How Can the Emergence of Mncs Best Be Explained?

How can the emergence of MNCs best be explained?

Introduction

Business development today linked to the globalization of business and the emergence of MNCs (Multi-National Corporations). The emergence of multi-national corporations is closely linked to globalization, it is a part of effects of globalization, and therefore at the beginning of my assignment I want to discuss about the drivers and the background of globalization.

Globalization contents a wide dimension of influences in economic, technological, business, political, cultural, social etc. And effects the living style of people in whole wide world. Swedish journalist Thomas Larsson, in his book The Race to the Top: The Real Story of Globalization (2001) says, “Globalization is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world.” Which I think can perfectly explain the meaning of globalization. The process of globalization started since centuries ago, to analyzing modern globalization as a process which been defined separate areas as globalization of economies, globalization of markets, globalization of industries, globalization of strategy (Garzina Jatuliaviciene and Marija Kucinskinen, 2006). The drivers of globalization are a combination of many factors that have forced business to look outside their domestic markets for growth opportunities. There are few key drivers of globalization: cost globalization (i.e. high product development cost, scale and scope economies), globalization of government policies (i.e. foreign investment policies, trade policies), market globalization (i.e. global costumers and similar wants and needs, global channels), globalization of competition (i.e. high volumes of exports/imports, global competitors). According to Waters, M. (2001) today the development of the world economy is in two obvious trends: First, the regional blocs of the world economy, the second is the globalization of the world economy. Regional blocs of the world economy are a important step in the realization of economic globalization, and economic globalization is the ultimate destination of the regional economic groupings.

The definition and the development of MNCs

For the definition of multi-national corporations, Raj Aggarwal et al. said there is no universally accepted standard of the term multi-national corporations. Many scholars and authors have different defined multinational corporations from variously point of view. But the generally definition is “an enterprise that engages in foreign direct investment (FDI) and owns or controls value adding activities in more than one country” (Dunning 1993, 3)

Earliest multinational corporations