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.
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.
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
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:
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.
Google.com.
(2023). Redirect Notice. [online] Available at: https://www.google.com/url?sa=i&url=https%3A%2F%2Fslideplayer.com%2Fslide%2F13535329%2F&psig=AOvVaw2vLcsXQmML1ZNGX4mS74vd&ust=1702965757380000&source=images&cd=vfe&opi=89978449&ved=0CBIQjRxqFwoTCJjom42omIMDFQAAAAAdAAAAABAR
[Accessed 18 Dec. 2023].
Google.com.
(2023). Redirect Notice. [online] Available at: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.pinterest.com%2Fpin%2F651614639825865732%2F&psig=AOvVaw2vLcsXQmML1ZNGX4mS74vd&ust=1702965757380000&source=images&cd=vfe&opi=89978449&ved=0CBIQjRxqFwoTCJjom42omIMDFQAAAAAdAAAAABAb
[Accessed 18 Dec. 2023].
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].
