Structure and the basic of activity of the multinational corporation
The process transnationalisation is characteristic for modern economy. In it the main characters are multinational corporations.
The organizational structure of multinational corporations, as a rule, is represented by the head company and its foreign branches.
The head parent company is an administrative center of the system of enterprises of the multinational corporation. Its functions usually include decision-making on merging with other companies, purchasing new firms; forming long-term industrial, investment and financial politics of branches and corporations as a whole; controlling the finance and research and development of foreign branches, at the same time the head company should enable managers of foreign branches to make decisions independently to satisfactory the demands of consumers of the local market and according to the legislation of the host country.
The basic organizational forms of foreign branches are:
- affiliated company (subsidiary) -a company which is controlled by another one. The controlling company owns over 50% - and sometimes 100% - of the ordinary shares of the subsidiary;
- associated company (associate) - a company of which at least 20% and not more than 50% the ordinary shares is held by another company;
- the branch (branch) - a part of a large organization that deals with one particular type of work.
The management of the multinational corporation solves problems of perfection of structure of management depending on assortment of goods and services, which they offer on the world market.
The example of an ideal structure of the multinational corporation is “General Electric”, whose market capitalization in 2000 exceeded 300 billion dollars (the highest figure in the history of USA companies). It is one of the most versatile companies in the world; it offers a wide assortment of goods, including aviation engines, industrial plastic, lighting devices, power installations and many other things in different regions.
Another example of American multinational corporations is “Ford” which began its enterprise activity in Europe in the 60s on the basis of its branch in Great Britain. In the 90s this corporation carried out the development of new models, manufacture of components and assembly of machines in five European countries, having united technological chains of factories of each of these countries in.
When trying to expend, the multinational corporation uses various forms of the world market. These forms are based on contract relations and are not connected with participation in the share capital of other firms.
Thus, the modern multinational corporations are based on the theory of a firm in the organization of manufacture and selling of goods and services and they have become the largest characters in the modern world economy.
Text II
Risks and benefits of starting a new business
Unfortunately, the record shows that two out of three new businesses fail within their first four years. According to the report The State of Small Business, the share of small business output has been declining since the early 1960’s. Large companies, in part due to their efficiency, have taken over markets that previously belonged to small businesses. Nevertheless, estimates showed that small businesses, defined by the Internal Revenue Service as businesses having fewer than 500 employees, accounted for 39 per cent of all the goods and services produced in America.
According to the report, small businesses face many other problems. Bad economic times affect small businesses more than they do big business. In addition, small business profits tend to fall faster, and small businesses are more likely to fail. According to the President’s report, “The larger the firm, the better the chance it has of surviving”. The report also said, “A firm with 21-50 employees has a 54 per cent chance of surviving four years. A firm of under 20 employees has a 37 per cent chance of surviving four years”.
What are the problems that face small business now? The National Federation of Independent Business report that the four top problems facing small business at the time were taxes, slow sales, the high cost of borrowing money and competition from other businesses. On the bright side, the innovativeness of entrepreneurs in small businesses is likely to enable a small business to react quickly and successfully to changing times. The report points out that 80 per cent of new jobs are provided by businesses with 100 of fewer employees. Small businesses produce twice as many innovations per employee as larger firms. Those innovations are the source of new jobs and new opportunities for entrepreneurs.
Where is entrepreneurship most likely to be welcomed? The answer is in small business. In fact, the word “ entrepreneur “ is frequently used to define a small business owner, since the owners of small businesses usually carry out many of the functions of those businesses themselves. In a large business the tasks of organizing and operating are done by many hired managers.
Large and small businesses organize in different ways to meet their objectives. Risk is diffused in corporations. Corporate leaders may risk their own jobs when they make major decisions that affect the future of the corporation negatively. But even if they lose their jobs, they have not lost personal investments. Because of the tremendous resources available to big business, a major failure in a large corporation is less likely to close that business than a similar disaster in a small business. But risk and size are only part of the story.
The very nature of the corporate business environment may not be suited to the independent personality and motivation of the typical entrepreneur. Large corporations may want bright and creative entrepreneurial talent to develop new or improved products or services. But large corporations, with their established procedures and layers of management authority, are seen as limiting innovation and the freedom the independent entrepreneur seeks.