Multinationals

The multinational shown is orgamised as a holding company. Atlantic holdings (the holding company or parent company) holds all or most of the shares in each of the operating companies (eg. windpower plc).

Operating companies are known as subsidiaries. Often they will have their own directors and their shares may be traded on local stock exchanges. For example, shares in US subsidary Topp Hotels inc. might be traded on the New York stock exchange.

Multinationals can gain from being big.They can buy in bulk. They can also locate operators to keep costs and taxation down. Sometimes production has to be based in certain areas to access markets that would otherwise be barred to them- this has brought several businesses into the European Union.

Some businesses are almost bound to be multinationals- oil for example, has to be discovered,extracted,refined, and then sold worldwide.

A multinational maay decide to pay tax in the ocuntry where its headquarters is based- which could be a country that has low business taxation- rather than where it actually operates. It can also take advantage of local low labour costs and less strict labour laws.

Multinationals have come into conflict with human rights groups, who see them as exploiting labour or natural resources in poorer countries in order to boost profits in richer ones.

Multinationals also benefit from global brands. A global brand is a brand image that is recognised throughout the world. This helps multinationals to compete agains local businesses.

Brands are of immense value to a business; they help it to be recognised and to gain new markets.