The Effects of Globalization on Multinational Corporations

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Multinational corporations are agents of globalization. At the same time, many multinational corporations are also affected by globalization in ways they may or may not like. This reality stems from the fact that multinational corporations have many subsidiaries, some of which benefit from globalization and others that do not. The effects of globalization on multinational businesses can be good or bad, depending on the nature of the corporation in question.

Access to New Markets

Globalization gives businesses access to markets that would have been difficult to reach in the past. Because of the internet, customers from anywhere in the world can order products from companies anywhere else in the world, and have those products delivered by airplane in just a few weeks. This is naturally a tremendous advantage to businesses, who stand to increase their potential customer base by millions by reaching out to foreign buyers.

Access to Labor at Cheaper Prices

Put multinational corporations and globalization together, and you get a business that can access labor at cheap prices. Outsourcing and off-shoring allow businesses to hire employees in foreign countries, where labor and real estate costs may be lower than in the business' home country. While these practices can have negative effects on workers looking for full-time jobs, there is no doubt that they decrease costs, and therefore increase profits, for businesses.

Minimize Costs Through Partnership Formation

Companies affected by globalization are able to form partnerships with organizations all around the world. Many American, European, and Asian companies have corporate partnerships that stretch across continents. For example, Google partnered in 2014 with South Korea's LG Electronics and in 2017 with Taiwan's HTC to be able to offer its own line of cellular phones, including the Google Pixel. These kinds of partnerships minimize costs and maximize quality by playing to the strengths of teams all around the world.

Opportunities for Tax Reduction

Globalization gives multinational corporations the ability to seek out foreign countries for their investments when their current country adopts a tax policy they find to be unfavorable. Countries with low corporate tax rates are sometimes called "tax havens," as they allow corporations and individuals to lower their tax rates by moving assets offshore. These counties include Bermuda, Belize and Switzerland. The international financial structure, comprised of encrypted information systems and private documents, makes all this possible

Coordination Challenges

Multinational corporations may have a difficult time coordinating activities in a globalized economy. A company that operates in America, Japan and Europe, for example, will need to hire employees who speak many different languages, and it may be difficult for that company to make sure all employees are on the same page when only a few of them speak the same language. Translators may be called upon to assist in information coordination where language barriers exist. Other coordination problems may come from differences in cultural norms, for example, marketing in the Muslim world, and business norms such as managing logistics in countries with low-quality infrastructure.