Multinational Corporations Should Be Viewed as Agents of the State - Coursework Example

| Word Limit: 2274 13th July Topic: MNCs SHOULD BE VIEWED AS ‘AGENTS OF THE ? Candidate Statement I hereby declare that this assignment is my own work and any use of materials from other sources has been referenced accordingly. Candidate Signature: Date: Tutor Statement I hereby confirm that this assignment, to the best of my knowledge, is the candidates own work and they have not collaborated in the production of this assignment with any other person. I also confirm that I have a record of this candidate’s progress tutorial/s. Tutor Signature: Date: TABLE OF CONTENTS 1. Introduction…………………………………………………………………………..4 2. Multinational Corporations…………………………………………………………..4 3. Trends and popularity of MNC…………………………………………………….…6 4. MNC as “agents of the state”……………………………………………………..…..9 5. Conclusion…………………………………………………………………………….12 References………………………………………………………………………………..14 1. Introduction Multinational Corporations have the pivotal role in the global economy. According to the various estimates, it has been analyzed that production made by multinational enterprises accounts to more than one-fourth of the overall output of the world and one-third of the global world trade. Investment made by the multinational corporations provides beneficial effects on the economic growth, managerial expertise, transferring technology, and capital. In the current world system, the wave of change brought by the globalization is the highlighted matter in the public debate and intellectuals all over the world. Recent advancement in the information technology has brought deregulation, and market liberalization all over the world has given fuel to the unprecedented surge in the multinational corporation’s growth. Some of the countries think that MNCs are ruthless exploiters simultaneously some other countries think that MNCs are benign engines that brought prosperity in their country. The study has discussed MNCs as state agent; popularity and trends related with Multinational corporations is also discussed in this study, as it is the crucial topic in the current period that has reinvented the way of doing business and has open the doors of growth, employment and prosperity in many countries. 2. Multinational Corporations There are different definitions of Multinational Corporations according to different criteria. Some of the scholars believe that multinational corporations is one that is structured in order to conduct business or ownership is held across many countries, or it is the one which is organized into the global product divisions. The United Nations never use this term “Multinational Corporations” or “Multinational Enterprises”; instead they use “Transnational Corporations” for calling these organizations, but this term is not widely used. According to the survey there are 10 companies, which are the best multinational workplaces as published in the year September 2010 and August 2011 (World’s Best Multinational Workplaces 2012). S.No. Company Industry Headquarters Global Revenue 1. Microsoft Information Technology/Software Redmond, Washington, United States $69.9 billion 2. SAS Information Technology Cary, North Carolina, United States $2.4 billion 3. NetApp Information Technology Sunnyvale, California, United States $5.1 billion 4. Goggle Information Technology/Internet Service Provider Mountain View, California, United States $29.3 billion 5. FedEx Express Transportation/ Package Transport Memphis, Tennessee, United States $24.6 billion 6. Cisco Information Technology San Jose, California, United States $40 billion 7. Marriott Hospitality/ Hotel/ Resort Bethesda, Maryland, United States $11.6 billion 8. McDonald’s Hospitality/ Food and Beverage Service Oak Brook, Illinois, United States $24.1 billion 9. Kimberly-Clark Manufacturing & Production Irving, Texas, United States $19.7 billion 10. SC Johnson Manufacturing & Production Racine, Wisconsin, United States $8.8 billion 3. Trends and popularity of MNC Since 1960s and 1970s multinational corporations, especially the American companies are increasingly dominating the world, after 1980s perception has changed as large corporations, have become the progress symbol in the increasing integrated world. The best way to define the multinational firms in present time is that among the 100 biggest economies of the world, 51 are multinational corporations, and there are only 49 are countries that provide the impression that corporations are larger in comparison to the average nation-state (Hontz 2009). If these are measured in dollar value of assets and sales, multinational firms are big. As multinational firms are becoming larger in comparison to the nation state, that creates a threat to the social, political, and cultural integrity of the nations. Since 1980 to 2000, the size of MNCs has grown that has lead to the growth in sales. 