Managers of all kinds of businesses are paying attention to what is going on across the borders and overseas. Many companies do business with and have their operations in foreign counties. Many of them are classified as multinational corporations, i. e. Companies with operating facilities, not just sales offices, in foreign countries.
The term “multinational” is used for a company which has subsidiaries or sales facilities throughout the world. Another expression for this type of business enterprise is “global corporation”.
Such companies control vast sums of money and they operate in countries with widely differing political and economic systems. There are two main reasons for the development of multinationals.
Firstly, when companies found that their national markets had become saturated, they realized that they could only increase profits by setting up subsidiaries abroad.
Secondly, if a country set up trade barriers-usually tariffs or quotas-against a company’s products, then the only alternative for the company was to establish a factory or sales organization in the country concerned. The economic boom of the 1960-s led to rapid growth of globe-trotting enterprises. In the highly industrialized countries, the availability of cheap labour lured many companies into building new factories and assembly plants.