Multinational Corporations or Multinational Companies are corporate organizations that operate in more than one country other than home country. Multinational Companies (MNCs) have their central head office in the home country and secondary offices, facilities, factories, industries, and other such assets in other countries.
These companies operate worldwide and hence also known as global enterprises. The activities are controlled and operated by the parent company worldwide. Products and services of MNCs are sold around various countries which require global management.
High turnover and many assets, aggressive marketing are some of the features of Multinational Companies. LTI, TCS, Tech Mahindra, Deloitte, Capgemini are some of the examples of MNCs in India. Lets us understand the features, advantages of Multinational Companies in detail.
Multinational Companies or Corporations – MNC
Multinational Corporation – MNC, the name in itself is pretty self-explanatory. It is a company or a corporation that operates in many countries. So it has business activity in more than one country at any given time.
So let us look at a more technical definition of an MNC. A multinational corporation is a company incorporated in its home country (country of origin) but it carries out business operations beyond that country in many other foreign countries, we call the host countries. Its head office will be in the home country.
Browse more Topics under Scales Of Business
- What are Micro Enterprises?
- Small Scale Industries
- Role of SSI in Economy
- Large Scale Industries
- Public Enterprises and their Structures
- Development of Public Enterprises in India
Features of a Multinational Company – MNC
1. High Turnover and Many Assets
MNCs operate on a global scale. Which means they have huge assets in almost all countries in which they operate. Their turnovers can also be incomprehensibly large. For example, Apple has a market capitalization of 1 trillion dollars. This is bigger than the entire economy of Saudi Arabia!
MNCs have unity of control. So while they have many branches in many countries, the main control will remain with the head office in its country of origin. The business operations in the host country have their own management and offices, but the ultimate control will still remain at the head office.
3. Technological Advantages
As we saw earlier, an MNC has at its disposal huge amounts of wealth and investments. This allows them to use the best technology available to boost their products and their company. Most companies also invest huge money in their Research & Development Department to invent and discover new technological marvels.
4. Management by Professionals
An MNC is run by very competent and capable individuals. They have suitable managers to take care of their business operations, technology, finances, expansion etc. And they are also able to attract the top talent to their corporations due to their resources and their reputations.
5. Aggressive Marketing
MNCs can spend a lot of their money on marketing, advertising, and promotional activities. They target an international audience, so effective marketing becomes necessary. Aggressive marketing allows them to capture the market and sell their products globally.
List of Multinational Companies in India
- Coca Cola
Learn more about Large scale industries here.
Advantages of Multinational Companies – MNC’s
As one can imagine, there are a lot of merits of having a multinational corporation exist and function in an economy. They also bring many advantages to the consumers as well. Let us see some merits of an MNC in both the host country and the home country.
Merits of a Multinational Companies in a Host Country
- One of the main advantages to the host country is that MNCs boost their economic growth. They bring with them huge investments and capital. And then through subsidiaries, joint ventures, branches, factories they promote rapid industrial growth. In fact, MNCs are known as the messengers of progress.
- A multinational corporation helps the technological growth of the country as well. They bring new innovations and technological advancements to the host country. They help modernize the industry in developing countries.
- MNCs also reduce the host countries dependence on imports. Imports reduce while exports from the country see a rise.
- All MNCs have enormous capital and resources at their disposal. A good portion of such resources is invested in R&D. This can be very beneficial to the host countries where they set up their R&D facilities.
- Multinational corporations also promote maximum utilization of the country’s resources. This, in turn, leads to economic development.
Merits of Multinational Companies in the Home Country
- MNCs make their home countries (country of origin) very rich by their revenues. The corporation will collect fees, royalties, profits, charges from all their host countries and bring them back to the home country. This huge inflow of foreign exchange is very beneficial to the home country.
- MNCs provide a means of co-operation between developed countries and developing or underdeveloped countries. This allows both to benefit from the partnership.
- And these multinational corporations also help promote bilateral trade relations between countries. This is beneficial to both the countries and the global market and economy.
Solved Question on Multinational Companies
Q: Are there any demerits of a Multinational Corporation?
Ans: Yes, an MNC also has a few disadvantages to deal with. Here are a few examples,
- A multinational corporation only has a profit motive. Their interests may not align with the national interests of the host country and be harmful to their economy and development
- In some host countries, the presence of MNCs can restrict competition and may even cause a monopoly or monopolistic competition.
- They also charge heavy fees and charges in their host countries. And move all the profits to their home country. This outflow of foreign exchange can be detrimental to the host country.
- They also use tactics like transfer pricing to avoid heavy tax liabilities