CHAPTER ONE

INTRODUCTION

Over the years, Multinational corporations (MNCs) have been a source of controversy ever since the East India Company developed the British taste for tea and a Chinese taste for opium.1 A typical multinational corporation (MNC) normally functions with a headquarters that is based in one country, while other facilities are based in locations in other countries. In some circles, a multinational corporation is referred to as a multinational enterprise (MNE) or a transnational corporation (TNC).2 They enter host countries in different ways and different strategies. Some enter by exporting their products to test the market and to find whether their existing products can gain sizeable market share. For such firms, they rely on export agents. These foreign sales branches or assembly operations are established to save transport costs because there is a limit to what foreign exports can achieve for a firm owing mainly to tariff barriers and quotas and also owing to logistics or cost of transportation. Most of the firms are encouraged by the low wage rates and other environmental factors. To meet the growing demands in the foreign countries firm considers other options such as licensing or foreign direct investment which are critical steps. Some continue with export even when they have settled for the foreign direct investment option.

Every step takes strategic planning and is motivated by profit through sales growth. The idea of multinational corporations has been around for centuries but in the second half of the twentieth century multinational corporations have become very important enterprises. Multinationals operate in different structural models.3 The first and common model is for the multinational corporation positioning its executive headquarters in one nation, while production facilities are located in one or more other countries. This model often allows the company to take advantage of benefits of incorporating in a given locality, while also being able to produce goods and services in areas where production is lower.4 The second structural model is for a multinational corporation to base the parent company in one nation and operate subsidiaries in other countries around the world. With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less function independently, outside of a few basic ties to the parent.Developing nations attracts multinational subsidiary operations due to a number factors such as cheap labour, low taxation and less vigilance concerning workers rights and environmental protection. They are made to contribute to the social security net (i.e. welfare, unemployment insurance, e.t.c) other factors including low pay for woman workers, child labour, and the absence of labour unions, also combine to make the third world ripe for exploitation.  The presence of multination in these countries improves overall living standards.  The benefits of the relationship are most often one sided, but the economic problems facing these nations makes it difficult for them to be picky about their investor.  Firms become multinational corporations when they perceive advantages to establishing production and other activities in foreign locations.  Firms globalize their activities in foreign locations.  Firms globalize their activities both to supply their home country market move cheaply and to serve foreign markets more directly.  Keeping foreign activities within the corporate structure lets firms avoid cost inherent in arms length dealings with separated entities while utilizing their own firm specific knowledge such as advanced production techniques.   By internalizing what would otherwise by cross-boarder transaction multinationals can bridge the information obstacles that often hinder trade.  For example, they may be able to move carefully monitor product quality or worker conditions in factories they own than in those of contractors, or adapt the composition of output more quickly to change in market condition.

Improvements in information technology have reduced the impediments to exerting corporation control across boarders.  These advances have combined in recent years with an increased openness on the part of government to foreign multination, as the economic benefits of a foreign presence to the host country have become more widely recognized.  These benefits include the increased investment and the associated jobs and income that the multinational firm brings, as well as technological transfer and improved productivity.  The role of multinationals in spreading industry best practices is likely to be especially important services, many of which are not easily traded across national boundaries.

Evidence of the heightened role of multinationals can be seen in the quickened pace of Foreign Direct Investment (FDI)  in recent years in 1991 FDI flows both in and out of other European country development (OECD), reached regard level; over 2.5 percent (%) of their combined gross domestic product (GDP) for in flow and 3.0 percent for outflow.  Most of foreign direct investment is between developed countries, since 1982, 75% (percent) of FDI out flow from OECD countries have gone to other OECD members.

SOURCE: United Nation Multinational Corporation in world development New York (2000).

1.1       OBJECTIVE OF THE STUDY

The main objective of this study is to critically look into the history of those multinational corporation in their host nations mostly developing nations if their existence has positive or negative impact on the development of the host country.

SIGNIFICANCE OF STUDY

The following were the significance of this study: -

i.                                           It will be a source of knowledge expansion to me

ii.                                         This research work will be my contribution to knowledge.

iii.                                      It will serve as source of data for others who may carryout research work on some or related topic in the future.

iv.                                      It will also serve as point of reference to policy makers in their relationship with matter concerning multinationals.

v.                                         This research work will be a companion to decision makers on foreign investment in the country.  Mostly when the fire of foreign investment is at higher level in the country.

SCOPE OF THE STUDY

The essay work will cover the following areas of study in terms of the activities of multinational corporation, the history, their roles as an agent of the development, their contribution towards development, the prose and coin i.e. advantage and disadvantages of their activities.  It will also examine their negativity in the area of profit send to their home ration.

LIMITATION

Due to the following constraints such as inadequate books or the topic posed a serious constraint on the write up some of the date needed for this write-up are not available at the time this write up services carious out.

It is prominent to note that no one has every thing to himself.  In everything, there arises some constraints, so it is in the case of this essay

i.                   Financial problem;  This problem is a great one especially in this present day economy recess in with inflation, sky rocketed prices of materials, where people are struggling to live within their limited resources.  This is especially applicable to a student who depends largely on others, among lost is that of transportation to and fro, the place of research, in some cases would have to trek for long distance.

ii.                 Time:  Time factor is another constraint, which the writer encountered.  Such as combining class activities i.e. test, assignments, lectures and exams with the project work other include the drudging of read and writing from one item to another in the attempt to accomplish the task.

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