50 industrial corporations taken from the Fortune 500 list of the year 1980 and 2000 and sales growth figures were computed. These figures were compared with the growth took place in world’s GDP in the same period of time. Big multinationals have not become large in comparison to the world as whole, but large regional difference was analyzed. There are many regions in a world that are growing much faster than other regions. East-Asia has increased in relative-size in comparison to the regions of Africa. Multinationals are not large corporations, as they dominate the news. Around 100 top multinational firms own nearly $2 trillion assets outside their own countries, quarter of world’s stock of foreign direct Investment (FDI). Recent wave of mergers has made multinationals even larger. Marketplace reveals that gush in MNC growth’s drive by myriad newcomers. MNCs market is not impenetrable to rival companies as multinational leaders such as, Shell and general electric took several years in building their empires that support in the growth impression and depends over the physical assets for erecting the entry barriers for the new competitors. But other vital giants such as, Cisco, Microsoft, Fresenius, Enron, and Ispat steel took few years in establishing their global business, because they relied on the human skills in order to promote the growth and tried to be competitive. In different countries, new technologies are transforming the possibilities of supply. Through mass customization customers are able to get precisely what ever they want from any part of the world. Corporation’s managers even know through their experience that through expanding their services in the global market involves more than pointing towards the few regions. While expanding their global services, companies usually face the problem of language, customs, finding local trading partners, and import/export regulations (John 1998). In the past, several companies were not able to conduct their global business operations seriously. Previously, it was 8% to 12% of their international business, which has now increased to 40% to 50%. MNCs are too popular in every country that they are unavoidable and are required in every country. MNC plays a significant role in various countries such as, Germany, Japan, USA, and India. According to the report generated by world investment, in the year 1985-90, the average growth of MNC was 34%. In the year, 1990 FDI flows to the developing countries have risen by US$ 32 billion. The MNCs are interested in Asian market. The reports have shown that, FDI coming through the MNCs has become the main source of gaining foreign capital for the developing countries in the recent period of time. Over 60% During the 90s, there has been a drastic increase in foreign investment trends, in India. Currently, USA is the biggest investor in India, followed by the UK, Japan, and the Switzerland. Foreign investments are concentrated on few sectors such as, power, oil refineries, electronics, chemicals, and electrical equipments. 4. MNCs as agents of the state MNC has their own sphere of influence since the division of the world market. These companies are found to be engaged in espionage and diplomacy tools of state interaction. Due to the wide economic resources at their end makes these companies more powerful in comparison to the new and small state. In 1993, General Motors was listed in the Fortune Global 500, and gross sales were larger than the GNP of Denmark and Finland. In present time, number and importance of MNC has grown (Ishiyama and Breuning 2010). According to the Year Book of International Organization list, the number of MNCs has increased in 2,190 as compared with 1000 in 1958. Since the 1990s, it has been observed that there are 10,000 firms holding their business activities and that are spread all over the world and even control the 90,000 subsidiaries. The United States is home to 159 MNCs, Japan has 135 and Britain has 41 MNCs. MNCs is viewed as the most important and powerful agent for the internalization of the human society. MNCs are viewed as huge economic that combines the capacity, know-how, and wisdom for treating the world as the single unit and for combing the production factors and maximizing the productivity and efficiency for gaining the competitive advantage. MNCs is also the powerful agent of bringing modernization in the less developed countries through creating new job opportunities, training the local citizens, introducing the advanced technological advancement, and thereby, providing a contribution to the state development. The Employees and managers of multinational corporations have become globe oriented and world minded oppose the nationalism and war that pave the manner of developing the world peace. There are several MNCs that are working as the agent of their state. States expand their global services in order to expand their business, revenue growth and attracting the customers worldwide. The MNCs usually gets the cheap labor at low cost in order countries; therefore, they try to expand their business and even try to lower the cost through global business. During the period of recession in the year 2008-2009, foreign companies outside their countries has experience the rapid growth. By the year 2010, these companies account for the one-third of the global revenues and is raked among the largest in the world (Ajami and Goddard 2006). As the agent, of the state MNCs importance in the world politics has grown and is ranked by the annual sales and state, according to the GNI. According toe the report of GNI, world’s top 100 economic entities, multinational corporation’s accounts to about 9 out of the 50, but in the next coming 50 years, they will account to 40. Many countries worry that these corporate giants are undermining the national government ability to control their own economies and their own fates. Because of sound financial strength of the states; their companies are able to meet the global reach. It is tempted to conclude that MNCs are becoming a threat to