly power May misunderstand the local culture Concern is about profit primarily rather than the host country’s interest Heavy use of non-renewable natural resources

How India benefited from MNCs Large amount of tax collections through MNC’s Increased revenue Economic health improved Employment increased Foreign relation increased

Nike Case Study The majority of Nike's manufacturing takes place in developing countries. Nike has launched its 'Transparency 101' program “Transparency 101 is monitoring factories in each country where Nike operates and ensuring that the practices in each are in line with its code of conduct.” The 'Reuse a Shoe' program which, since its inception, has enabled some 13 million pairs of athletic shoes to be recycled

Case Study: Microsoft Corporation “The contribution of U.S. multinationals to the overall U.S. economy often extends beyond their main business practices of hiring and paying workers, buying inputs, and investing in capital and R&D. Many of these multinationals interact with schools, governments, and other institutions in ways that foster the human capital and institutions that help increase U.S. productivity.” – Microsoft Mission Statement

How MNCs Affect the Home Country

How MNCs Benefit the Host country The host country brings more capitol to the country “The worldwide operations of U.S. multinationals are highly concentrated in America and their U.S. parents, not abroad in their foreign affiliates.” International engagement drives the overall strength of a nations economy Success as a nation depends on how competitive that country’s businesses are globally.

What MNCs Cost the Host Country The host county looses revenue to other countries through foreign taxes. For this reason, further globalization means that wealth will be more spread out among countries as they pay foreign taxes The host country looses some control over these business making it more likely that they could become a monopoly

MNCs are influencing the globe Globalization internationalizes the financial and natural resources of a nation while creating interdependency among multiple nations

How MNCs Benefit the Global Market When competition increases, more employment opportunity are available. When competition increases quality of services go up Gives advantages to the purchasing country with the purchasing of raw materials New companies can now network to expand their business

Criticisms of MNCs Take jobs away from the home country Pollute the area Depletes Social Capital Outsource for cheap labor

Outsourcing takes away Jobs! “Often referred to as the New International Division of Labour this resulted in new spatially interconnected geographies of economic activities as different components for any one product began to be produced in different places with core, world locations retaining skilled work processes (e.g. research and development) and the periphery seeing the establishment of new branch plants responsible for labour-intensive assembly and low-skilled functions”

Typical online outsourcing job pays about $2- $3 per hour Cost $1

Takeaways The Benefits of MNCs outweigh the costs MNCs promote global economic interdependence Globalization is both necessary and beneficial to the main country as well as the foreign country

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