Conglomerates and Multinationals

Many of today’s corporations have thousands of employees and control billions of dollars in assets and it is the large corporations that define the structure of the nation’s economy in the USA.
They often dominate major industries and regional economies, and make it possible to produce goods and services that require combining massive amounts of capital, technological know-how, labour resources, managerial skill, and the ability to obtain and process large and nodiverse amounts of information.

In 1990 the combined sales of the large 500 US industrial corporations were estimated as $2.3 trillion, profits reached $93.4 billion, and they collectively employed nearly 12.5 million workers.
The combined annual revenues of the world’s top five corporations alone were nearly $450 billion and it was more than the gross national product of several countries.

Business having become more competitive, new and more complex corporate combinations appeared.
They are known to be formed by the absorption of one or more companies by another, the merger process involving either acquiring a controlling share of a company’s stock or buying the company outright.
Many corporations have expanded by means of mergers with and acquisitions of businesses in unrelated industries, such collections of businesses being called conglomerates.

For instance, International Telephone and Telegraph achieved its growth by absorbing such companies as Sheraton Hotels, Avis Car Rentals, the Hartford Insurance Company, Continental Bakeries, and others.
Antitrust laws preventing the growth of the corporations within a single field have promoted the establishment of conglomerates.
Between 1955 and 1980 the top 500 corporations absorbed some 4,500 smaller companies.
One problem caused by mergers is that the economic growth does not necessarily result from them, and no new jobs may be created, sometimes acquisitions influencing negatively the country’s economy.
For example, a small company may be acquired by a larger one, have its assets drained off, and then be liquidated, causing the loss of jobs, goods or services, and competition.

Another path to the growth for many corporations has been expansion abroad and it gave rise to the formation of multinational corporations.
Moving production closer to markets by establishing foreign subsidiaries, such corporations maintain extensive business activities and large-scale production facilities throughout the world, and their revenues sometimes exceed the total revenues of the countries in which they operate.

The growth of multinationals has had both benefits and drawbacks.
It has linked the world more closely together economically and has helped speeding the development of poorer nations.
It has also increased free-market competition by providing consumes with greater choice in the goods they may buy.
Among the drawbacks, especially for American firms, has been a great outflow of money for overseas investment and a net loss of jobs to foreign workers.

Some firms locate plants abroad in regions where labour is cheaper and ship the products back to the Unites States to compete with more expensive domestically made goods.
Multinationals are so powerful throughout the world that they are likely to be a dominant force shaping the world e3conomy in future.

Be Sociable, Share!

Comments are closed.

Log in