Honda as Multinational Corporation |HI UMM|

MULTINATIONAL CORPORATION (MNC) MNC’s and Labor in The Global Economy

NAME

STUDENT ID NUMBER

Prasetiyo Wahyu A.P

201310360311240

Muhammad Kamaludin

201310360311219

Ahmad Syaifudin Bukhari

201310360311218

Muhammad Marjan Khalek

201310360311198

Sulaiman Samaalee

201310360311265

University of Muhammadiyah Malang Faculty of Social Science and Political Science International Relations Majority 2015

The Introducing of Multinational Corporation A multinational corporation or multinational enterprise is an organization that owns or controls productions of goods or services in one or more countries other than the home country. It can also be referred as an international corporation, a "transnational corporation", or as a stateless corporation. A multinational corporation is usually a large corporation which produces or sells goods or services in various countries. It may be attributed as multinational corporation when a corporation is registered in more than one country or has operations in more than one country. Following Salvatore’s divinision, Multinational corporation is a business entity that owns, controls, or manages production facilities spread across a number of 1869. (Salvatore, International Economics vol 1). Multinational corporations take many different forms and engage in many different activities: 

Importing and exporting goods and services

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Making significant investments in a foreign country

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Buying and selling licenses in foreign markets

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Engaging in contract manufacturing—permitting a local manufacture in a foreign country to produce their products

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Opening manufacturing facilities or assembly operations in foreign countries

The history of multinational corporations is closely intertwined with the history of colonialism, with the first multinational corporations founded to undertake colonial expeditions at the behest of their European monarchical patrons. Prior to the era of New Imperialism, a majority European colonies not held by the Spanish and Portuguese crowns were administered by chartered multinational corporations. Examples of such corporations include the British East India Company, the Swedish Africa Company, and the Hudson’s Bay Company. These early corporations facilitated colonialism by engaging in international trade and exploration, and creating colonial trading posts. Many of these corporations, such as the South Australia Company and the Virginia Company, played a direct role in formal colonization by creating and maintaining settler colonies.Without exception these early corporations created differential economic outcomes between their home country and their colonies via a process of exploiting colonial resources and labour, and investing the resultant

profits and net gain in the home country. The end result of this process was the enrichment of the colonizer and the impoverishment of the colonized. Some multinational corporations, such as the Royal African Company, were also responsible for the logistical component of the Atlantic Slave Trade, maintaining the ships and ports required for this vast enterprise. During the 19th century formal corporate rule over colonial holdings largely gave way to state-controlled colonies, however corporate control over colonial economic affairs persisted in a majority of colonies. History of MNC After World War II the activities of multinational (MNC) is growing rapidly. MNC began to dominate the post-World War II because of the country's post-war industry first began to decline and the US is the only country that is still strong. Rapid capital accumulation to then spur the development of technology in the US. MNC is a company controlled by the capitalists to profit as much as possible (to obtain raw materials and cheap labor in various countries). The emergence of multinational corporations that have actually been around since the Middle Ages, for example in the 16th century until the 18th century known for trading companies such as "East India Company". In accordance with the explanations Marx that much focus on economic institutions, multinational corporations were born as a result of three main conditions created by the development of capitalism: 1. Conditions capitalist companies impose requirements on individual companies to continue to expand its economy, it is like what Marx wrote in Capital, the development of capitalist production makes it constantly necessary to keep increasing the amount of venture capital in a particular industry, and competition makes the laws immanent of capitalist production is felt by each individual capitalist, as external coercive laws. 2. The growing concentration of capital accumulated in fewer and fewer employers (corporate), which then raises two interrelated, namely the deployment of large-scale production and the combination of several companies (eg mergers and acquisitions). 3. The world market provide additional space for luggage capitalist production. First, as the world market in order to provide the basic elements of supporting capitalism, eg the

