What are the different Forms of Multinational Corporations?

Multinational Corporations operate in the following ways.

1 . Franchising

In this form, multinational corporation grants firms in foreign countries the right to use its trade marks, patents, brand names etc. The firms get the right or licence to operate their business as per the terms and conditions of franchise agreement. They pay royalty or licence fee to multinational corporations. In case the firm holding franchise violate the terms and conditions of the agreement, the licence may be cancelled. This system is popular for products which enjoy good demand in host countries.

2. Branches

In this system multinational corporation opens branches in different countries. These branches work under the direction and control of head office. The headquarters frames policies to be followed by the branches. Every branch follows laws and regulations of the head office and host countries. In this way multinational companies operate through branches.

3. Subsidiaries

A multinational corporation may establish wholly owned subsidiaries m foreign countries. In case of partly owned subsidiaries people in the host countries also own shares. The subsidiaries in foreign countries follow the polices laid down by holding company (Parent company). A multinational company can expand its business operations though subsidiaries all over the world.

4. Joint Venture

In this system a multinational corporation establishes a company in foreign country in partnership with local firms. The multinational and foreign firm share the ownership and control of the business. Generally, the multinational provides technology and managerial skill and the day to day management is left to the local partner. For example, in Maruti Udyog the Government of India and Suzuki of Japan have jointly supplied capital. Suzuki supplies technology and the day to day management lies with the Government of India.

5. Turn Key Projects

In this method, the multinational corporation undertakes a project in foreign country. The multinational constructs and operates the industrial plant by itself. It provides training to the staff in the operation of plant.

It may also guarantee the quality and quantity of production over a long period of time.