Multinational corporations

Some of the world's largest companies operate in dozens of countries at the same time. A phone might be designed in California, made from parts sourced in Korea and Taiwan, assembled in China, and sold in shops in Spain. The companies behind this kind of operation are called multinational corporations, or MNCs.

What Is a Multinational Corporation?

A multinational corporation is a single company that owns or controls offices, factories, or shops in more than one country. The company has a headquarters in one country — called its home country — and operations in many others, called host countries. Apple, Toyota, Nestlé, McDonald's, Samsung, Volkswagen, and Unilever are all multinational corporations.

Globalization

The growing connection between countries — through trade, MNCs, communication, and culture — is called globalization. Faster ships, cheaper flights, container shipping, and the internet have all made it easier for companies to operate globally. As a result, the share of the world economy run by MNCs has grown enormously over the last fifty years.

Supply Chains

A supply chain is the chain of suppliers, factories, transport, and shops that turns raw materials into a finished product in a customer's hands. A supply chain for a smartphone may stretch across ten countries: rare-earth metals from one, glass from another, computer chips from a third, assembly in a fourth, and customers everywhere. When something goes wrong in one country — a storm, a port closure, a war — the whole chain can be disrupted.

Outsourcing

Outsourcing is when a company hires another company — often in a different country — to handle part of its work. A British retailer might outsource its customer-service phone lines to India. A US clothing brand might outsource its sewing to factories in Vietnam. Outsourcing lets the company focus on its core business and often reduces costs, though it can also raise concerns about quality, working conditions, and the loss of local jobs.

Benefits and Concerns

• Benefit — MNCs create jobs in host countries, often at higher pay than local employers.
• Benefit — MNCs bring new technology, skills, and management practices.
• Benefit — MNCs make global products available to local shoppers.
• Concern — much of the profit may flow back to the home country, not stay in the host country.
• Concern — large MNCs can sometimes outweigh small national governments in bargaining power.
• Concern — global brands can crowd out local culture and small local businesses.
• Concern — workers in some supplier factories may face poor conditions or low pay.