Globalization and the Multinational Corporation

Abstract

Introduction The world economy is becoming increasingly globalized. Campuses have students from many different countries. The chips in your laptop computer may have come from Korea, and its software could have been developed by Indian engineers. We hope that during your study break, you savor some Italian espresso, although the “Italian” coffee beans that were roasted in Italy were likely grown in Indonesia or Brazil. The concept of globalization refers to the increasing connectivity and integration of countries and corporations and the people within them in terms of their economic, political, and social activities. Because of globalization, multinational corporations dominate the corporate landscape. A multinational corporation (MNC) produces and sells goods or services in more than one nation. A prototypical example is the Coca-Cola Company, which operates in more than 200 countries. An MNC probably produces your favorite brew. For example, Anheuser-Busch InBev is a publicly traded company headquartered in Belgium with origins dating back to 1366. Over time, the local Belgian firm grew into an MNC called Interbrew, with famous brands such as Stella Artois and Leffe. In 2004, Interbrew and Companhia de Bebidas das Americas (AmBev), from Brazil, merged to create InBev; and in 2008 InBev acquired Anheuser-Busch, the brewer of Budweiser beer, to become Anheuser- Busch InBev. The company is now the largest brewer in the world by volume, producing 457 million hectoliters (hl) of beer. In November 2015, they revealed plans to acquire SABMiller, originally a South African but now a global brewer. The link between a large European company and a large company from an emerging economy is no coincidence. In the first decade of the twenty-first century, the world witnessed strong growth in Brazil, Russia, India, and China (sometimes called the BRICs), although growth has substantially declined of late. Today, the BRICs account for more than 20% of the world's gross domestic product (GDP) and more than 50% of the GDP of all emerging countries. The integration of these emerging economies into the global economy was forcefully illustrated in 2006, with the creation of the world's largest steel company, Arcelor Mittal. Mittal Steel, an Indian company, took over Arcelor, a European steel producer, which was created by an earlier merger of steel companies in France, Belgium, Luxembourg, and Spain. The fact that Arcelor's management at first opposed the takeover shows that globalization does not necessarily proceed smoothly.