Multi-National Company

Definition of a Multinational Corporation (MNC)

• Multinational Corporations (MNCs) are companies that operate in multiple countries while being headquartered in one.
• Examples: Nike, Apple, Coca-Cola, Toyota.
• MNCs facilitate globalisation by connecting production, distribution, and consumption across countries.

Case Study 1: Nike (International MNC)

Sourcing of Raw Materials and Components:

• Rubber: Sourced from Thailand and Indonesia.
• Leather: Supplied from South America and the USA.
• Synthetic Materials: Produced in Germany.

Location of Basic Processing Units:

• Nike's footwear manufacturing occurs in:
  • Vietnam (over 50% of global production).
  • Indonesia, China, India.
• Locations are chosen based on low labour costs and proximity to raw materials.

Location of Markets:

• Core Markets:
  • USA (accounts for over 40% of global revenue).
  • Europe (Germany, UK, and France).
• Emerging Markets: India, Brazil, and Southeast Asia.

Case Study 2: CRH (Irish MNC)

Overview of CRH:

• CRH (Cement Roadstone Holdings) is a building materials company headquartered in Dublin, Ireland.
• It is one of the world's largest MNCs in the construction sector, operating in over 30 countries.

Sourcing of Raw Materials and Components:

CRH sources raw materials locally in the regions where it operates to reduce transportation costs:

• Limestone, sand, and gravel are key materials for cement and aggregates.
• In Ireland, materials are sourced from quarries owned by CRH.

Location of Basic Processing Units:

• CRH has processing units in multiple countries:
  • Cement plants in Ireland, the USA, and Poland.
  • Aggregate plants and concrete facilities across Europe, North America, and Asia.
• Strategic Locations: Processing units are located near raw material sources to minimise costs.

Location of Markets:

• European Markets: Ireland, the UK, and the EU are key consumers of CRH products.
• Global Reach:
  • Strong presence in North America (USA and Canada).
  • Expanding into emerging markets in Asia and South America.

Mobility of Modern Economic Activities

Nike:

• Nike shifts production to countries with lower labour costs.
  • Example: Manufacturing moved from South Korea and Taiwan to Vietnam and Indonesia.
• Contracts production to independent factories, allowing flexibility in relocating operations.

CRH:

• CRH's operations are highly mobile in terms of sourcing raw materials and acquiring companies in new markets.
  • Example: Acquisition of materials companies in Eastern Europe to expand its reach.

Corporate Strategies: Opening and Closure of Branch Plants

Nike:

• Opens plants in low-cost regions (e.g., Vietnam) and closes them in higher-cost locations (e.g., Taiwan).
• Relies on outsourcing to reduce the costs of building its own factories.

CRH:

• Focuses on acquisitions to enter new markets rather than building new plants.
  • Example: Acquisition of Ash Grove Cement in the USA.
• Closes operations in regions with declining demand or resource depletion.

Product Life Cycle and Changes in Location

Nike:

• Introduction: Initial production in high-cost regions for innovation.
• Growth: Shifts to large-scale production in low-cost regions.
• Maturity: Focus on global marketing and branding.
• Decline: Factories may close as demand for older product lines decreases.

CRH:

• Locations of cement plants and quarries are adjusted based on market demand and resource availability.

Future Development of Economic Activities

Nike:

• Teleservices: Customer support operations in countries like India.
• Information Technology: Advanced logistics systems for inventory management.
• E-Commerce: Expansion of direct-to-consumer online sales.

CRH:

• Sustainability: Focus on environmentally friendly practices like producing low-carbon cement.
• Technology: Adoption of automation and AI to improve efficiency in cement production.

Advantages and Disadvantages of MNCs

Advantages:

1. Global Employment: Nike and CRH provide jobs in manufacturing and services.
2. Economic Growth: Boost GDP in host countries.
3. Technology Transfer: Bring advanced technology to developing countries.

Disadvantages:

1. Exploitation of Workers: Low wages and poor working conditions (criticised in Nike's factories).
2. Environmental Impact: Cement production contributes to carbon emissions (CRH is addressing this).
3. Profit Repatriation: Most profits return to the MNC's home country, limiting benefits for host nations.