A multinational company has its headquarters in one country and affiliates or subsidiaries in other nations.
Company is a term with several uses. In this case, we are interested in its meaning as the entity that is dedicated to the development of commercial or productive activities with the objective of obtaining a profit. The adjective multinational , meanwhile, refers to that linked to several nations.
A multinational company , in this framework, is a company that operates and has interests in different countries . Generally, the notion is associated with the organization that has subsidiaries in different places .
Characteristics of a multinational company
A company becomes multinational by investing in a State that is not that of its main headquarters, giving rise to the birth of other business units (the so-called subsidiaries or affiliates ). Typically, these subsidiary firms depend economically and administratively on the original headquarters.
Although a multinational company creates jobs in various countries and contributes to local economies, it is common for profits to be remitted to the nation of origin. This often means that they are criticized and the possible negative effects of their actions are highlighted.
The Coca-Cola Company is a multinational company.
The logic of its operation
The strategy of a multinational company is usually based on reducing production costs and international sales of its products . These organizations establish themselves in countries where they access raw materials and process or transform them at a lower cost than they would have in their place of origin. In turn, the production is marketed beyond borders, expanding its reach.
Suppose a company is based in the United States . Aiming for growth, it creates a subsidiary in India , where producing is cheaper. Then, the products manufactured in the Indian plant are offered in Latin America , Asia and other regions through multiple subsidiaries. As can be seen, the entity in question can be classified as multinational.
For and against multinational companies
Economists, sociologists and other thinkers often have conflicting positions on multinational companies. There are those who highlight its positive contributions to economies , while others emphasize its negative effects.
If we return to the previous example, it could be stated that the multinational company in question contributed to generating employment in India . But, from another perspective, it can be indicated that this same decision led to not creating or eliminating jobs in the United States . On the other hand, the landing of the company on Indian soil may cause a distortion in said market , altering competition.
Another aspect that is often highlighted is that multinational companies tend to take advantage of legislation that allows them to hire workers with low salaries and limited labor rights , unlike what happens in their place of origin. Something similar happens with the environmental impact : a multinational can treat its waste and control pollution in one way in its subsidiaries and another in its base. Thus, the differences in the quality of life of the people are accentuated and the real and sustainable possibilities of progress are affected.