Multinational Or Global Corporations

The term multinational or global, corporation is used to describe a firm that operates in an integrated fashion in a number of countries. During the period since World war II, a new and fundamentally different form of international com-mercial activity has developed and this has greatly increased worldwide economic and political interdependence. Rather than merely buying resources from and selling goods in foreign nations, multinational firms now make direct investments in fully integrated operations from extraction of raw materials. Through the manufacturing process to distribution to consumers throughout the world. Today multinational corporate networks control a large and growing share of the world’s technological, marketing and productive resources.

Companies, both U.S. and foreign. go global for six primary reasons:

1. To seek new markets. After a company has saturated its home market, growth opportunities are often better in foreign markets. Thus, such homegrown firms as Coca-Cola and Mcdonald’s are aggressively expanding into overseas markets and foreign firms such as Sony and  Toshiba now dominate the U.S. consumer electronics market.

2. To seek raw materials. Many U.S. oil companies such as Exxon, have major subsidiaries around the world to ensure access to the basic resources needed to sutain the companies primary business line.

3. To seek new technology. No single nation holds a commanding advantage in all technologies so companies are scouring the globe for leading scientific and design ideas. For example, Xerox has introduced more than 80 different office copiers in the United States that were engineered and built by its Japanese joint venture, Fuji Xerox. Similarly, versions of the super concentrated detergent that Procter & Gamble first formulated in Japan in response to a rival’s product are now being marketed under the Ariel name in Europe and under the Cheer and Tide labels in the United States.

4. To seek production efficiency. companies in high-cost countries are shifting production to low-cost countries. For example, GE has production and assembly plants in Mexico, South Korea and Singapore and even Japanese manufacturers are shifting some of their production to lower cost countries in the pacific Rim. Even BMW and Mercedes-Benz in response to high production costs in Germany have built assembly plants in the United States. The ability to shift Production from country to country has important implications for labor costs in all countries. For example when Xerox threatened to move its copier rebuilding work to Mexico its union in Rochester agreed to work rule changes and productivity improvements that kept the operation in the United States. Some multinational companies make decisions almost daily on where to shift production. When Dow Chemical saw European demand for a certain solvent declining. The company scaled back production at a German plant and shifted its production to another chemical which had previously been imported from the United states. Relying on complex computer models for making such decisions. Dow runs its plants at peak capacity and thus keeps capital costs down.