Write a short note on MNCs?

ANS. The multinational corporation is a business organization whose activities are

located in more than two countries and is the organizational form that defines foreign
direct investment. This form consists of a country location where the firm is
incorporated and of the establishment of branches or subsidiaries in foreign
countries.
Multinational companies can, obviously, vary in the extent of their multinational
activities in terms of the number of countries in which they operate. A large
multinational corporation can operate in 100 countries, with hundreds of thousands
of employees located outside its home country.
The economic definition, however, does not capture the importance of the
multinational corporation as the organizational mechanism by which different social
and economic systems confront each other. The multinational corporation, because
usually it develops in the cultural and social context of one nation, exports its
organizational baggage from one institutional setting to another. In this regard, it
plays a powerful role as a mechanism by which to transfer organizational knowledge
across borders.
However, while being foreign implies that it might serve the valuable role of importing
new practices, its foreign status also implies that its practices are likely to conflict
with existing institutions and cultural norms. Moreover, since multinational
corporations are often large, they pose unusual challenges to national and regional
governments who seek to maintain political autonomy and yet are often anxious to
seek the investment, technology, and managerial skills of foreign firms. There are,
thus, economic and sociological definitions of the multinational corporation that differ,
and yet complement, each other. In the economic definition, the multinational
corporation is the control of foreign activities through the auspices of the firm. In the
sociological definition, the multinational corporation is the mechanism by which
organizational practices are transferred and replicated from one country to another.
The nature of multinational corporations has undergone a drastic change with the
unfolding of the process of globalisation around the world. This is evident from the
changes that are fast occurring at the level of production activities taking place within
the MNCs. As against the older times when there was a clear demarcation between
production activities taking place at the headquarters and secondary activities
occurring in the subsidiary branches, now the companies have become truly global,
with the headquarters merely being a convenient site for strategic decision-making.
Gone are the days when a MNC such as IBM could be regarded as an American
company with several foreign affiliates. Given the widespread expansion of sales
owing to revolutionary developments in the field of global communication, production
activities have today become truly global, and longer need to be located at the
headquarters. . Several new developments like the diversification productions of
activities, adoption of global marketing, strategies with an emphasis on creating a
uniform brand image, and recruitment of top management personnel from across the
globe indicate beyond doubt, full globalisation of MNCs.
Multi-national corporations have also come under a lot of criticism lately.
Anti-corporate advocates criticize multinational corporations for being without a basis
in a national ethos, being ultimately without a specific nationhood, and that this lack
of an ethos appears in their ways of operating as they enter into contracts with
countries that have low human rights or environmental standards.(7) In the world
economy facilitated by multinational corporations, capital will increasingly be able to
play workers, communities, and nations off against one another as they demand tax,
regulation and wage concessions while threatening to move. In other words,
increased mobility of multinational corporations benefit capital while workers and
communities lose. Some negative outcomes generated by multinational corporations
include increased inequality, unemployment, and wage stagnation.
The aggressive use of tax avoidance schemes, and multinational tax havens, allows
multinational corporations to gain competitive advantages over small and
medium-sized enterprises. Organizations such as the Tax Justice Network criticize
governments for allowing multinational organizations to escape tax, particularly by
using base erosion and profit shifting (BEPS) tax tools, since less money can be
spent for public services.