Scribd
Upload
7 views3 pages

Multinational Corporation (MNC) : Key Takeaways

A multinational corporation (MNC) operates in multiple countries, coordinating global management from a centralized head office. While MNCs can create jobs and provide advanced goods in developing nations, they also face criticism for exploiting these markets and negatively impacting domestic job opportunities. The document outlines the types of multinationals, their advantages and disadvantages, and the risks they encounter in international operations.

Uploaded by

abhinayadarsh8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
7 views3 pages

Multinational Corporation (MNC) : Key Takeaways

A multinational corporation (MNC) operates in multiple countries, coordinating global management from a centralized head office. While MNCs can create jobs and provide advanced goods in developing nations, they also face criticism for exploiting these markets and negatively impacting domestic job opportunities. The document outlines the types of multinationals, their advantages and disadvantages, and the risks they encounter in international operations.

Uploaded by

abhinayadarsh8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Multinational Corporation (MNC)

A multinational corporation (MNC) has facilities and other assets in at least one country
other than its home country. A multinational company generally has offices and/or
factories in different countries and a centralized head office where they coordinate
global management. Some of these companies, also known as international, stateless,
or transnational corporate organizations, may have budgets that exceed those of some
small countries.

KEY TAKEAWAYS

 Multinational corporations participate in business in two or more countries.


 MNC can have a positive economic effect on the country where the business is
taking place.
 Many believe manufacturing outside of the U.S. has a negative effect on the
economy with fewer job opportunities.
 Transnational business is considered diversifying the investment.
0 seconds of 1 minute, 24 secondsVolume 75%

How a Multinational Corporation (MNC) Works


A multinational corporation, or multinational enterprise, is an international corporation
whose business activities are spread among at least two countries. Some authorities
consider any company with a foreign branch to be a multinational corporation; others
limit the definition to only those companies that derive at least a quarter of their
revenues outside of their home country.

Many multinational enterprises are based in developed nations. Multinational advocates


say they create high-paying jobs and technologically advanced goods in countries that
otherwise would not have access to such opportunities or goods. However, critics of
these enterprises believe these corporations have undue political influence over
governments, exploit developing nations, and create job losses in their own home
countries.

The history of the multinational is linked with the history of colonialism. Many of the first
multinationals were commissioned at the behest of European monarchs in order to
conduct expeditions. Many of the colonies not held by Spain or Portugal were under the
administration of some of the world's earliest multinationals. One of the first arose in
1600: the British East India Company, which took part in international trade and
exploration, and operated trading posts in India.1
Other examples include the Swedish
Africa Company, founded in 1649, and the Hudson's Bay Company, which was
2

founded in the 17th century.23

A large majority of high revenue companies in the U.S. are multinational.


Types of Multinationals
There are four categories of multinationals that exist. They include:

 A decentralized corporation with a strong presence in its home country.


 A global, centralized corporation that acquires cost advantage where cheap
resources are available.
 A global company that builds on the parent corporation’s R&D.
 A transnational enterprise that uses all three categories.

There are subtle differences between the different kinds of multinational corporations.
For instance, a transnational—which is one type of multinational—may have its home in
at least two nations and spread out its operations in many countries for a high level of
local response. Nestlé S.A. is an example of a transnational corporation that executes
business and operational decisions in and outside of its headquarters.4

Meanwhile, a multinational enterprise controls and manages plants in at least two


countries. This type of multinational will take part in foreign investment, as the company
invests directly in host country plants in order to stake an ownership claim, thereby
avoiding transaction costs. Apple Inc. is a great example of a multinational enterprise,
as it tries to maximize cost advantages through foreign investments in international
plants.

Advantages and Disadvantages of Multinationals


There are a number of advantages to establishing international operations. Having a
presence in a foreign country such as India allows a corporation to meet Indian demand
for its product without the transaction costs associated with long-distance shipping.

Corporations tend to establish operations in markets where their capital is most efficient
or wages are lowest. By producing the same quality of goods at lower costs,
multinationals reduce prices and increase the purchasing power of consumers
worldwide. Establishing operations in many different countries, a multinational is able to
take advantage of tax variations by putting in its business officially in a nation where the
tax rate is low—even if its operations are conducted elsewhere. The other benefits
include spurring job growth in the local economies, potential increases in the company's
tax revenues, and increased variety of goods.

A trade-off of globalization—the price of lower prices, as it were—is that domestic jobs


are susceptible to moving overseas. This suggests that it’s important for an economy to
have a mobile or flexible labor force so that fluctuations in economic temperament
aren't the cause of long-term unemployment. In this respect, education and the
cultivation of new skills that correspond to emerging technologies are integral to
maintaining a flexible, adaptable workforce.

Those opposed to multinationals say they are ways for corporations to develop
a monopoly (for certain products), driving up prices for consumers, stifling competition,
and inhibiting innovation. They are also said to have a detrimental effect on the
environment because their operations may encourage land development and the
depletion of local (natural) resources.
The introduction of multinationals into a host country's economy may also lead to the
downfall of smaller, local businesses. Activists have also claimed that multinationals
breach ethical standards, accusing them of evading ethical laws and leveraging their
business agenda with capital.5

What Makes a Corporation Multinational?


A multinational corporation (MNC) is one that has business operations in two or more
countries. These companies are often managed from and have a central office
headquartered in their home country, but with offices worldwide. Simply exporting
goods to be sold abroad does not make a company a multinational.

Why Would a Company Want to Become International?


A company may seek to become an MNC in order to grow its customer base around the
globe and increase its market share abroad. The primary goal is therefore to increase
profits and growth. Companies may want to introduce their products in ways that are
modified or tailored to specific cultural sensibilities abroad. MNCs may also benefit from
certain tax structures or regulatory regimes found abroad.

What Are Some Risks that Multinationals Face?


MNCs are exposed to risks related to the different countries and regions in which they
operate. These can include regulatory or legal risks, political instability, crime or
violence, cultural sensitivities, as well as fluctuations in currency exchange rates.
People in the home country may al

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy