EU Business and Multinational Corporations: Advantages and Challenges

Posted on Mar 11, 2025 in Business Administration and Management (BAM)

The Business and the EU:

Economic and social cohesion is especially key to the redistribution of wealth in the community, promoting overall development, especially in disadvantaged countries economically. Furthermore, the latest matches directly to the EU legislation enshrines the following freedoms:

  1. Freedom of Establishment: Businesses of the Member States are entitled to be provided in the EU state that is more convenient.
  2. Freedom to Practice: Practitioners can perform their activity in any Member State.

Advantages and Disadvantages of the Internal Market:

Pros:

  • Decreasing average costs
  • Registration and broader protection in the community of trademarks and distinctive marks
  • Better exploitation of patents
  • Suppression of the distortion of competition through various tax rates and types of tax
  • Reduction of fixed overhead costs and unit costs as a result of higher production volume
  • Shorter periods of waiting at borders
  • Reduction of formalities with the mutual recognition of standards and admission procedures

Cons:

  • Positioning in the markets will be more difficult with increased competition
  • Linguistic barriers
  • Increased costs of travel and transportation of goods
  • Increased costs of administration and control of business abroad
  • Increased capital requirements for the creation or expansion of new markets

The Multinational Corporations:

The multinational corporation is the most sophisticated expression of modern capitalism, arising as a result of the widening process of markets. Large commercial units operate not only in the country where they were born, but also in markets that need to be more extensive.

  • Parent Company: The originating company for development and natural growth, creating subsidiaries, first in the country of origin, then in the rest of the world.
  • Subsidiaries: A group of companies that depend on and are controlled by the parent company.

Characteristics of Multinationals:

  1. Are companies that generate results in more than one country. They are called multinational, transnational, and supranational institutions operating in several countries.
  2. Have great penetrating power: Meeting the normal business national, multinational enterprises can enter and stand within a given market supported by the global results.
  3. Use the most advanced technologies: Invest heavily in research and development (R&D).
  4. Are markedly economic in order: Their aim is the maximization of profits in all countries where they operate.
  5. Have a perfect knowledge of the political and economic systems of the countries where they operate.
  6. Are very large companies, ever increasing.
  7. Achieve economies of scale and benefit from synergy: They are very large, have great economic power, which allows them to manufacture and produce large quantities.



Advantages and Disadvantages of Multinationals:

Advantages:

  • Possibility of using cheap labor
  • Operating in new markets with almost non-existent competition
  • Maintenance of products for longer periods of time
  • Production versus environmental policy more permissive, which is a reduction, additional production cost for obtaining certain tax obligations products.
  • Much softer, even exemptions may be made to the systems of social protection reduced.

Disadvantages:

  • Market positioning will be more difficult with increased competition
  • The bad press attached to these companies in any country where international organizations are installed, these countries require an environmental policy that allows sustained growth
  • Linguistic barriers, development and distribution infrastructure
  • Poor preparation and lack of experience of the working masses

The Financing of Multinationals:

  1. Self-financing: Retention of the benefits or profits, depreciation funds for productive investments.
  2. Capital Increases: By issuing new shares, which represent a capital increase.
  3. Issuing a Loan: When securities are placed on the market obligations.
  4. Long-term Debt: The long-term foreign finance non-instrumented in securities.