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Multinational Corporations
   A multinational corporation (MNC) has industrial and commercial organizations in foreign countries. Manufacturing plants are established abroad, in conjunction with supporting marketing systems.
   Multinational investment has a long history. In the early years of this century, European companies realized that their own home markets were small. Just as the Americans went west in the 1800s, European companies like Nestle, Unilever, and Royal Dutch Shell went overseas for new markets and became MNCs well before World WarⅡ. United States companies, which have a large home market of over 218 million people, had other incentives to multinationalize. Establishment of an MNC was a way to generate income from diversified sources, thereby spreading recession risks. It was a way to maximize return on investments, and it was a way to benefit from cheaper labour abroad.
   The formation of the European Economic Community (EEC) in 1958 spurred the growth of MNCs, especially the American ones. The EEC established import duty-free associations of countries, thus creating vast markets. This meant that one Western European plant of a United States MNC could sell its products within the EEC to a market of 200 million people without running into customs duties between countries. United States multinational growth in Europe was soon followed by the establishment of United States bank branches.
    How multinational can a corporation get? Some companies, like Nestle of Switzerland, make over 90 percent of their sales on exports and manufactured goods abroad. Today the large MNCs control from 50 to 200 foreign subsidiaries with 30 to 90 percent of their sales on exports and foreign-produced goods. In 1973 some experts estimated an annual turnover of $600 billion for all MNCs combined. These MNCs owned over 80,000 subsidiaries worldwide. At that time the annual growth rate of MNC sales was estimated at around 10 percent    well above the average Gross National Product growth of many nations.
   A favourable aspect about MNCs is that they create jobs in foreign countries. They also contribute to innovation or creation of new products and technology. But when innovation levels off and local technology reaches a point of sufficiency, MNCs are sometimes considered to be no longer useful. At this point MNCs run the risk of nationalization, which is the confiscation of a company’s property (plant, equipment, etc. ) by a foreign government with or without adequate compensation. Successful MNCs eventually must learn how to interrelate their subsidiaries with the parent company, how to delegate decision-making authority, and how to develop satisfactory methods of control and supervision.
   Having entered the international arena, an MNC faces an awesome task. It must worry not only about how to overcome the communication barriers already mentioned cultural differences, distance, and environment, but also how to deal with the different legal and tax structures in the various countries. An MNC also has to cope with foreign currency so that it can protect its foreign assets. Some other problems an MNC has to consider are: how to secure continued access to resources; how to deal with increased criticism and interference by foreign governments; and how to deal with labour laws and anitrust legislation both at home and abroad.
   In recent years MNCs have come under heavy criticism. Domestically they have been accused of exporting jobs, meaning that jobs are lost at home because the MNCs set up plants in other countries, sometimes exporting the products back home for consumption. Less developed countries, on the other hand, charge that for years they have been underpaid for their natural resources may be regarded as a challenge to national sovereignty. In other words, this viewpoint sees the MNC as capable of circumventing or subverting national objectives and policies. This obviously reflects the majority voting power of developing countries in the United Nations.
   Widely publicized reports of payoffs to government officials by MNCs, and even interference in local politics, have brought heavy pressure on MNCs to exercise greater care, police their tactics, and redefine their strategy. For example, Lockheed, an American aircraft corporation, was found to have bribed officials in Japan and Europe to gain large government purchase contracts. The case became one of the world’s most notorious episodes in 1970s.