what is multinational company
Answers
Explanation:
A multinational corporation is a corporate organization that owns or controls production of goods or services in at least one country other than its home country.
Multinational Corporation (MNC)
What Is a Multinational Corporation(MNC)?
A multinational corporation (MNC) has facilities and other assets in at least one country other than its home country. A multinational company generally has offices and/or factories in different countries and a centralized head office where they coordinate global management. These companies, also known as international, stateless, or transnational corporate organizations tend to have budgets that exceed those of many small countries.
Multinational Corporations
KEY TAKEAWAYS
Multinational corporations participate in business in two or more countries.
MNC can have a positive economic effect on the country where the business is taking place.
Many believe manufacturing outside of the U.S. has a negative effect on the economy with fewer job opportunities.
Transnational business is considered diversifying the investment.
How a Multinational Corporation (MNC) Works
A multinational corporation, or multinational enterprise, is an international corporation that derives at least a quarter of its revenues outside its home country. Many multinational enterprises are based in developed nations. Multinational advocates say they create high-paying jobs and technologically advanced goods in countries that otherwise would not have access to such opportunities or goods. However, critics of these enterprises believe these corporations have undue political influence over governments, exploit developing nations, and create job losses in their own home countries.
Types of Multinationals
There are four categories of multinationals that exist. They include:
A decentralized corporation with a strong presence in its home country.
A global, centralized corporation that acquires cost advantage where cheap resources are available.
A global company that builds on the parent corporation’s
A transnational enterprise that uses all three categories.
There are subtle differences between the different kinds of multinational corporations. For instance, a transnational—which is one type of multinational—may have its home in at least two nations and spread out its operations in many countries for a high level of local response. Nestlé S.A. is an example of a transnational corporation that executes business and operational decisions in and outside of its headquarters.4
Meanwhile, a multinational enterprise controls and manages plants in at least two countries. This type of multinational will take part in foreign investment, as the company invests directly in host country plants in order to stake an ownership claim, thereby avoiding transaction costs. Apple Inc. is a great example of a multinational enterprise, as it tries to maximize cost advantages through foreign investments in international plants.
According to the Fortune Global 500 List, the top five multinational corporations in the world as of 2019 based on consolidated revenue were Walmart ($514 billion), Sinopec Group ($415 billion), Royal Dutch Shell ($397 billion), China National Petroleum ($393 billion), State Grid ($387 billion).5
Advantages and Disadvantages of Multinationals
There are a number of advantages to establishing international operations. Having a presence in a foreign country such as India allows a corporation to meet Indian demand for its product without the transaction costs associated with long-distance shipping.
Corporations tend to establish operations in markets where their capital is most efficient or wages are lowest. By producing the same quality of goods at lower costs, multinationals reduce prices and increase the purchasing power of consumers worldwide. Establishing operations in many different countries, a multinational is able to take advantage of tax variations by putting in its business officially in a nation where the tax rate is low—even if its operations are conducted elsewhere. The other benefits include spurring job growth in the local economies, potential increases in the company's tax revenues, and increased variety of goods.