Essay on the Meaning and Definition of Multinational Company

A multinational corporation/company is an organisation doing business in more than one country. ‘In other words it is an organisation or enterprise carrying on business in not only the country where it is registered but also in several other countries. It may also be termed as international corporation, global giant and transnational corporation.

According to the United Nations a multinational corporation is “an enterprise which owns or controls production or service facilities outside the country in which it is based”. In the words of W H Moreland, “Multinational Corporations or Companies are those enterprises whose management, ownership and controls are spread in more than one foreign country”.

Thus a multinational company carries on business operations in two or more countries. Its headquarters are located in one country (home country) but its activities are spread over in other countries (host countries). MNC’s may engage in various activities like exporting, importing, manufacturing in different countries. It may also lend its patents, licences and managerial services to firms in host countries.

Characteristics of Multinational Companies (MNCs)

The distinctive features of multinational companies are as follows.

1. Large Size:

A multinational company is generally big in size. Some of the multinational companies own and control assets worth billions of dollars. Their annual sales turnover is more than the gross national product of many small countries.

2. Worldwide operations:

A multinational corporation carries on business in more than one country. Multinational corporations such as Coco cola has branches in as many as seventy countries around the world.

3. International management:

The management of multinational companies are international in character. It operates on the basis of best possible alternative available any where in the world. Its local subsidiaries are managed generally by the nationals of the host country. For example the management of Hindustan Lever lies with Indians. The parent company Unilever is in The United States of America.

4. Mobility of resources:

The operation of multinational company involves the mobility of capital, technology, entrepreneurship and other factors of production across the territories.

5. Integrated activities:

A multinational company is usually a complete organisation comprising manufacturing, marketing, research and development and other facilities.

6. Several forms:

A multinational company may operate in host countries in several ways i.e., branches, subsidiaries, franchise, joint ventures. Turn key projects.

Aims

Multinational companies make investments in different countries with the following aims.

(a) To take tax benefits in host countries;

(b) To exploit the natural resources of the host country;

(c) To take advantage of Government concessions in host country;

(d) To mitigate the impact of regulations in the home country;

(e) To reduce cost of production by making use of cheap labour and low transportation expenses in the host country.

(f) To gain dominance in foreign markets;

(g) To expand activities vertically.