A corporation is a legal entity that is designed to protect its individual members from financial liability. From this basic legal identity, some multinational corporations have grown into enormous, world-spanning organizations with the power to influence national economies. Corporations are owned by shareholders, and their purpose is to maximize profits for their owners.
People on both sides of the controversies that rage around the activities of multinational corporations acknowledge that their primary goal is to maximize profits. Shareholders and supporters see this as a positive trait that improves economies and benefits people, while opponents accuse the profit motive of encouraging exploitation of the poor and environmental destruction. Movements such as Corporate Social Responsibility, or CSR, attempt to temper the profit motive by making corporations more accountable to communities and the natural world, encouraging them to re-invest some of their profits in social programs and environmental protection.
A corporation can most effectively protect its profits by achieving market dominance. This involves extensive advertising, producing a product that appeals to the public and squeezing out competitors through efficient production techniques and high sales. Market dominance helps a multinational corporation thrive in good economic times and survive during lean times. A competitive economic system favors companies who are able to outperform their competitors. While many countries have laws against monopolistic business practices, a well-honed corporation can effectively dominate a market while steering clear of practices that could actually be labeled as a monopoly.
A growth-based economic system requires corporations to continually invent, develop and market new products to expand their market share. This process requires large investments in research and development. A central goal of a multinational corporation is to remain more innovative than its competitors, and to anticipate what products will be most profitable in the coming years. The corporation must then get that product into the market. Competitors will copy a successful idea as soon as it is made public, so corporations put great effort into keeping innovative ideas secret until they can be publicly released as fully developed products.
Multinational corporations are required to maximize returns for their shareholders, and this requires constant expansion to keep profits growing. Expansion may take the form of growth within a company, or it may manifest itself as friendly or hostile takeovers of other companies. Mergers and acquisitions form a large percentage of corporate growth within a market that is largely saturated in terms of growth potential. Companies that weaken or whose growth slows are at greater risk of takeover by other companies.