A multinational company, also known as an MNC, registers itself as a corporation in one country but has its presence globally with diversified units spread across the globe. It generates around 25% or more of its revenue outside its home country.
The term multinational company refers to a business entity that operates in more than one country. A multinational company is a combination of companies and subsidiaries operating across national borders within the same market sector. According to this definition, if your business operates in three countries, then it is considered as multinational company.
The global nature of the internet has made it easier to communicate and conduct business from anywhere in the world. The quick pace at which business transactions can take place has been a blessing for companies and organizations. However, there are also challenges that come with conducting business overseas. One challenge is ensuring that the policies, procedures, and internal systems will be able to support the global operations of an MNC in multiple countries.
This blog will cover everything you need to know about multinational companies, their advantages, and a list of trending MNCs.
Did you know? The concept of MNC dates back to the 17th century. The Netherlands established the first multinational corporation, The Dutch East India Company, in 1602.
What is a Multinational Corporation?
Multinational Corporations are corporate organisations with business operations in at least one country other than its home country. Generally, it maintains a centralized headquarter that coordinates global management. A Multinational Corporation, also known as a transnational enterprise (TNE), owns and controls the production of its goods and services in the home country and outside. MNCs make a foreign direct investment in another country by establishing branches or foreign subsidiaries.
How Does a Multinational Corporation Work?
A Multinational Corporation expands itself by setting up branches, production, sales, and service units. It is a strategy by which it can increase its revenue growth while keeping the manufactured products affordable. Setting up branches in more than one country and preparing the goods according to their requirement gets them a significant customer base.
MNCs generally appoint managers to see the operations in various regions.
They prefer hiring the locals to know more about the local population demand. It will help them to prepare the products relevant to the requirements of the local population. They also appoint the Vice president for international operations to coordinate with the managers of the respective regions.
An MNC could positively impact the countries in which it operates and would generate high-paying jobs and advanced goods in countries. However, simply exporting goods for sale to more than one nation does not make a business a Multinational Corporate. They should maintain business operations in other countries and make foreign direct investments.
How Does a Multinational Corporation Work?
Multinational companies indeed generate tremendous opportunities for growth. But, some people argue that it creates unemployment in the home country. They should understand that every Nation has plans for flexible employment rules If business houses and education systems cooperate, they can prepare highly-skilled manpower eager to compete in the global market. It would create opportunities across the globe.
Features of a Multinational Company
Some common Characteristics of a Multinational Corporation are:
- Since Multinational companies employ capital-intensive technology in manufacturing and marketing, it has at their command over advanced and sophisticated technology.
- The biggest strategy for success for multinational companies is spending higher sums of money on advertising and marketing. Through this strategy, they can secure international business where they can sell all the products and services they generate.
- A Multinational Company hires professionally competent managers to manage huge funds and international business operations.
- They use capital-intensive technology to produce top-of-the-line products and services. It has to pay special attention to the quality of its products since it has to compete globally.
- The source of command is found in the home country since the head office in the home country controls the management of offices in others.
Examples of a Multinational Corporation
We have given below a list of some Multinational companies:
It is an American multinational technology company specializing in software, consumer electronics, and online services. It has its headquarters in Cupertino, California. The major products are iPhone, Apple Watch, Apple TV, etc. Apple is one of the Big Five American information technology companies. It competes with Amazon, Meta, Alphabet, and Microsoft.
This is one of the leading American multinational information technology companies. It provides professional consulting services for industries like banking, healthcare, capital markets, life sciences, retail, transportation & logistics, manufacturing, media & entertainment, and utilities. It is Headquartered in Teaneck, New Jersey.
Formed in 1905 by the merger of the Anglo-Swiss Milk Company, Nestle is a Swiss multinational food and beverage processing corporation with its headquarters in Vaud, Switzerland. Its products include baby food, confectionery, dairy products, frozen food, ice cream, breakfast cereals, and snacks. Not to forget, it is the largest publicly held food company in the world.
Unsurprisingly, Google is the most visited website in the world. This American Multi-Tech company offers search engine technology, artificial intelligence, online advertising, e-commerce, cloud computing, and whatnot. Google is the Most Powerful company owing to its market dominance and technological advantages.
Best-known for its software products, Microsoft is an American multi-tech corporation specializing in consumer electronics, personal computers, and related services. The corporation has its Headquarters in Washington, United States. Microsoft created the first Smart Watch in 1994.
This is the largest online retailer and a prominent cloud service provider. Amazon originally opened for business as an online book-selling company. It is a multi-tech corporation providing e-commerce, digital streaming, and artificial intelligence. The company offers an affordable product range, enabling customers to buy almost anything, including food, clothing, jewelry, books, toys, electronics, beauty supplies, and household goods.
Selling more than twenty-eight hundred products in more than 200 countries, Coca-Cola is the largest beverage manufacturer around the globe. The company specializes in soft drinks and has its headquarters in Atlanta, Georgia. Coca-Cola India is its subsidiary operating in India. This company also sells other non-alcoholic drinks, syrups, and alcoholic beverages.
It is an Irish-American professional services company having its Headquarters in Dublin. This Multinational corporation offers information technology services, consulting, and operating services. Accenture has 305,000 employees, highest number of workers is in India, which equals around 130,000 workers.
Serving more than 47 million customers around the globe, it is the largest chain of hamburgers and fast-food restaurants. The chain is well-known for its cheeseburgers, hamburgers, chicken items, and french fries. The company has also expanded to include salads, wraps, and fruits on its menu. This chain has become quite an obsession among children and youngsters. Today, there are more McDonald’s restaurants than hospitals in the United States.
Recognized as the most cash-rich Japanese company, Sony Group Corporation is the Largest technology and media conglomerates in Japan. It has its Headquarters in Tokyo, Japan. Operating as one of the largest manufacturers of electronic Products and the largest video game publisher, it is one of the most comprehensive media companies alongside.
You all must have heard about Infosys. It is the best-known IT consulting and software services offering software maintenance, internet consulting, and many more. Infosys Limited is an Indian multinational information technology providing business consulting and outsourcing services. It is the second-largest Indian IT corporation after Tata Consultancy Services.
Advantages of a Multinational Company
Multinational Companies have many benefits of being global- economies of scale of production, global brand recognition, and the capacity to employ skilled labor from across the globe.
The advantages of a multinational corporation are:
1. Lower production costs
Entering into international markets is a standard approach to reduce input costs or access a broader pool of resources. Multinational corporations are better placed than domestic companies to take benefit of input cost differences.
2. Product Quality
A multinational company remains competitive by consistently offering quality products. They do this by developing and testing products internally, shipping them to customers and providing management with real-time feedback on how well they're doing.
The concept of outsourcing relates to specialization. A multinational firm can reduce costs by outsourcing labor-intensive production to cheaper labor-cost countries.
4. Avoidance of tariffs
Multinational companies are exempt from import quotas and tariffs. They can filter through countries having lower corporation tax rates.
5. Employment of skilled labor
Since multinationals have a bigger talent pool from across the globe, they can employ better managers or innovators. These hired specialists can drive the growth of the company.
Globalization has enhanced the growth of large multinational companies. Imports and exports are all elements of globalization. With this article, you can better understand the definition, features, and examples of a Multinational Corporation.
Follow Khatabook for the latest updates, new blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and account.