Chapter I. Theoretical aspects of the multinational corporation
1.1 Maintenance, structure and the basic types of activity of the
1.2 Advantages and disadvantages of politics of the multinational
Chapter II. The role of the multinational corporation of the USA in the
operation of multinational corporations of the USA in Russian
The modern economy is moving towards the creation of uniform economic
space where the basic subjects of economic relations are no longer countries,
but multinational companies and their alliances. Thus, the obvious trend to
their integration, to what the wave of the international mergers and absorption
testifies is observed.
The basis of all multinational firms is made up of American companies.
The number of workers and employees who are engaged in overseas branches is
enough to tell that, is equal to half of American employees engaged in the
The international giants have deeply taken root into economic structure
of developing states and it is, certainly, reflected in the strategy of
multinational corporations. Owing to similar changes American multinational
corporations bring certain corrective amendments to the strategy, but,
nevertheless, constantly and purposefully export the working capital. So, this
practice deserves the closest attention with the purpose to work out effective
recommendations to form domestic multinational corporations for further
functioning in the world economy.
Chapter I. THEORETICAL ASPECTS OF FUNCTIONING AND DEVELOPMENT
OF THE MULTIONATIOL CORPORATION
1.1 Maintenance, structure
and the basic of activity of the multinational corporation
The process transnationalisation is characteristic for modern economy. In
it the main characters are multinational corporations.
The organizational structure of multinational corporations, as a rule, is
represented by the head company and its foreign branches.
The head parent company is an administrative center of the system of
enterprises of the multinational corporation. Its functions usually include
decision-making on merging with other companies, purchasing new firms; forming
long-term industrial, investment and financial politics of branches and
corporations as a whole; controlling the finance and research and development
of foreign branches, at the same time the head company should enable managers
of foreign branches to make decisions independently to satisfactory the demands
of consumers of the local market and according to the legislation of the host
The basic organizational forms of foreign branches are:
- affiliated company (subsidiary) –a company which is controlled by
another one. The controlling company owns over 50% - and sometimes 100% - of
the ordinary shares of the subsidiary;
- associated company (associate) – a company of which at least 20% and
not more than 50% the ordinary shares is held by another company;
- the branch (branch) - a part of a large organization that deals with
one particular type of work.
The management of the multinational corporation solves problems of
perfection of structure of management depending on assortment of goods and
services, which they offer on the world market.
The example of an ideal structure of the multinational corporation is
“General Electric”, whose market capitalization in 2000 exceeded 300 billion
dollars (the highest figure in the history of USA companies). It is one of the
most versatile companies in the world; it offers a wide assortment of goods,
including aviation engines, industrial plastic, lighting devices, power
installations and many other things in different regions.
Another example of American multinational corporations is “Ford” which
began its enterprise activity in Europe in the 60s on the basis of its branch
in Great Britain. In the 90s this corporation carried out the development of
new models, manufacture of components and assembly of machines in five European
countries, having united technological chains of factories of each of these
When trying to expend, the multinational corporation uses various forms
of the world market. These forms are based on contract relations and are not
connected with participation in the share capital of other firms.
Thus, the modern multinational corporations are based on the theory of a
firm in the organization of manufacture and selling of goods and services and
they have become the largest characters in the modern world economy.
1.2 Advantages and disadvantages of politics of the
Actively participating in the processes of international manufacture on
the basis of the traditional international division of labor, the multinational
corporation has created its own intrafirm international manufacture on the
basis of modernized international division of labor, taking into account
developing markets. This intrafirm variant of the international manufacture has
become the core of modern international corporations.
The organization of the intrafirm international manufacture gives the
multinational corporation a number of advantages:
benefits of the international specialization of manufacture in different countries
tax, investment and other the privileges, given by countries to foreign
investors as much as possible;
3) to maneuver loading of capacities, adapting the production
programs according to the world market;
4) to use affiliated companies as a jumping-off place for further
expansion on developing markets.
Marking the advantages of functioning of the multinational corporation in
the system of the world economy, it is necessary to tell about their negative
influence on the economies of those countries in which they function. Experts
- counteraction to economic policy of those countries, where the
multinational corporation carries out its activity;
- infringement of the state laws.
