Macroeconomics

Multinational corporation is a company that operates and produces goods in more than one country. In recent decades multinational corporations have used the advantage of their economies of scale to invest in developing and less developed countries where cost of production is cheaper and other variables for production is favorable towards the firm. In 1970s it became common for a multinational corporation to have a worldwide system of production where each stage of production is specialized in different country. For example Toyota assembles its engine and steel in Japan while it assembles the leather for its chairs from Argentina.Since multinational corporations operate worldwide and invest and raise finance internationally then profit is based on the world's economy rather that one country. Another thing that should be kept in mind is that in the recent decades there have been many different trading agreements between countries and many barriers to foreign companies have been lowered by the World Trade Organization. This have raised the opportunity for multinational corporations to grow and obtain a larger economies of scale.