Lesson 3 - Page 1 - Why are multinational corporations important in the global economy?
Objectives: In this lesson, your team will:
- Distinguish the roles of multinational corporations in the production and distribution of economic goods and services.
- Explain how multinational corporations contribute to economic change at different geographic scales.
General Tips: Here are a few suggestions that can help your team complete this Lesson together:
- Click the icon to open a new window with instructions for completing the lesson's collaborative learning activities (listed as Step 1, Step 2,, and so forth).
- Your team should use the Group Discussion Board (located in the Communication area) to discuss questions that appear in blue boxes.
- Important vocabulary terms are defined in the Glossary (located in the Documents area).
- Complete this Lesson according to the schedule provided by your instructor. Doing so will ensure that your team learns together.
- Elect leaders for each local group who can help coordinate the efforts of the entire team.
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How do multinational corporations shape the global economy?
Multinational corporations (MNCs) are important agents
that affect the global production, distribution, and flow of capital and
resources. MNCs enter new foreign markets via a process of cross-border
mergers and acquisitions - a process by which one corporation gains
control of the operations and financial portfolio of another
corporation. Since 1980, the percentage of cross-border corporate
mergers has risen from 20% to 35% of all corporate mergers (Figure 1).
Table 1 provides examples of the economic value of cross-border mergers
and acquisitions for companies.
Figure 1. Worldwide Mergers and Acquisitions,
1980-2001. Source: World Watch Institute 2003
Table 1. Some of the Largest Crossborder Merger & Acquisition Deals Completed during 1998-99. Source: World Investment Report 2000.
| Year | Value US$ billion | Acquiring Company | Home Economy | Industry | Acquired Company | Host Economy | Industry |
|---|
| 1999 | 60.3 | Vodafone Group PLC | UK | Telecommunications | AirTouch Communications | US | Telecommunications |
| 1998 | 48.2 | British Petroleum Co PLC | UK | Oil & Gas | Amoco Corp | US | Oil & Gas |
| 1998 | 40.5 | Daimler-Benz AG | Germany | Motor Vehicles | Chrysler Corp | US | Motor Vehicles |
| 1999 | 34.6 | Zeneca Group PLC | UK | Drugs | Astra AB | Sweden | Drugs |
| 1999 | 34.6 | Mannesmann AG | Germany | Metals | Orange PLC | UK | Telecommunications |
As you might imagine, MNCs account for some of the most
powerful economic institutions ever created. In this lesson, your team
will look carefully at the operating strategies of MNCs and see just how
influential MNCs have become in the global economy. Your team will also
examine case studies to show how significant MNCs have become in many
local areas.
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