Dissecting Multinational Corporations

A multinational corporation (MNC) also termed transnational corporation (TNC), international corporation, or multinational enterprise (MNE), is a corporate entity that handles manufacture of products or distribution of services in more than one country. One great example of an MNC is Oriflame Cosmetics, which operates in 55 countries for 40 years now. The Dutch East India Company, established in 1602, is said to be the first modern MNC.

An MNC is different from an international business company/corporation (IBC), which is an offshore business entity that is tax-free yet prohibited from operating within the locality where it was incorporated. An IBC, therefore, can only do business in foreign locations.

Interestingly, some multinationals are so large their budgets can exceed the national GDPs (Gross Domestic Product) of some countries. Thus, MNCs have a strong influence in local and international economies, as well as global relations. Their impact on government policy is evidenced by the threat of market withdrawal. Due to their size, actions taken by MNCs would definitely cause dependent local economies to experience boost or breakdown.

Additionally, MNCs have important role in globalisation; thus, countries and regions compete for the establishment of multinationals within their jurisdiction. These localities attract MNCs by offering business incentives including tax breaks, government assistance, improved infrastructure, and lax labour standards. Nevertheless, multinationals are generally committed to attain operational efficiencies, so they are not readily enticed by cheap or poor labour standards. This is specifically true to MNCs based in Europe, the United States, and Japan.

Multinationals have the capability to fund costly yet useful technologies and processes like advance pollution control mechanisms. These competencies allow them to lobby local governments to enforce laws that will cripple non-compliant competitors, especially those that cannot afford high-end technologies.