Competitive
advantages of multinational corporations
A.S. Rybak
East Ukrainian National
University named after
Volodymyr Dahl
Lugansk, Ukraine
In the context of
global economy international business is the main and most significant area of
realization of international economic relations. Nowadays multinational
corporations (MNCs) can have a powerful influence on both local economies and
the world economy.
Modern
multinational corporations carry out the important functions. The majority of
these functions are stimulating. Firstly, MNCs stimulate scientific and technological
progress. Secondly, they promote the globalization of world economy, engaging
host countries in international economic relations. Thirdly, they stimulate the
development of world production. It is important to mention that being the
world’s largest investors, MNCs are constantly increasing their production
capacity and create new products and jobs in the host countries, encouraging
them to develop production, and as a result to develop the world economy.
Fourthly, they stimulate competition in the global market [3].
The main reason for
the rapid development of multinational corporations in the second half of the
20th century is the high efficiency of their activity in comparison
with companies operating only in one country [4].
What gives a
multinational corporation a competitive edge over a national champion? Most researchers
[2] cite these key areas of advantage for MNCs:
- access to skilled staff and
plenty of opportunity for their selection;
- ownership and access to
natural resources, the capital and results of research and development
worldwide;
- horizontal diversification
in different branches or vertical integration by a technological principle
within the limits of one branch, providing economic and financial stability of
multinational corporations;
- ability to select the
location of branch offices in different countries, taking into account the size
of their national markets, economic growth, prices, availability of economic
resources and political stability;
- possibility to use the state
external economic policy in the various countries according to the interests of
multinational corporations;
- possibility to overcome
various barriers on ways of introduction the goods on the market of this or
that country through exports with the help of direct investments.
There is no company
without problems it is facing. In any case, there will certainly be some sort
of problems or negative factors militating against its survival or continuity. The
arguments against MNCs are:
- their impact on development
is very uneven. In many situations their activities reinforce dualistic
economic structures and widen income inequalities. They tend to promote the
interests of some few modern-sector workers only. They also divert resources
away from the production of consumer goods by producing luxurious goods
demanded by the local elites;
- they typically produce
inappropriate products and stimulate inappropriate consumption patterns through
advertising and their monopolistic market power;
MNCs often use their economic
power to influence government policies in directions that are unfavorable for
development. The host government has to provide them with special economic and
political concessions;
- multinationals may damage
the host countries by suppressing domestic entrepreneurship through their
superior knowledge, worldwide contacts, and advertising skills. They drive out
local competitors and inhibit the emergence of small-scale enterprises [1].
However, the
positive role played by multinational corporations in emerging markets is
undeniable [3]. They invest, bring new production technology and management,
increase gross domestic product, and influence the balance of payments,
increasing an export gain or reducing import. All these changes inevitably
strengthen national economy, increase the level of lives of its citizens.
All things
considered, the development of MNCs is the natural process of evolutionary
changes in the global economy. Multinational corporations have become a
significant subject of international economic relations and are a necessary
link in the process of increasing global productivity and increasing living
standards of people throughout the world.
References
1.
Benefits and Challenges of Multinational Companies
(MNCs)// http://ezinearticles.com/?&id=5171208
2.
Harvard Business School: Globalization
Feature - Why Being Multinational Is No Longer Enough// http://hbswk.hbs.edu/archive/2679.html
3.
Multinational Corporations: Good or Bad?// http://www.economicshelp.org/blog/538/
4.
www.en.wikipedia.org/wiki/Wikipedia//
The Free Encyclopedia
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