Worldbeater, Inc

This article discussed about the role of multinational corporations in integrating world

economies. Some refers multinationals as a success for global capitalism by bringing

advanced technology to poorer countries and low-cost products to wealthier ones.

Multinational is also one of the reason globalisation takes place. I agree with this because in

1995, multinationals cranked out $7 trillion in sales through their foreign affiliates. This

amount is greater than the world’s exports. Multinational play an important role in global

investment. I agree with this where at the end of the 1996, the total stock of foreign direct

investment outside their home countries are over $3 trillion. World domestic and foreign

direct investment grows faster since 1985.

However, globalisation could easily make multinational companies less important. This is

because, as transport costs and trade barriers fall, it becomes easier to serve foreign markets

by exporting, rather than establishing factories and research centres around the world. And as

capital markets become more integrated and liquid, it is easier for single-country firms to

raise money by selling bods or shares. The basic reason for multinationals growth is

economies of scale. However, the notion that economies of scale force companies to become

multinationals does not hold up. But, firms find economies of scale at a level other than that

of the factory floor. Let us take Coca-Cola as an example. Economies of scale playing its role

in other areas such as reinforcing its brand by making a global marketing effort and helping

its bottlers, most of whom are independent learn from the experiences of their counterparts in

other countries.

The next reason is vertical integration. The interdependence of suppliers and users of a

particular resource makes it difficult for such firms to cooperate, since there is always the risk

that one will try to undermine the other. This is the reason firms integrate vertically by

buying their suppliers or their customers.

The next reason is they tend to be successful. Unsuccessful firms will close their business and

give way to those that can earn higher profits. As the world economy becomes more

integrated, it is to be expected that the companies most adept at crossing borders are those

that prosper. Many companies are serving other companies rather than household consumers.

For example, if multinational car manufacturers want to use the same headlights in cars

assembled in different countries, then headlight manufacturers must become multinational,

too. Although deregulation and privatisation have had a big effect on the telecoms industry,

the demands of corporate customers are helping propel the globalisation of that industry.

Multinational’s size and scale can make it possible for them to exert power in an exploitative

way. A multinational company can move from one country two another if the country’s law

is too restrictive. This may make it harder for governments to raise revenue, protect the

environment and promote worker safety. Critics fear an undesirable “ race to the bottom”,

with government reducing desirable social protection to attract investment by multinationals.

Another critic is multinationals are exporting jobs to low-wage countries. But this is true in

some industries only such as textiles and electronics. The flow to developing countries,

therefore, are going directly to regions to highest growth prospect. FDI investment mergers

and acquisitions help to achieve economist of scale in marketing and distribution .In certain

industries and for certain products, the importance of multinational companies is increasing

quickly. But the trend is easy to over stated.

Even in manufacturing, speed, innovation and proximity to customers can matter more than

sheer size. Being multinational is no guarantee of success.