A multinational enterprise is a firm that has productive capacity in a number of countries. The profit and

income flows that they generate are part of the foreign capital flows moving between countries .Almost

all the largest multinational firms are American, Japanese, or West European.

They hold a power that is often more influential than the government itself in some countries. In the 21st

century, this business model continues to be highly desirable because of the tremendous profit that can

be generated.

Because of their size, multinationals can have a significant impact on government policy, primarily

through the threat of market withdrawal. For example, in an effort to reduce health care costs, some

countries have tried to force pharmaceutical companies to license their patented drugs to local

competitors for a very low fee, thereby artificially lowering the price. When faced with that threat,

multinational pharmaceutical firms have simply withdrawn from the market, which often leads to limited

availability of advanced drugs. In these cases, governments have been forced to back down from their

efforts. Furthermore, the ultimate goal of every corporation is to be a MNC (multinational company)

because it allows corporations to expand their market share and maximize shareholders wealth.

On the other hand, in increasing their market share they can take advantage of economies of scale,

meaning that the more units they produce the cheaper the cost per unit. This results in more overall

profits for the firm. To prevent competitors from arising, Large multinational enterprise tend to hold a

patent which they control so they can assure that the exclusivity of their products is protected.

Finally, multinational companies have definitely taken over small firms, making it very difficult to new

investors to enter the market. On the other hand, consumers tend to trust the multinational companies’

products because they ensure minimum standards which somewhat seeks consumers’ expectations.

Various critics have been made about how these large enterprise are contributing in pollution and use of

non renewable resources which is putting the environment under threat. However, multinational

enterprise are rarely affected by critics and continue to grow tremendously.

References:

http://www.bized.co.uk/virtual/dc/copper/theory/th18.htm

Michele Fratianni & Chang Hoon Oh, 2009. "Expanding RTAs, trade flows, and the multinational enterprise," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 40(7), pages 1206-1227, September.