Multinational Corporations (MNCS) are corporations that operate in more than one country. The model of a MNCS is dynamic offering both benefits and detriment factors to our society.
A common model experienced with MNCS is a center of operations is in one country with manufacturing facilities in other countries where the company can benefit from producing goods and services where cost of production is lower due to labor costs (Tatum, 2003, 2). The benefit to produce at a lower cost provides a competitive advantage and a greater margin in the product sold producing increased capital for the company and shareholders. Other benefits are to provide work in other countries that maybe limited in the area providing financial infrastructure and social development (Wyans, 2008, 2) in developing countries. Some possible detriments to this MNCS model is displacement of jobs from one country, the quality of the product may not be to standard, and workers may not possess or have equal worker’s rights laws as we do where exploitation can occur.
However, the MNCS model can produce high-quality, low-priced products. MNCS create competition, and in return “delivers mutually beneficial gains from exchange and sparks the collaborative effort of all nations to produce commodities efficiently” (Quinlivan, 2009, 6). Foreign investments have increased due to MNCS. However, increasing foreign investments does not necessarily equate to increasing domestic investments. In other words, due to MNCS, there have been some signs of decreased domestic investments (Quinlivan, 2009, 8). Decreased domestic investments may help the financial infrastructure in developing countries, but can damage the financial infrastructure in the domestic country.
With the increased awareness of human rights in other countries and the need to decrease environmental issues by making environmental friendly products, attracts great apprehension with the functionality of MNCS. One example of an environmental issue is the drive to extract oil from Nigeria triggered protest. The military was used to harass and kill protesters (Anup, 2002, 4). MNCS must be aware and conscience of their actions when operating in other countries. However Quinlivan (2009) argues that MNCS are the driving force to spread green technologies and creating the market for green products (14). Both examples of the impact and the increased awareness MNCS brings to the environment and human rights provide substance. There must be a balance to ensure MNCS are socially responsible as it pertains to each country.
Some argue MNCS sparked a cultural phenomenon where three distinct metaphors are occurring including cultural homogenization, cultural polarization, and hybridization. The influence by the MNCS and the product trusted upon diverse cultures is alleged by some to be a western standardization known as homogenization (Holton, 2000). The impact on cultures can cultivate cultural hatred towards a specific country where resistance against western culture creates cultural polarization.
There are many MNCS operating today benefiting society and the economy. One example is the conglomerate Wal-Mart. The chain of stores is doing exceedingly well during our current economic downturn due to their ability to offer the customer what they want and that is affordable merchandise. There is a paradigm shift in spending where consumers are trading down, and that is where Wal-Mart capitalizes with their brand image of saving people money (Gross, 2008, 4). Wal-Mart operates in other countries helping their overall profitability where the U.S. market is at idle, other countries are thriving well which contributes to Wal-Mart’s success (Gross, 2008, 4).
There are also arguments against Wal-Mart where doing business is hurting our society. Wal-Mart’s ability to purchase product from suppliers at such a low cost hurts the suppliers to the point where they must lay-off employees to make up the loss. Wal-Mart’s purchasing of foreign products accelerates the need to move jobs overseas to compete which are contributing to increasing MNCS (Fishman, 2007, 7-8).
To conclude, there are many contributing factors of MNCS that can benefit and can be a detriment to society. MNCS are very popular while gaining traction for years. However, the increasing of MNCS requires oversight to ensure the pros outweigh the cons. There must be a balance for MNCS to ensure human rights, culture, financial infrastructure, the environment, the product is of quality, and ethical practices is the foundation rather than just being considered in the decision making process.
Anup, S. (2002). Corporations and the environment. Global Issues. Retrieved November 23, 2009, from http://www.globalissues.org/article/55/corporations-and-the-environment
Fishman, C. (2007). The wal-mart you don’t know. Fast Company. Retrieved November 23, 2009, from http://www.fastcompany.com/magazine/77/walmart.html
Gross, D. (2008). The wal-mart puzzle. Slate. Retrieved November 23, 2009, from http://www.slate.com/id/2185221/
Holton, R. (2000). Globalization cultural consequences. The Annals. Retrieved November 23, 2009, from http://ann.sagepub.com/cgi/content/abstract/570/1/140
Quinlivan, M. G. (2009). Multinational corporations: myths and facts. Action Institute. Retrieved November 23, 2009, from http://www.acton.org/publications/randl/rl_article_364.php
Tatum, M. (2003). What is a multinational corporation? Wise Geek. Retrieved November 23, 2009, from http://www.wisegeek.com/what-is-a-multinational-corporation.htm
Wyans, J. (2008). Multinational Corporations – benefits and drawbacks. Associated Content. Retrieved November 23, 2009, from http://www.associatedcontent.com/article/1062818/multinational_corporations_benefits.html?cat=4