globalization & multinationals

““Multinational are big, irresponsible, monopolistic Multinational are big, irresponsible, monopolistic monsters bent on destroying anything that stands in monsters bent on destroying anything that stands in

the way of profits.”the way of profits.”

Prepared by:

Akshat Agarwal, Faizan M. Syed & Haoying Tian

ContentsContents Definition of globalization

Discussing the “real rulers” of the world

Globalization and free trades effect

Arguments of Multinationals

Multinationals friend or foe?

DefinitionDefinition A “buzz” word

◦A process by which the people of the world are unified into a single society and function together. This process is a combination of economic, technological, socio-cultural and political forces.

Source: Sheila L. Croucher

The “real rulers” of the worldThe “real rulers” of the world

Tool of information

Defines us as humans

5 major media companies own 95 % of media

The “real rulers” of the worldThe “real rulers” of the world Media

◦In 1945, 80 % of US media outlets were independent. In 2008 23 corporations own more than 80 % of the US’s media outlets.

◦35,000 media outlets ◦CNN gets to 110 million viewing

households worldwide ◦The rich world’s coverage of the Third

World – has decreased


24/7 coverage◦ Watching every move

“Hand in hand”


33 % of world output & 66 % of world trade

Tax competition

Market withdrawal


Cost of transport and communication

Increase in foreign operations

What is Free Trade?

Free Trade is a system in which the trade of goods and services between or with in countries flows unhindered by government-imposed restrictions

Benefits of Free Trade

Non-tariff barriers

Regulatory legislation and quotas

Free Market


According the report of ADF, because of the Australia-Thailand free trade agreement has been implemented, Australia can make a 140 millions dollars profit from selling dairy and Thailand can also save more than 50 millions dollars for the dairy import.

Source:http://www.foodqs.com/news/gjspzs01/2004112514358.htm


In 1960’s Hong Kong established a policy of no tariffs on imports, no subsidies to exports, no fixing of prices or wages, absolutely minimal regulations, low taxes (a maximum average of 15 percent on personal income) and government spending.


In 1960, GDP per capital (1995 prices) in Hong Kong was only $2,247 - less than one-third Britain's $7,906.

By 1994, Hong Kong’GDP per capital had multiplied nearly eight-

fold, to $17,832 - one-third higher than Britain's $13,430.

Source: National Center For Policy Analysis

Globalization, ‘free trade’ and employment

‘Free trade’ leads to comparative advantage shifting the employment to cheaper labour and lower regulation in the third world.

Comparative advantage leads to specialization, which means focusing on fewer industries. This means that some industries grow while workers get laid off in other industries, making them move to lower-paying jobs.

Globalization leads to free movement of labour.

This means that when industries in some countries are getting laid off, workers can just move to the specialized country.

(Source: O’Sullivan, Economics)

Protectionist policiesImport banQuotas and voluntary export restraintsTariffs

Free movement of labour is notoccurring on a bigger scale in most part of the world.



Comparative advantage also leads to lower prices of products.

Due to protectionist policies, workers in the non specialized industry have to accept lower wages in same country.

The advantages of lower prices is bigger than the disadvantages of unemployment an lower wages in the economy.

Definition of Private Equity

In finance, private equity is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange.

There is a wide array of types and styles of private equity and the term private equity has different connotations in different countries

Source: http://www.epi.org/content.cfm/briefingpapers_bp147

What are the advantages of private equity?

1. Simplicity

2. Alignment of management and ownership

3. Dividend policy of a private equity firm

4. Capital structure

Source: Harold Bierman, Private Equity: Transforming Public Stock to Create Value, 2003

Argument of Private Equity Firms

According to Tom White’s takeovers by ‘private equity’ firms leads to destroy jobs

Private equity firms are investment funds that tend to focus on buying companies that are undervalued or poorly managed, in order to turn them around and sell at a profit. To do that, they combine their own capital with borrowed money. This can work, if the firm that’s been bought out can earn money fast enough to pay the interest on the borrowed money.

On the contrary, research for the World Economic Forum shows that private equity lay off more old and create more new jobs, but rarely go bankrupt.

Their management changes seem to be making an impact. In the United States, every year just 1.2% of private equity-owned firms are being forced into bankruptcy.

In contrast, about 1.6% of firms issuing bonds go bankrupt.

Argument of Private Equity Firms

Source: Do takeovers by ‘private equity’ firms destroy jobs?Monday, January 28, 2008 Tom Whiteand; Private equity defends job recordby Tim Weber

“Globalization is the bane of some and a boon for others, but however

much it shakes us up as it shakes itself out, it is something that we

must inevitably deal with”.

Benefits for MNC’s Benefits for MNC’s

Government provides them with tax benefitsGet cheaper labour as compared to home countryCost of raw material is low Leverages in the rules and regulationsSetting up cost is low as compared to home

country Special grants and benefits offered by the state

government for land, etc.

Advantages of MNC’s to host countryAdvantages of MNC’s to host country

Through globalization i.e. mergers in the LDC’s, companies get a financial strength to carry on their business. Like Air India in India is looking for a merger.

Setting up of new business provides poor societies with employment.

MNC’s introduce new technology and techniques of manufacturing to the developing nation

Advantages of MNC’s to host countryAdvantages of MNC’s to host country

Brings more sophisticated managerial techniques that these countries lack

MNC’s further help the developing economies to develop by stimulating the economy with its products and services.

Disadvantages of MNC’s to host countryDisadvantages of MNC’s to host country

Growth of the developing nations thus gets dependent on the developed once

Country depends on the MNC’sDisrupts the local communities when the factories

are relocated or closedTaking advantage of there size they exploit the

workers and the environment in the developing nation

MNC’s are just devastating the small and locally owned business i.e. why they are some times said ‘Monopolistic Monsters’

Disadvantages of MNC’s to host countryDisadvantages of MNC’s to host country

Friend or foe?Friend or foe?

Opec’s influence

Microsofts innovation

QUESTIONS OR COMMENTS?QUESTIONS OR COMMENTS?

Thank you for your time and attention

globalization & multinationals

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