Project Materials

AN EVALUATION OF THE ROLE OF MULTINATIONAL CORPORATIONS TOWARDS ECONOMIC GROWTH IN NIGERIA (A CASE STUDY OF NIGERIA BOTTLING COMPANY PLC

Chapter one

INTRODUCTION

1.1 Background of the Study

Multinational businesses (MNCs) have long been a source of contention, dating back to the East India Company, which established the British appetite for tea and the Chinese taste for opium. A typical multinational corporation (MNC) has a headquarters in one country and several sites in different nations.

A multinational firm is also known as a multinational enterprise (MNE) or a transnational corporation (TNC) (Tatum, 2010). They invade host countries using varied methods and strategies.

Some start by exporting their items to test the market and see if their existing products can achieve a significant market share. Such enterprises rely on export brokers.

These international sales branches or assembly operations are developed to minimise transport expenses since a firm’s foreign exports are limited by tariff barriers and quotas, as well as logistics or transportation costs. The majority of enterprises are encouraged by low wages and other environmental conditions.

To address expanding needs in foreign nations, the firm is considering various possibilities such as licensing or foreign direct investment, both of which are crucial stages. Even after deciding to pursue foreign direct investment, some companies continue to export.

Every step involves strategic planning and is driven by profit through sales growth. The concept of multinational firms has existed for centuries, but in the second half of the twentieth century, multinational corporations became extremely important organisations.

Tatum (2010) posits that global corporations follow distinct structural paradigms. The first and most typical model is for a multinational firm to establish its executive offices in one country while manufacturing facilities are situated in one or more other nations.

This technique frequently allows the company to get the benefits of incorporating in a specific location while simultaneously producing goods and services in locations where production costs are cheaper (Ozoigbo and Chukuezi, 2011).

The second structural model allows a multinational organisation to base its parent company in one country while operating subsidiaries in other nations around the world.

With this paradigm, almost all of the parent’s functions are based in the country of origin. Aside from a few basic relationships to the parent, the subsidiaries essentially operate autonomously.

A third approach to establishing a multinational corporation entails establishing a headquarters in one country to oversee a diverse conglomeration spanning many countries and industries (Tatum 2010, Robinson 1979).

According to this model, the multinational corporation contains affiliates, subsidiaries, and potentially certain facilities that report directly to the headquarters. Such direct investment implies the extension of managerial control across national borders (Gilpin, 1987).

While institutions are critical for economic development, especially in resource-rich nations, the relationship between multinational firms and host country institutions is little understood (Wiig and Kolstad, 2010).

Multinational firms may assist patronage problems in resource-rich countries, increasing the resource curse. Multinational corporations (MNCs) in service industries have contributed to the sector’s significant and expanding impact on the global economy (Goerzen and Makino, 2007).