Multinational Corporation

A multinational corporation is an enterprise that carries on business operations in more than one country. It invests, produces, markets, and operates in several countries. It extends its manufacturing and marketing operations through a network of branches and subsidiaries which are known as its foreign affiliates.

According to the United Nations, multinational corporations are “enterprises which control assets –factories, mines, sales offices and the like – in two or more countries.”

According to a report of the International Labour Office, “the essential nature of the multinational enterprises lies in the fact that its managerial headquarters (called parent company) are located in one country (known as home country) while the enterprise carries out operations in a number of other countries (known as host countries) as well. Obviously, what is meant is a corporation that controls production facilities in more than one country. Such facilities having been acquired through the process of foreign direct investment. Firms that participate in international business, however, large they may by, solely be exporting or by hunting technology are not multinational enterprises”.1

Characteristics of Multinational Corporations

1. Large size
2. Worldwide operations
3. Centralised ownership and control
4. Sophisticated technology
5. Professional management
6. International market
7. High brand equity

The terms – multinational corporation, international corporation, transnational corporation and global corporation are often used as synonyms. Bartlett and Ghoshal, however, distinguish between these as follows:

• International Corporation : An international corporation has a domestic (home country) orientation in so far as the overseas operations are treated as appendages to the headquarters. The parent company extends the domestic product, price, promotion and other business practices to the foreign markets. The assets, resources, processes and decisions in overseas affiliates are controlled from the headquarters.

• Multinational Corporation : In a multinational corporation, decisions are decentralised. It operates like a domestic company of the country and responds to the specific needs of each country’s market. According to Bartlett and Ghoshal, a multinational corporation is characterised by a decentralized federation of assets and responsibilities, a management process defined by simple financial control systems, over laid on informal personal coordination, and a dominant strategic mentality that viewed the company’s worldwide operations as a portfolio of national businesses.

• Global Corporation : A global corporation produces in home country and markets these products globally or produces the products globally and focuses on marketing these products domestically, Overseas operations are used to build global scale and overseas affiliates act as implementing agencies for the decisions taken by the headquarters.

• Transnational Corporation : A transnational corporation invests, produces, markets and operates across the world, It seeks to achieve global competitiveness through worldwide flexibility and learning. The resources and decisions of all the units are decentralised and these units act in an interdependent but integrated manner.