What is a multinational company?
A multinational company (MNC) is a company that operates business in at least one country other than home country. After some definitions, it also creates at least 25% of itsrevenueOutside of his home country.
In general, a multinational company has offices, factories or other facilities in different countries around the world as well as a central headquarters that coordinates global management.
Multinational companies can also be referred to as international, stateless or transnational corporate organizations or companies. Air can have budgets that exceed in small countries.
The central theses
- Multinational companies perform business in two or more countries.
- Some consider a multinational company to be one that generates 25% or more income outside the home country.
- An MNC can have a positive effect on the countries in which it works.
- Some believeOutsourcingThe US production in a foreign country has a negative impact on the US economy.
- Investing in a multinational company is a way to expand an international engagement in a portfolio.
How a multinational company works
A multinational company is a company whose business activities take place in at least two countries. Any company can consider any company with a foreign branch as a multinational company. Other companies can only limit the definition to those companies that achieve at least a quarter of their income outside their home country.
Multinational companies can invest direct investments abroad. Many based on industrialized countries.WereIn countries that would otherwise have no access to such possibilities or goods.
However, critics of these companies believe that multinational companies have an inappropriate political influence on the governments, exploit developing countries and create jobs in their own home countries.
The history of the multinational company is associated with the history of colonialism. At the behest of the European monarchs, many of the first multinational companies were commissioned to carry out international expeditions.
Some of the colonies not held by Spain or Portugal passed the administration of some of the earliest multinational companies in the world. One of the first was the East India Company, which was founded in 1600.This British multinational company took part in international trade and exploration and operated trade items in India.Other early examples of multinational companies are the Swedish Africa company founded in 1649 and Hudson's Bay Company, founded in 1670.
Characteristics of a multinational society
Some of the characteristics that are common different types of multinational companies include:
- A global business presence
- Usually large and powerful organizations
- Business carried out in different languages
- A complicated business model and a complicated structure
- Direct investments abroad
- Created jobs abroad, possibly found with higher wages than locally
- Is looking for improved efficiency, lower production costs, larger market shares
- Has significant expenses in connection with the navigation of the rules and regulations abroad
- Pays taxes in countries where it works
- Reports financial informationInternational Financial Reporting Standards(IFRS)
- Sometimes accused
- Sometimes accused
US multinational companies employed 43.9 million employees around the world in 2019.
4 types of multinational companies
Multinational companies can be viewed as four main organization types.
A decentralized company
A decentralized company maintains a presence in his home country and has autonomous offices and other facilities at locations around the world. This type of multinational company has the ability to achieve more, faster because it is decentralized.himself and make his own decisions.
A central global company
A central global company has a central headquarters in the home country. The leading employees and management that are located there monitor the global offices and operations as well as domestic operations.Offices usually have to report from personnel for important activities to approval from the headquarters and obtain approval.
An international department within a company
An international department is the part of the multinational company that has been held responsible for all international operations. This structure facilitates company decisions and general activities in local foreign markets. However, independent company may have problems if the entire company consensus and measures are required.And presentation of the carefully maintained, company -wide brand image, which was determined by the multinational company, can also be a challenge.
A transnational company
A transnational society includes a parent-sub-sied structure, in which the parent company monitors business abroad and in their home country. Daughter companies can use the assets of the parent such as research and developmental data. Daughter companies can also be different brands. The parent usually maintainsA management role that leads the business activities of its domestic and foreign subsidiaries.
Examples of multinational companies are IBM, Berkshire Hathaway, Apple, Microsoft, Amazon and Walmart.nestlé S.A.is an example of a transnational company that makes business and operational decisions within and outside of its headquarters. His subsidiaries is Nespresso.
Advantages and disadvantages of multinational companies
International operations offer multinational companies, consumers and a workforce a variety of advantages and disadvantages.
The development of an international presence can open up new markets and sales options that are not available or not possible if you operate in Germany. For exampleSatisfy without the transaction costs associated with long -distance traffic.
Companies can set up operations in markets in which their capital can be used most efficiently, and wages have less effect on the end result than in the home country.
By producing the same quality of goods at lower costs, multinational companies can reduce prices and increase the purchasing power of consumers worldwide.
Multinational companies can also use lower tax rates that are available in countries that strive for their direct investments and the jobs they have created, but if they consider that the European Union has a plan to implement a minimum tax of 15% for corporate profits in order to implementTo become effective in 2023.
Further advantages are a direct financial investment abroad and employment growth in their local economies.
A compromise ofglobalization- The price of lower prices is that domestic workplaces change overseas. This can increase unemployment in the home country and make long -standing employees difficult to find new jobs in outsourced industries.
Those who expose themselves against multinational companies indicate the potential they may have to developMonopoly(for certain products). This can increase prices for consumers, suffocate the competition and inhibit the innovation.
Multinational companies should also have a negative impact on the environment, since their business activity can promote country development and exhaustion of local and natural resources.
Multinational companies can also cause the demise of small local companies, and activists have also claimed that multinational companies violate ethical standards. They accuse them of avoiding laws in order to advance their business agents.
What does a company do multinational?
A multinational company is one that has business offices and businesses in two or more countries in the world. This companies are often managed by a central office with headquarters in their home country, and the simple export of goods abroad does not make a multinational company.
Why should a company want to become a multinational company?
Usually it is the main goal of a company to increase profits and growth. If it can increase a global customer base and increase its market share abroad, it can believe that opening of offices abroad is worth the costs and the effort.see benefits in certain tax structures or regulatory regimes abroad.
What are some risks with which multinational companies are confronted with?
Multinational companies are exposed to risks related to the various countries and regions in which they work.Annoy outsourcing of jobs.
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Importance of Multinational Corporation
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.
MNCs threaten local industries, which are still developing, because of their immense economic strength. Domestic industries are unable to compete with MNCs. MNC threat has forced the closure of several local enterprises.
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