MDU BBA NOTES
Definition of Multinational Corporations
- A multinational corporation is a business organization whose activities are located in more than two countries and are the organizational form that defines foreign direct investment.
- This form consists of a country location where the firm is incorporated and of the establishment of branches or subsidiaries in foreign countries.
- Multinational companies can, obviously, vary in the extent of their multinational activities in terms of the number of countries in which they operate.
- A large multinational corporation can operate in 100 countries, with hundreds of thousands of employees located outside its home country.
A multinational company is one that is incorporated in one country (called the home country); but whose operations extend beyond the home country and which carries on business in other countries (called the host countries) in addition to the home country.
Features of Multinational Corporations (MNCs)
Huge Assets and Turnover
Because of operations on a global basis, MNCs have huge physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than the national economies of several countries.
International Operations Through a Network of Branches
MNCs have production and marketing operations in several countries, operating through a network of branches, subsidiaries, and affiliates in host countries.
Unity of Control
MNCs are characterized by unity of control. MNCs control the business activities of their branches in foreign countries through a head office located in the home country. Managements of branches operate within the policy framework of the parent corporation.
Mighty Economic Power
MNCs are powerful economic entities. They keep on adding to their economic power through constant mergers and acquisitions of companies, in host countries.
Advanced and Sophisticated Technology
Generally, an MNC has at its command advanced and sophisticated technology. It employs capital-intensive technology in manufacturing and marketing.
An MNC employs professionally trained managers to handle huge funds, advanced technology, and international business operations.
Aggressive Advertising and Marketing
MNCs spend huge sums of money on advertising and marketing to secure international business. This is, perhaps, the biggest strategy for the success of MNCs. Because of this strategy, they are able to sell whatever products/services, they produce/generate.
Better Quality of Products
An MNC has to compete on the world level. It, therefore, has to pay special attention to the quality of its products.
Definition of Multinational Corporations, Features of Multinational Corporations (MNCs)