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The United States, Japan, and the major economic forces of Western Europe are developed countries whose infrastructures and well-established financial markets are conducive to the operation and potential success of multinational corporations (MNCs). Many MNCs are based in the U.S. Many of these companies are among the Fortune Global 500.
China, which had one of the world’s fastest-growing economies in the past decades, is a country where many MNCs established operations. Additionally, China itself is the headquarters of many growing multinational corporations. Examples of large Chinese MNCs include Huawei Technologies, Lenovo, and Haier.
Key Takeaways
- Developed countries such as the United States, Japan, and those located in Western Europe are the headquarters of many of the world’s largest multinational corporations (MNCs).
- Although still a developing country, China is also the headquarters of several growing MNCs.
- MNCs require both soft and hard infrastructure to sustain their businesses and facilitate trade.
- Soft infrastructure includes access to a well-trained labor force, advanced technology, and a stable government.
- Hard infrastructure refers to the physical infrastructure of roads, bridges, ports, railways, and airports that enable MNCs to move goods from place to place.
Advantages Gained by MNCs in These Countries
Multinational corporations (MNCs), also known as multinational enterprises, rely upon infrastructure, both soft and hard, to establish and sustain healthy business environments in any given location. These infrastructures are closely related, and both are impacted by politics and economics. MNCs view the existence of infrastructure as critical to facilitating trade, as well as necessary for investing and doing business in the country.
Soft Infrastructure
The U.S., Western Europe, and Japan all possess highly developed soft infrastructures and financial markets that enable companies located there to raise large amounts of money at a low cost. The presence of advanced technology and sophisticated management techniques is also an enormous advantage to these companies.
Soft infrastructure encompasses human capital, specialized talent, training, and supporting institutions such as colleges and universities that help produce educated employees. A sound, soft infrastructure also contains administrative, judicial, and law enforcement agencies that safeguard the kind of political and social stability necessary to do business efficiently, as well as grow and convey specialized services to people.
The absence of soft infrastructure means there are institutional voids, such as a lack of regulatory systems, specialized intermediaries, educational institutions, talent, and training. This makes it difficult for new corporations based in developing countries to access human capital or talent inexpensively, and it is equally challenging for MNCs wishing to do business in such countries.
Hard Infrastructure
Hard infrastructure consists of roads, bridges, ports, buildings, and any structures falling under the heading of public works. Because hard infrastructure impacts transportation, its absence negatively affects the supply chain potential and the ability of MNCs to move materials and goods from place to place physically.
According to the Bureau of Economic Analysis, U.S. multinational enterprises employed 43.9 million workers worldwide in 2019. Employment was the largest in China, the United Kingdom, Mexico, India, and Canada.
Though MNCs have long avoided entering developing countries, globalization and the new potential to initiate the creation of infrastructures find them more frequently embracing the challenge. The promise of receiving enormous tax revenues compels governments in developing countries to entice MNCs to do business in their territories.
Benefits of MNCs
In addition to providing revenue, MNCs generate jobs, stimulate local economies, as well as create and share culture. They also introduce previously unavailable goods and services, advanced technologies, and management techniques. Local MNCs can then take advantage of these benefits, becoming more competitive and creating their own opportunities to do business across national borders.
MNC Statistics
The United States is the country that has the most multinational corporations, numbering 719 companies. That is 33% of total MNCs globally that are headquartered in the U.S. Following the U.S. is Japan with 264 MNCs (12%). Rounding out the top five are China; 219 companies (10%), U.K.; 118 companies (5%), and India; 81 companies (4%).
What Are Examples of Multinational Corporations?
Examples of multinational corporations include Apple, Amazon, Microsoft, McDonald’s, and Volkswagen. These companies are headquartered in one nation but operate divisions in many other countries in order to expand their business and reach more customers.
What Are the Characteristics of Multinational Corporations?
Multinational corporations have high-quality products that attract customers, which results in a well-known brand name. They also have strong financials and efficient business operations. Most MNCs are technologically advanced, have savvy advertising, and a skilled workforce.
What Is the Largest Company in the World?
The largest company in the world by market capitalization is Apple Inc. In 2021, it had a market cap of $2.3 trillion. After Apple, the next largest company is Microsoft with a market cap of $2 trillion.
The Bottom Line
Multinational corporations are headquartered in one country and operate in many other countries. They do this to expand their business and reach more customers, with the intended goal of increasing profits. Many also operate in other countries as a means of cost savings.
The country with the largest number of MNCs is the U.S., followed by Japan and China. Many European countries and India also have many MNCs.