Reasons for the Growth of Multinational Corporations
The main factors which have contributed towards the growth of multinational corporations are given below:
- Market Expansion : The growth of GDP and per capita income in various countries led to increasing demand for goods and services. Companies in developed economies, explained their operations overseas to exploit the expanding markets abroad.
- Marketing Superiorities : Multinationals enjoy the following marketing superiorities over the following over the domestic companies :
a) Availability of more reliable and up-to-date information about market conditions.
b) Reputation in the market due to popular brands and image.
c) More effective advertising and sales promotion techniques.
d) Wide distribution network.
e) Quick transportation and warehousing facilities.
- Financial Superiorities : Multinationals are financially superior to domestic companies in the following respects :
a) Huge financial resources.
b) More effective and economical utilisation of funds through transfer of excess funds from one country to another.
c) Easy access to foreign capital markets.
d) Easy mobilisation of high quality resources of different types.
e) Access to international banks and financial institutions.
- Technological Superiorities : Multinationals have strong R & D departments. They can invent and innovate new products and processes more easily and frequently. This provides them an edge over national companies. Developing countries invite multinationals for advanced technology due to the following reasons :
a) Developing countries do not have the resources to develop advanced technology and the level of industrialisation is low.
b) They are unable to exploit their rich mineral and other natural resources due to shortage of funds and low level technology.
c) They do not have adequate foreign exchange reserves to import raw materials, capital equipment and technology on their own.
d) They face difficulty in marketing their products in highly competitive world markets.
