We explain what a multinational company is, its characteristics and examples. Also, why they are criticized and defended.
What is a multinational company?
A multinational company is a large corporation, created and registered in a main country, but with subsidiaries spread throughout the world which allow you to trade internationally and globally. This implies that they can buy the raw material in one country, industrially process it in another and sell their final products in a third location, as convenient.
Although multinational companies are typical of the globalization of the second half of the 20th century and the first half of the 21st its direct antecedents come from the 16th and 17th centuries, when European mercantilism encouraged imperial powers to compete for world resources and install colonial regimes on other continents.
Thus, it can be considered as an important antecedent to the Muscovy Trading Company (“Muscovy Company”) founded in London in 1555 to trade between Russia and England. However, multinational companies themselves appeared in the 19th century, and were the first to set up their factories in foreign countries where labor was cheaper.
Multinational companies proliferated after World War II, especially those from the United States, and since then they have become a very important global economic player.
Characteristics of a multinational company
Multinational companies are characterized by the following:
- They are global economic actors, that is, have a presence in different regions of the world and trade their goods in international markets, having a global vision of their businesses at all times.
- produce goods in large quantities and the place where they are made is not usually the same place where they are sold.
- are important investors in research, technology, advertising and marketing, and industrial organization, and their activities usually have an impact on the development of the populations where they settle.
- manage enormous capital, even greater than the GDP of certain countries which makes them very influential financial entities.
- Their headquarters are usually located in the country of origin or in highly industrialized nations. From them the entire company is controlled.
According to their productive structure, they can be classified into three types:
- Horizontally integrated multinational companies. When their production facilities are located in different countries, but they produce the same goods or very similar goods.
- Vertically integrated multinational companies. When they focus on the production of intermediate goods that then serve as supplies for final production in other countries.
- Diversified multinational companies. When they have international production centers in which very dissimilar elements are produced.
Importance of multinational companies
Multinational companies represent an important sector of the global economy and have in many cases become an unstoppable industrial force. many of them manage enormous investment capital that allows them to control international markets and even influence politics local or regional, but at the same time sponsor large social, ecological and cultural campaigns. So they embody to a large extent many of the virtues and great dangers of the globalized economy.
Examples of multinational companies
Some examples of multinational companies are:
- McDonalds. It is one of the largest and most successful fast food companies in the world. Of American origin, it has a presence in 118 countries, under the franchisee model.
- Google. It is one of the great corporate colossi born in the United States at the end of the 20th century. Google provides a diverse series of digital services and technological gadgets through multiple computer products, with thousands of servers and data centers on the planet.
- Samsung. It is the largest conglomerate of South Korean multinational companies in the technology, financial, construction and biotechnology sectors. It was founded in 1938 as an import-export company and its global success in the 1990s came with cell phones and telematics technologies.
- Microsoft Corporation. It is one of the great American computer companies of the 20th century. Microsoft is headquartered in Redmond, Washington, but has a large presence and impact in the global market, thanks to its numerous divisions dedicated to the creation and marketing of computing services and products.
- Walmart. It is an American chain of discount stores and warehouse clubs started in 1962, which currently has 11,000 stores under 65 brands in 28 different countries, and more than 2 million employees in total.
- Nike. It is an American company dedicated to the manufacturing and marketing of sports clothing, which has more than 70,000 employees in different countries. It is among the main sports sponsors in the world.
- adidas. It is a German company founded in 1949 that is dedicated to the manufacturing and marketing of textiles, specifically footwear and sportswear. It has offices all over the world (and more than 57 million employees) and its products are among the most consumed on the planet.
- toyota. It is a Japanese automobile manufacturing company that was founded in 1993 and is headquartered in Japan, but has branches and factories in different countries. It is one of the most famous car brands in the world, considered in 2019 as the second largest existing car manufacturer.
- The Coca-Cola Company. It is a company based in Atlanta, Georgia, dedicated to the production and sale of sugary soft drinks, and its most important product is Coca-Cola. Founded in 1886, it is a sponsor of the Olympic Games, the FIFA World Cup and has subsidiaries in numerous countries on all continents.
Criticisms and arguments in favor of multinational companies
Multinational companies are the subject of numerous criticisms and also arguments in their favor. The main ones of them are:
| Reviews | Arguments in favor |
|---|---|
| They are exploiters of the cheap labor of the poorest countries, where decent labor laws often do not even exist. | They generate large amounts of employment for the locals of the country where they are established. |
| They promote the concentration of global wealth, by competing unfairly with local companies and producers, and directing profits towards their country of origin. | They invest large amounts of resources in research and international advertising, which in turn promotes development and competitiveness. |
| They are often responsible for catastrophic damage to the ecosystem, without being held accountable. | They are important sponsors of sporting, cultural or social events on an international and global scale. |
| They promote global inequality by marketing their products in the first world and not in the country where they are manufactured. | They promote the transfer of technology and industrial knowledge to the poorest countries. |
Difference between multinational and transnational company
There is no universal academic consensus regarding the difference between a multinational company and a transnational company. In some sources it is stated that both terms refer to the same thing, but that “multinational” is used as a friendlier word and that suggests that the company belongs to the entire planet, when the only thing that is truly multinational is the market in which the company markets its products.
However, in other sources it is stated that the difference between them has to do with the international expansion model: transnational companies appeal to the franchisee and to the creation of local and autonomous “copies” of itself, while the multinational company consists of an orchestra of productive elements distributed throughout the world.
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References
- “Multinational” on Wikipedia.
- “Multinational companies” in My Triple A.
- “Multinational companies” (video) in Economy from Home.
- “Multinational Corporation (business)” in The Encyclopaedia Britannica.
