Multinational Corporations - Essay Example

MULTINATIONAL CORPORATIONS Introduction The end of cold war and the disintegration of the Soviet Union turned the world once polarized into two distinctive blocks into a singular entity which groped with its existence over a period of one and a half decade, until it achieved the present status. New as well as developing nations ran over one another to grab whatever opportunity they got to establish their identity in the new world scenario. The last few years have seen the development of rapid communication and transportation means in the world due to computerization and information technology. This has opened up new vistas and opportunities for the large corporations who are increasingly delving into offshore activity and expansion. Multinational Corporations have now become an integral part of the international society. Whether these multinational giants are beneficial or damaging to the society as such is a question which is debatable. There are opinions for and against the multinationals depending upon one’ perspective and social position in this world. We shall discuss the impact of multinational corporations in detail and present views for and against them in the following paragraphs. One major factor to be considered when one talks about multinationals is that most of them are from the developed countries like the USA, Japan, UK, France and Germany (International Labour Organization {ILO} website). Other countries are almost non participants or have just started making their presence felt as exemplified by the Daewoo Corporation of Korea and Venezuela (oil company), according to ILO. No doubt that multinationals have been in existence from the very beginning ever since companies and corporations came into being and looked beyond their horizons for business. The British Empire which ruled most parts of the world in the last two centuries is an example of a multinational temperament and presence. The multinationals do cover up some of the essential requirements of the human race and strive to fulfil every need but at the same time they tend to obliterate any small enterprise which attempts to launch similar products or services. View I: Positive Contribution of Multinationals Multinationals become what they are not just due to tremendous financial resources but due to quality products and services for the people. They set up global standards for their products which are difficult to emulate. Continuous research and development goes into their product line and they keep making changes according to the immediate requirements and economics of the world. They provide employment comparable to the best in the world. Multinationals have been responsible for sustaining industry in many parts of the world in face of economic turmoil and political upheaval. For example the British manufacturing industry passed through a sluggish phase in the nineteenth century and would have collapsed without the foreign direct investment of American companies (Godley Andrew, 2006). Godley is of the view that productivity growth in the manufacturing sector was the direct result of new technologies introduced by the Americans in Britain without interfering with the retail sector which remained in British control. This substantiates the claim that multinationals are beneficial for a society. Another example is that of the Japanese auto industry which developed after the Second World War. This sector provided fuel efficient and economic vehicles within reach of the middle class all over the world. They set up certain standards of manufacturing which were impeccable and the auto giants of the world were forced to imitate them. Cost effective and quality products are the hallmarks of most multinationals with a trust base in customers all over the world. Due to their financial strength and large size, the multinationals possess the capacity to invest in research and development and come out with better products all the time (www.economicshelp.org). They have the strength to tide over difficult times when inflation or natural disasters are a hindrance to development. They are able to make available the goods at a reasonable and economical price to the consumers and maintain a steady supply as well so that the customers are not left wanting at any stage. View II: Negative Aspects Attributed to Multinationals Multinational Corporations due to their large size and economic power tend to get overbearing and ruthless towards competitors. They try to enforce their dictum in the parent country as well as in developing countries, where they are having an increasing presence nowadays. They have a tendency to monopolize the branch of industry they represent. A very common example is that of Coca Cola, the soft drinks giant, which has a global presence and does not allow any other competitor to stand up to it, either by eliminating the company by aggressive marketing tactics, or acquiring the small brands into its fold. India had banished Coca Cola from the country in 1977 which resulted in tremendous success of small players within the country. But after the Indian government allowed the re-entry of the giant, it totally obliterated the existing local soft drinks companies. The multinationals are driven by profit alone which sometimes results in negligence towards environmental degradation and destruction of renewable resources (www.economicshelp.org). This is illustrated by another example from India where the Union Carbide Company was responsible for a large number of deaths and blinding of people due to the leakage of Methyl Isocyanate gas from its manufacturing facility. The multinationals are also blamed for hiring labour at a reduced rate in less developed countries (www.ontheissue.org). As the less developed countries need the money pumped in by multinational corporations the latter exploit this situation by indulging in unethical practices. They establish manufacturing facilities in such countries to bypass the strict environmental and labour laws in their own country (Haddock Steve, 2000, www.ontheissue.org). The money they bring in is just an initial attraction as ultimately they take back more money out of the country, which ideally would have been reinvested for the target country’s development (Haddock Steve, 2000, www.ontheissue.org). Supermarkets and fast moving consumer goods section are monopolized by multinational companies in most of the world markets which has a negative effect on the small corner and traditional shop owners who suffer loss in business as well as their right to make an independent living. Conclusion Multinational Corporations have become an integral part of modern economy and despite the drawbacks one cannot deny the role they have played in making this world a more uniform and cosmopolitan place. Strict laws and acts enacted by major powers of the world have attempted to attenuate monopolistic activities and unethical practices of such corporations. They have triggered a healthy competition worldwide and emergence of large corporations from the third world countries is becoming a reality in modern times. Such corporations are now under continuous media glare which does not desist from highlighting any unethical practices, if used, and to set them right with the help of pertinent and competent regulatory authorities and organizations of the world. References: 1. Article (2008),Economics Help,Multinational Corporations: Good or Bad?,Available Online at: http://www.economicshelp.org/blog/economics/multinational-corporations-good-or-bad/ 2. Godley Andrew, 2006, American Multinationals and Innovation in British Retailing, 1850-1962 Available Online at:www.helsinki.fi/iehc2006/papers3/Godley.pdf 3. Haddock Steve (2000), OnTheIssues, Are multinationals evil?, Online Article available at: http://www.ontheissues.org/AskMe/fdi.htm 4. International Labour Organzation (ILO), Multinational Corporations, Available Online at: http://wwwold.itcilo.org/actrav/actravenglish/telearn/global/ilo/multinat/multinat.htm Read More