Introduction

“For too long, citizens have been content to follow where government and multinational corporations lead. The profit motive has become immune to attack. It is understood that as long as something is profitable for shareholders, nothing else matters enough” Occupy Protester CTV Op-ED – RT News.

The word “Multinational” is a combined word of “Multi” and “National”, which when combined refers to numerous countries. A Multinational Corporation is a corporation that has its facilities and other valuable assets in at least one country, which is other than its parent country. It is a organization or company that both produces and sells services and goods in a multitude of countries. Some MNCs have a budget which is greater than some small sized countries GDP’s. [1]

Some of the major examples of MNCs today are Nokia, McDonalds, Microsoft, Exon Mobile and BP.

One of the initial MNCs was the East India Company (1600 – 1874), which is an excellent examples of both the benefits and drawbacks of such ventures. On one hand there existed a dynamic profit making entity, on the other existed a company operating on foreign soil, under very little control of the British government, having, operating and running their own private armies, utilizing military power and ultimately taking over administrative functions of India.

MNCs have come a long way since then and have seen a sharp increase in the past few decades. The numbers of active MNCs went from being roughly 7,000 in the 1970’s to 78,000 in 2006, being responsible for over half the global industrial output. [2]

Multinational corporations usually bring with them foreign direct investment, which is direct investment in a country by the company for expanding their existing business base or for buying of raw goods and inputs from them.

Multinational corporations were the vital factor in globalization, where local and national governments competed against each other in order to incentives and attract more MNCs and ultimately, investment in their countries. An example of such incentive is the Free Trade Zones, where goods may be manufactured, handled, landed or even exported without any intervention of the local custom authorities. Most of these free trade zones exist in developing countries such as Pakistan, Mexico, Sri Lanka, Madagascar, Brazil and India, as they are eager to attract more foreign investors. [3]

Definition of MNC:

Economists are not in unanimous agreement as to how best define trans or multinational corporations. Most MNCs are multidimensional and can be viewed from a multitude of perspectives. These include: Ownership, strategy, management and structural.

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According to Franklin Root (1994), that though some argue that ownership is the key criterion amongst all of the above, a firm truly becomes multinational given its parent company or headquarter is run/owned by nationals of varying countries. Examples that fit this category are Unilever and Shell, which are owned and run by Dutch and British interests.

However via this test, very few companies would fall under the banner of being a true Multinational company, rather most are uninational.

According to Howard Perlmutter (1969) [4] multinational companies might pursue either world oriented, host country oriented or home country oriented policies. He uses these terms as geocentric, polycentric and ethnocentric, however the last is misleading since it focuses upon ethnicity and race, but most countries are themselves populated by a variety and mix of races, whereas Polycentric means the MNCs operations only take place in a couple of foreign countries.

Franklin Root (1994) [5] states that MNC is a parent company which:

1. Shows implementation of strategies of finance, marketing, staffing and production in its business.
2. Has direct and binding control over its affiliates and their policies.
3. Uses those affiliates to conduct foreign production in several countries.