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

• References

• Atenzio, Charles V. The Impact and Potential Role of Multinational Corporations in Achieving Sustainability in Latin American Countries. Thesis. Massachusetts Institute of Technology, 2010. N.p.: n.p., n.d. Academia.edu. Web. <https://www.academia.edu/1593254/The_Impact_and_Potential_Role_of_Multinational_Corporations_in_Achieving_Sustainability_in_Latin_American_Countries>.

• "How Much Do U.S. Multinational Corporations Pay in Foreign Income Taxes?" Tax Foundation. N.p., n.d. Web. 01 Oct. 2015.

• THE IMPACT OF MULTINATIONAL CORPORATIONS ON INTERNATIONAL RELATIONS -A STUDY OF AMERICAN MULTINATIONALS. Thesis. Middle East Technical UNIVERSITY, 2006. N.p.: n.p., n.d. Web.

• Koksal, Evren. The Impact of Multinational Corporations on International Relations- A Study of American Multinationals-. Thesis. Middle East Technical University, 2006. N.p.: n.p., n.d. Web. <https://etd.lib.metu.edu.tr/upload/12608016/index.pdf>.

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n.d. Web. 01 Oct. 2015.• Slauughter, Mathew J. "A Strategy to Strengthen the US Economy." CBR Chinese Business Review 10.03

(2011): n. pag. Business Roundtable and The United States Council Foundation. Web.• Faulconbridge, James R., and Jonathan V. Beaverstock. "Globalization: Interconnected Worlds." (2008):

331-41. Sagepub.com. Web. 10 Nov. 2015. <http://www.sagepub.com/sites/default/files/upm-binaries/24132_19_Hollway_Ch_19.pdf>.

References• "Benefits of Developing World-Ready Software." Benefits of Developing World-Ready Software.

MSDN, n.d. Web. 10 Nov. 2015. <https://msdn.microsoft.com/en-us/goglobal/bb978434.aspx>.• MOUNIKA SELVA SOUJANYA VINUTHUNA. "Role of Mnc's in India." Role of Mnc's in India. N.p.,

n.d. Web. 11 Nov. 2015. <http://www.slideshare.net/RakeshKumar296/role-of-mncs-in-india-26336968>.

• Korten, D. C. "Do Corporations Rule the World? And Does It Matter?"Organization & Environment 11.4 (1998): 389-98. Sage Publications. Web.

• "Cost of Living in India." . Prices in India. Updated Nov 2015. Numbeo, n.d. Web. 11 Nov. 2015. <http://www.numbeo.com/cost-of-living/country_result.jsp?country=India>.

• Diamond, Jared. "Transcript of "Why Do Societies Collapse?"" Jared Diamond: Why Do Societies Collapse? TEDX, Feb. 2003. Web. 11 Nov. 2015. <http://www.ted.com/talks/jared_diamond_on_why_societies_collapse/transcript?language=en>.

• Rosen, Rebecca J. "A Study of the 1.5 Million American Households With Practically No Income at All." The Atlantic. Atlantic Media Company, 11 Sept. 2015. Web. 11 Nov. 2015. <http://www.theatlantic.com/business/archive/2015/09/americas-poorest-two-dollars-a-day/404659/>.