Multinational: Concept and Role of MNCs
A multinational company is one which 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.
It must be emphasized that the headquarters of a multinational company are located in the home country.
Neil H. Jacoby defines a multinational company as follows:
“A multinational corporation owns and manages business in two or more countries.”
Point of comment
A multinational corporation is known by various names such as: global enterprise, international enterprise, world enterprise, transnational corporation etc.
Some popular examples of multinationals are given below
Role of Multinational Corporations (MNCs)
(i) 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 national economies of several countries.
(ii) 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.
(iii) Unity of Control
MNCs are characterized by unity of control. MNCs control business activities of their branches in foreign countries through head office located in the home country. Managements of branches operate within the policy framework of the parent corporation.
(iv) 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.
(v) Advanced and Sophisticated Technology
Generally, a MNC has at its command advanced and sophisticated technology. It employs capital intensive technology in manufacturing and marketing.
(vi) Professional Management
A MNC employs professionally trained managers to handle huge funds, advanced technology and international business operations.
(vii) Aggressive Advertising and Marketing
MNCs spend huge sums of money on advertising and marketing to secure international business. This is, perhaps, the biggest strategy of success of MNCs. Because of this strategy, they are able to sell whatever products/services, they produce/generate.
(viii) Better Quality of Products
A MNC has to compete on the world level. It, therefore, has to pay special attention to the quality of its products.