commercial revolution (advertising / advertisement), the expansion of world trade, and the transformation of feudalism to capitalism. In fact, capitalism emerged in the 16th century after the abolition of the feudal system (Magdoff, 1978: 166). That is feudalism was replaced by capitalism, are basically identical but packaged differently. Feudalism talk about sociopolitical power in the land (land that is controlled by landlords) are controlled or concentrated oligarchy by the royal family and a knight (the monarchy), basically almost the same as the concentration of capital and capital (the capitalist system) in several major industrial owner called corporate multinationals. Typical characteristics of multinational companies, among others: 1. Scope of income generating activities (revenue) multinational companies beyond the boundaries of the State. 2. Trade in multinational companies mostly occurs within the scope of the company itself, although the interstate. 3. Control of the use of technology and capital is preferred in view of these two factors is the competitive advantage of multinational companies. 4. Development of management and distribution system that crosses state boundaries, particularly venture capital system, licensing and franchise. Character Multinationals Multinational companies usually have traits - traits: 1. Establish branches - branches abroad 2. Vision and strategy used to produce the goods are global (worldwide), so the company 'make or produce goods that can be used in all countries. 3. More likely to choose certain business activities, general manufacturing. 4. Put the branches in the country - developed countries. Advantage and disadvantage value of MNC According to Petrella, when a country is trying to attract foreign companies to enter, then the presence of the company will reduce and even eliminate the power and role of the state government itself. The negative aspects of MNC in the opinion of Colman and Nixson; in which they stated that the main purpose of MNCs is to maximize global profits and all their actions aimed at achieving the main goal, and not to developing countries where they invest. Welfare and development of the host country is regarded as the responsibility of the State Government concerned.

Governments of developing countries compete to attract the attention of MNCs. As a result, each government agency trying to create policies such as lowering the tax rate, the tax holiday policies, incentives, and subsidies (Piasecki and Wolnicki, 2004). Like a coin, there are always two different sides. So also with the presence of MNC in Indonesia. First, As the advantages of the presence of MNC are :    

The government will increase national income Tax revenues Physical infrastructure investment Empowerment and local employment.

Second, as the disadvantages of the presence of MNC are questioned on aspects of:   

The social welfare Environmental protection Human rights (HAM) of workers.

Labor advantages In the presence of MNCs can provide employment opportunities, training skilled workers, and transfer of knowledge, technology and skills for the local workforce, which will result in increased levels of labor productivity than with workers at local companies. Labor disadvantages The presence of MNCs always been inseparable with human rights issues. The problems in the form of payment of wages below standard, the exploitation of underage workers, gender discrimination, sexual harassment, working under duress, and unsafe working environment (Wells, 2003; Bernadette, 2002; Bernstein, 2005). In 2000, the International Labour Organization (ILO) points out the fact that there are more than 200 million children in the 514 years of age involved in the exploitation of workers in less developed countries. In the aspect of payment of wages, there is a significant imbalance between labor and capital. Multinational companies and the role of the employment of a country If we talking about the multinational companies, there is a lot that we can find around us. From a multinational company in the food, cosmetic, pharmaceutical, electronics, to transportation. All of these is the role of the central state (original state) as the founders and also as the investors of a particular company, and also the role of member states as providers. In our country, Indonesia the role of central state industry such as Japan, the US, even some European countries extent has affected the pace of the economy of the country and participate in supporting the country's economy. The emergence of various multinational companies have opened up opportunities for economic globalization. They are the main distributor of

various factors of production, ranging from capital, labor and production technology, all in a massive scale, from one country to another. In its operations to various third world countries, they run some innovative business operations and complex that it can no longer comprehend only with the theories of simple trade, especially regarding the distribution of profits. Giant corporations such as IBM, Honda, Exxon, Philips, Hitachi, British Petroleum, Renault, Nestle, and Coca-Cola, have been increase to the global level in its operations. This has affected the domestic political economy of a country. We will give you an example of the many examples of multinational companies in the world, that come in to Indonesia and its role on employment in Indonesia. Honda Motor Company, Ltd. "Honda Technology Research Institute Company, Limited" is a manufacturer of cars, trucks, motorcycles and scooters from Japan. They also made the allterrain vehicle (ATV), electric generators, marine engines, and garden equipment.1 Honda established on 24 September 1948 by Soichiro Honda. With more than 14 million internal combustion engines are made every year, Honda is the largest engine manufacturer in the World. In 2004, the firm started producing diesel motors, and do not require filters to pass pollution standards. Honda is headquartered in Tokyo. Their shares are traded on the stock exchange in Tokyo, New York stock exchange, and also trades in Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, London, Paris and Switzerland. American Honda Motor Co., headquartered in Torrance, California.2 One of the company name Honda in Indonesia are PT Astra Honda Motor (AHM). PT Astra Honda Motor (AHM) is the pioneer of the motorcycle industry in Indonesia. Founded on 11 June 1971 with the initial name of PT Federal Motor, whose shares are majority owned by PT Astra International. At that time, PT Federal Motor only assemble, whereas components imported from Japan in the form of CKD (completely knocked down). The government's policy to localizes automotive components of PT Federal Motor have been produced many various components of Honda motorcycles in 2001, in Indonesia through several subsidiaries, including PT Honda Federal (1974), which produces basic components such as Honda motorcycle chassis, wheels, exhaust and etc., PT Showa Manufacturing Indonesia (1979) which specialized in producing shock absorbers, PT Astra Honda Engine Manufacturing (1984), which manufactures motorcycle engines and PT Federal Izumi Mfg. (1990) which specialized in producing piston. 3