- multinational corporations really remain a source of some the negative
social consequences connected with egoistic motives of their activity.
Political and economic value of transnational corporations is so great,
that in historically foreseeable time they will remain one of the important
factors of influence strengthening of industrially developed countries in many
regions of the world.
II. The role of the multinational corporation of the USA in the world economy
2.1 The operation of multinational corporations of the USA in
Russia is gradually transforming into the country for which the economy
is characterized by greater liberalization, an open access for foreign
companies to the majority of spheres of economic activities. In particular,
large transnational corporations come to Russia, which economic activities have
a global character.
The following companies - «General
Electric», «Westinghouse Electric», «GEC-Alston», etc. - while showing care,
take steps to gain profit on newly created markets.
American automobile companies are also entering the markets of the
countries with transitive economy, by means of investments very cautiously. The
company "Ford" has been producing cars at a new assembly factory in
Poland since autumn 1995, but the volumes of the assembly were small. The
company «General Motors» has created in Gilwice an assembly factory of family
cars «Opel Astra» from imported accessories. In Russia «General Motors» has set
up organized a small manufacture (assembly) on the basis of the factory Elabuga
In Belarus market " Ford " has adjusted coproduction of the car
"Ford-Transit" which is greatly exported to the CIS countries. It
invested 30 million dollars in it, this is very small capital for investments
abroad. In Russia «Ford» has recently started a small manufacture of elite cars
in Leningrad region. Investments are also not so greater (150 million dollars),
but the project is remarkable because the enterprise in Russia was constructed
from zero while projects of other foreign companies use operating capacities of
their Russian partners. Though the part of the Russian accessories in the cost
of the car is also insignificant (6 %), but in the long term this part will
Thus analyzing the activity of large transnational corporations, it is
possible to note successful factors which success for the introduction and
promotion of the multinational corporation in the Russian market:
1) the success in Russia is often promoted by “a non-standard behavior”:
many western businessmen note the specificity of conditions in the countries
with transitive economy, especially in Russia where the methods used in other
countries, do not always work;
2) because of high risk in the Russian economy;
3) the market of foodstuffs and consumer goods in Russia is undergoing if
not boom, but obvious revival and growth. Therefore many western manufacturers
of the foodstuffs consider Russia a perspective commodity market.
Observing obvious trends on the world market, we can draw the conclusion
that transnational corporations are one of the most powerful elements of
internationalization of the society. "Global" transnational
corporations, first of all American ones, have transferred into the dominating
factor of development of the world economy and international economic relations
today. Direct investments of the multinational corporations play a key role in
the functioning of national economies and expansion of international industrial
system - a material core of modern globalized economy.
The analysis of activity of the multinational corporation allows to
allocate the following basic sources of effective activity of the multinational
corporation (in comparison with only national companies):
advantages of possession by natural resources: the capital and knowledge,
especially the results of research and development;
of an optimum arrangement of enterprises in different
countries in view of sizes of their home market, rates of economic growth, the
price and qualification of a labor, prices and availability of other economic
resources, development of an infrastructure;
the purposes of financial resources of all world;
knowledge of a conjuncture of the commodity, currency and financial markets in
of the international management, including the optimum organization of
manufacture and selling, maintenance of high reputation of a firm.
Sources of effective activity of this type are dynamical: they usually
increase in process of growth of actives of the company and in diversification
of its activity. Thus, with necessary conditions of realization of these
sources, reliable and inexpensive communication of the head company with
foreign branches, a wide network of business contacts of foreign branches with
local firms of the host country , skilful use of the opportunities given by the
legislation of this country can be used.
The multinational corporation can continue function effectively by reducing
the bureaucratic device, improving the control system and advertising activity
mastering old market more deeply and getting on new foreign markets.
Thus, the carried out research s allows to draw the conclusion that now
it is possible to speak about a division of labor not so much between the
countries, but between transnational corporations.
There is a complex and continuously developing phenomenon of the
international corporation in the system of intereconomic communications, which
demands constant attention, studying and international control.
The largest multinational corporations of the USA which have enclosed
greater volumes of investments in the Russian economy
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