Disadvantage of multinational companies

9. International corporations

Multinational ("multis") or transnational corporations are corporations that operate in several countries (often worldwide) and often also produce.


Fig. 1: Multinational or transnational companies operate worldwide.
As a result of their expansion, they operate one global strategic business planning. International activity opens up new and larger sales markets as Cost advantages (Savings in labor, raw materials, energy and transport costs) and reduces dependence of national Economic policy and national Economic fluctuations.
The multinational companies can be distinguished by their appearance:
Multinational companies (or "classic" multinational companies) have a clear idea locatable headquarters, usually in Country of incorporation. In addition, they operate with their subsidiaries in many other countries or around the world and generate significant income there.
Yet they are recognizable Relation to their country of origin or your headquarters. The subsidiaries are more like branches, so all will important decisions in the Headquarters of the home country met. Examples are McDonald's, Microsoft or Apple.
Transnational corporations (or "modern" multinational corporations), on the other hand, have more of the character of one Corporate networkthat can no longer be precisely located geographically. The company is represented by a Corporate identity, i.e. a globally regulated (and no longer national) Corporate culture.
The branches in different countries are more own company as subsidiaries. These act very autonomous and customize products, sales, marketing etc. the local conditions at. decisions are usually not central or. from the point of view of one Headquarters, but from one global perspective met. Examples are NestlĂ© or Royal Dutch Shell
In practice, however, the boundaries between these "ideal types" are quite fluid.
Fig. 2: Transnational companies make decisions from a global perspective.
Reasons for the creation of international companies:
  • Cheap workers in the host countries
  • Proximity to those stored there Raw materials 
  • Additional Sales markets
  • State subsidies enable factories to be built inexpensively.
  • Low environmental standards in other countries save on expensive investments.
  • Tax benefits in certain states allow higher profits.
  • Better traffic conditions (Infrastructure)
  • Bypass of Trade restrictions (e.g. in countries where there are no import quotas and customs duties)
Fig. 3: The proximity to raw materials is one of the reasons for international companies.
Despite their contribution to the improvement of the international division of labor, to the dissemination of technical and business know-how, to the expansion of world trade and thus also to Progress, prosperity and competitiveness its effect is also controversial. Concerns are raised, among other things economic concentration of power and possible political influence, Distortion of competition and Tax evasion raised.
Advantages for developing countries
  • High risk investments are possible because multinationals have very high capital reserves
  • Providing of Host State Taxes
  • Create new ones Jobs
  • Higher Wages and better social benefits
  • Improvement of the Level of training of the population: multinationals educate specifically Skilled workers for their production and bind them to the company
  • Economic growth and thus increase the GDP of the host country
  • High technology is brought into the country
Disadvantages for developing countries
  • Companies interested in Profit maximization (Self-interest)
  • Subsidies and Tax reliefso that multinationals settle down
  • competitor to the resident companies
  • Transfer of the Profits in the mother state
  • No promotion of Social system
  • Through dumping prices Eliminate domestic competition
Roland, M. (Ed.): GEOGRAPHY. Lesson 10, Dr. Roland GmbH, edition 3/2016, Vienna
https://pixabay.com/de/skyline-new-york-600001/ (14.9.2016)
https://pixabay.com/de/tagebau-inden-rohstoffe-steinkohle-284498/ (14.9.2016)