10. The Global Market Leaders (Multinational Companies-MNCS)

 

10.1 What is a Multinational company?

Facilities and other assets are located in at least one country outside of the country of origin for a multinational corporation (MNC).A multinational corporation often maintains offices and/or factories across national borders in addition to a centralised head office where global management is centralised.

These developed nations the United States, Japan, and the main economic powers of Western Europe have well-developed financial markets and infrastructures that support the operations and possible prosperity of multinational corporations (MNCs). USA is home to a large number of MNCs. numerous of these businesses are listed in the Fortune Global 500.

Many MNCs have operations in China, which has had one of the fastest-growing economies in the world in recent decades. Furthermore, the headquarters of numerous expanding multinational corporations are located in China. Big Chinese MNCs include Lenovo, Haier, and Huawei Technologies.(Cheung, 2020)

The most well-known multinational corporations in the world include Amazon, Toyota, Google, Apple, Zara, Starbucks, McDonald's, and others.

10.2 Types of multinational companies

Multinational corporations are classified into four categories: transnational enterprises, international companies, global centralised corporations, and decentralised multinational corporations.

Figure 01

Type of Multinational Companies

Source studySmarter UK .(n.d)

10.2.1 Decentralised multinational corporations

Multinational companies that are decentralised are well-established in their native nation. "Decentralisation" refers to the absence of a central office. The head office and each office may run independently of one another. Multinational companies with decentralised operations can grow quickly because new organisations can be established across the country with ease.

McDonald’s is a multinational company with a decentralised structure. Despite operating in more than 100 countries, the fast-food chain, Burger King, is most prevalent in the United States, where it has approximately 18,322 locations as of 2021. Every McDonald's restaurant is independently operated, and it is able to modify its offerings and advertising tactics to draw in local clients. Consequently, distinct McDonald's locations offer a diverse range of menu options. With no additional expense to the corporate office, new restaurants can be swiftly established anywhere in the world thanks to the franchising business model.

10.2.2 Global centralised corporations

Globally centralised businesses maintain a central office for administration back home. To save time and money on production while utilizing local resources, they might outsource their work to developing nations.

Apple, for instance, is a multinational, centralised company that uses nations like China, Taiwan, Korea, and Mongolia to produce iPhone components.

10.2.3 International companies

International companies make use of the parent company's resources to create new features or products that will give them an advantage over competitors in regional markets.

To draw in local consumers, each Coca-Cola location is free to create unique product designs and marketing strategies.

With branches across multiple nations, transnational corporations have a decentralised organisation. The overseas branches are largely under the parent company's control.

10.2.4 Transnational enterprises

One multinational company with a decentralised organisation is Nestle. Major decisions are made by headquarters, but every subordinate has considerable autonomy over how it runs its day-to-day business. Nestle has a long history of demonstrating its ability to adapt to changing business environments without compromising its core values, as evidenced by its rise from a small village operation to a global leader in food manufacturing

10.3 Main Features of Multi-National Companies

These are the primary characteristics of multinational corporations:

High volume of sales: MNCs bring in considerable annual revenue thanks to their global customer base. In 2021, for instance, Amazon's global sales totalled $127.79 billion.3. In 2020, Coca-Cola's net operating revenues reached $33.01 billion.4 In 2021, McDonald's reported $23.2 billion in revenue worldwide.5.

Unity of control: To oversee all business operations worldwide, multinational corporations frequently have their headquarters in their home nation. Even though each foreign branch operates independently, they all have to adhere to the parent company's general guidelines.

Economic power: Because of their massive size and turnover, multinational corporations have a significant amount of economic power. By establishing subsidiaries or purchasing companies abroad, they increase their power.

Aggressive marketing: International corporations heavily invest in domestic and international advertising. This raises awareness throughout the world and gives them access to a wide range of goods and services.

Superior product: Multinational corporations are well-known throughout the world. Multinational corporations must continue to provide superior goods and services if they want to preserve their reputation.

10.4 Advantages and Disadvantages of Multinational companies

10.5 Threats of multinational companies

The following are some difficulties that multinational corporations operate in their host nations:

Figure 02

Threats by Multinational Companies

Source studySmarter UK .(n.d)

Monopoly power

Multinational corporations can easily take the lead in the market thanks to their large market share and turnover. A lot of multinational corporations (MNCs) pledge to promote healthy competition; however, some may misuse their monopoly power to force out smaller companies or keep in new ones. Sometimes, operating other businesses is made more difficult by the existence of multinational corporations.

Independence loss

Due to their substantial market power, multinational corporations are able to influence the rules and legislation of their host nations. For instance, some developing nation governments might not raise the minimum wage out of concern that the multinational corporation would relocate to a less expensive economy due to the increased labour costs.

Resource exploitation

The exploitation of local resources is a drawback of outsourcing for multinational corporations. These comprise labour and capital resources in addition to natural resources.

Advanced technology

Multinational corporations may use technology that is too advanced for the nation they are located in. The new machine or system may be difficult for local staff to operate if they are not properly trained. In other situations, local jobs may be replaced by new technology.

Conclusion

The multinational corporation has a significant impact on global trade patterns and factor movements. A company that operates internationally yet has its headquarters in one nation is known as a multinational corporation.Multiplex corporations are growing for a variety of reasons. First, trade restrictions, perish ability, or the requirement to create a product specifically for the local market may make exporting a less desirable option. Buying stock in a company or lending money to it seems like a simple way to invest.This blog explained about the Type of Multinational companies ,features ,Advantages,disadvantages and treats of Multinational companies.

References

Cheung, B. (2020). What countries are most multinational corporations based in? [online] Investopedia. Available at: https://www.investopedia.com/ask/answers/021715/why-are-most-multinational-corporations-either-us-europe-or-japan.asp.

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StudySmarter UK. (n.d.). Multinational Company: Meaning, Types & Challenges. [online] Available at: https://www.studysmarter.co.uk/explanations/business-studies/influences-on-business/multinational-company/.

www.youtube.com. (n.d.). Advantages and Disadvantages of Multinational companies. [online] Available at: https://www.youtube.com/watch?v=xC7DGaVwh0E  [Accessed 18 Dec. 2023].

www.youtube.com. (n.d.). What is a Multinational Corporation? [online] Available at: https://www.youtube.com/watch?v=OGg9K1wymWk  [Accessed 10 Oct. 2022].