the state power. There issues over the national political leaders have little control for eroding the sovereignty and the international system major organizing principle. There are many state agencies that lack the sufficient depth of industry expertise in fostering and monitoring the non research and deployment types investment that contribute in growth productivity. The government of Malaysia ha started bargaining over the various general ways with the foreign investors on the issues of technology for governing the foreign direct investment to enhance the technology. Many scholars put the stress over the role of multinational corporations as agents of dependency. They argue over the rise of MNCs that has placed the great economic restrictions on the LDC development. Through the emergence, of the multi national corporations fundamental change has occurred in the way of doing the trade and international finance in the last 20 years. Global business leaders such as, Royal Dutch Shell, the Bank of America, General Motors, Nestle, Siemens and fiat has grown in power and number. MNC serve as the agent important for developing the contemporary capitalism to the next stage in relation with the political authority and international wealth. As the agent of the state, MNCs has brought many changes in employment and welfare of millions of people. Fear and suspicion of the multiple product-division and transfer of production has become intense in United Nations, and they are been asked to prepare the detailed growth appraisal and strength. According to the report generated in the year 1973, MNCs role in the world development has noted there are 650 MNCs and has the combined turnover of 77 3 billion dollars in the year. Around 213 companies are doing $1 billion business outside the financial sectors of capitalist economy. There average worth exceeds the nations GNP value in the world except the USA and USSR. New phenomenon of Multinational Corporation has been analyzed that conservative politicians has welcome the productive wealth inflow, sophisticated and technology management that boost the countries. But these are also distributed through the threat that is posing by the MNC to the regulatory and administrative capabilities of the nation state (Farmer 2006). Automobile and computer industry in Britain dominate the affiliates of American MNCs. France, Italy, and Germany experience the invasion, especially in the field of computers, telecommunications and aerospace industries. Across the Canada, Atlantic, it has been analyzed that 63% of the mineral and industrial assets are pass into the foreign control and Australia has reached the figure of 35% (Sage Publications 2011). Through operating its business in other countries, Multi national corporations are enjoying the revenue growth ion their countries, as they have to incur less cost on their production in other country. MNCs also lead to the development in the country. Through MNC money inflows very easily in the developing countries; that lead to the prosperity in various countries. MNCs has given a boost to the export and enhanced the industrial performance of the host economies even the laissez-faire capitalism advocates has grown about the free-ranging power. 5. Conclusion The study has discussed the multinational corporations all over the world. In the present time there popularity has increased and is growing in many developing countries. Multinational Corporations brought foreign capital in the country that lead to the prosperity in the country. United States is the main hub of multinational corporations. Through multinational corporations many developing countries has enjoyed the recent technological developments that has brought by the MNCs. The culture of MNC has been enhanced through the globalization that has brought modernization and has change the pattern of doing the business all around the world. Now more and more countries are trying to increasing their business operations in other countries. The study has successfully described that multinational corporations are the agents of the state. As the agent of the state they bring business in other countries and create many job opportunities, growth, and prosperity. Through this way the host country gets the opportunity to conduct their business activities at low cost and increase in revenue. It also helps the organizations in attracting a large number of customers and expands their business activities. The study has discussed the different challenges faced by the multinational corporations in other countries along with the various benefits availed by the companies. References Ajami, R. A. and Goddard, G. J. 2006. International Business: theory and Practice. New York: M.E. Sharpe. Farmer, B. R. 2006. American Political Ideologies: An Introduction to the Major Systems of Thought in the 21st Century. USA: McFarland. Hontz, E. 2009. Engaging local businesses in reform. [Online]. Available at: http://www.cctrends.net/?tag=mnc [Accessed on: 13 July 2012]. Ishiyama, J. T. and Breuning, M. 2010. 21st Century Political Science: A Reference Handbook, Volume 1. USA: SAGE. John, S. 1998. Multinational corporations. Foreign Policy. 113, pp. 1-12. Sage Publications. 2011. Sage Brief Guide to Business Ethics. USA: SAGE. World’s Best Multinational Workplaces. 2012. [Online]. Available at: http://www.greatplacetowork.com/best-companies/worlds-best-multinationals/list-of-the-25-best-from-2011 [Accessed on: 13 July 2012]. Read More