Text 2. Multinationals of Today

A multinational corporation(MNC) or a transnational corporation (TNC) is a corporation or an enterprise that manages production or delivers services in more than one country.

Very large multinationals have budgets that exceed some national GDPs (gross domestic product). Multinational corporations can have a powerful influence in local economies as well as the world economy.

Many MNCs are very large in relation to the national income of the countries in which they are located. This means that it is not as easy for the host governments to enforce national laws on MNCs. Generally speaking, governments want to get investment from these MNCs because they generate jobs and incomes. Other benefits include training of local workers. Technology transfer is also a positive motivation.

In a highly competitive world, companies seek to reduce their costs as much as possible. The prospect of a foreign company setting up in a country where labour is cheap is attractive both for the company and the host country's government. Multinational corporations can be divided into three broad groups according to the configuration of their production facilities:

• Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products (example: McDonald's);

• Vertically integrated multinational corporations manage production establishments in certain countries to produce products that serve as input to its production establishments in other countries (example: Adidas or Nike);

• Diversified multinational corporations manage production establishments located in different countries that are neither horizontally nor vertically nor straight, nor non-straight integrated (Microsoft or Siemens).

Answer the Questions:

1.What is a multinational corporation?

2. What budgets do large multinationals have?

3. Why can multinational corporations have a powerful influence in local economies?

4. What do local governments want from multinational corporations?

5. What benefits of multinationals can you name?

6. What do companies seek in a highly competitive world?

7. How can multinational corporations be divided?

8. How does a horizontally integrated multinational corporation organise its business?

9. What is avertically integrated multinational corporation?

10. What type of companies are Microsoft and Siemens?