1

Johnson, Richard Alan (2005), Six men who built the modern auto industry, MotorBooks International, ISBN 0760319588, Accessed on 2015-05-11 2 Ohnsman, Alan. "Honda's Dream of U.S. Production Protects Profits as Yen Surges". Bloomberg. Accessed on 2015-05-11. 3 From : http://www.astra-honda.com, Accessed on 2015-05-15.

With the chain system (assambly line) at least simplify and accelerate the process of producing goods and providing employment opportunities for native Indonesian weeks to work in the corporate environment. Along with the development of economic conditions and the growth of the motorcycle market changes in shareholding in motorcycle manufacturer Honda. In 2000 PT Federal Motor and several subsidiaries in combining into one under the name of PT Astra Honda Motor, the composition of its ownership to 50% owned by PT Astra International Tbk and 50% owned by Honda Motor Co.Japan. Currently, PT Astra Honda Motor has three facilities assembly plant, the first plant is located Sunter, North Jakarta which also serves as the headquarters. The second plant located in Pegangsaan Dua, Kelapa Gading, and also the third plant where located on the same factory and most advanced factory is located in the West Cikarang, Bekasi. The third plant is the latest assembly plant facility has been operating since 2005.4 Motorcycle industry today is a huge industry in Indonesia. Employees of PT Astra Honda Motor alone currently amounts to 22.563 people (December 2014), plus 130 vendors and suppliers as well as thousands of other networks, all of which have had an impact remarkable economic chain. Overall economic chain is expected to provide employment opportunities to about 500 thousand people. PT Astra Honda Motor will continue to work to produce a means of transport wheel 2 a fun, safe and economically in accordance with the expectations and needs of the people of Indonesia. From here we can conclude together that multinational company took part in sustaining the economic and political life of a country. The availability of new jobs oportunities with the chain system (assembly line) have already been open up new opportunities for citizens of the country concerned.

4

From : http://www.astra-honda.com, Accessed on 2015-05-15.

Conclusion Honda Motor Company, Ltd. is a manufacturer of cars, trucks, motorcycles and scooters from Japan. They also made the all-terrain vehicle (ATV), electric generators, marine engines, and garden equipmen. One of the company name Honda in Indonesia are PT Astra Honda Motor (AHM). PT Astra Honda Motor (AHM) is the pioneer of the motorcycle industry in Indonesia. Founded on 11 June 1971 with the initial name of PT Federal Motor, whose shares are majority owned by PT Astra International. In Indonesia thare are several subsidiaries, including PT Honda Federal, PT Showa Manufacturing Indonesia, PT Astra Honda Engine Manufacturing. With the chain system (assambly line) at least simplify and accelerate the process of producing goods and providing employment opportunities for native Indonesian weeks to work in the corporate environment. Employees of PT Astra Honda Motor alone currently amounts to 22.563 people (December 2014), plus 130 vendors and suppliers as well as thousands of other networks, all of which have had an impact remarkable economic chain.

Resource :  Oatley Thomas.1954. International Political Economy ” Interests and Institutions In the Global Economy”. (Forth Edition). Library of congress cataloging in publication data 

Johnson, Richard Alan (2005), Six men who built the modern auto industry, MotorBooks International, ISBN 0760319588. Accessed on 2015-05-11.

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Grant, Robert M. (2003), Cases in contemporary strategy analysis (ed. 3rd), WileyBlackwell, ISBN 1405111801. Accessed on 2015-05-13.

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Ohnsman, Alan. Honda's Dream of U.S. Production Protects Profits as Yen Surges. Bloomberg. Accessed on 2015-05-11.

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From : www.astra-honda.com. Accessed on 2015-05-15.