Multinational corporation: Definition of how it works, four types (2023)

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.


(Video) What is a Multinational Company?

Multinational corporations

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:

(Video) Multinational Corporations

  • 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.

(Video) What is a multinational? BBC Learning English

Examples of multinational companies are IBM, Berkshire Hathaway, Apple, Microsoft, Amazon and Walmart.nestlé 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.

(Video) What is a Multinational Corporation?

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.

(Video) Multinational Corporations (MNCs) - Important Characteristics

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.


What are MNC give four features of MNC? ›

A multinational corporation (MNC) is a company that operates in its home country, as well as in other countries around the world. It maintains a central office located in one country, which coordinates the management of all its other offices, such as administrative branches or factories.

How does multinational corporation works? ›

A multinational corporation is a company that does business in a select few countries around the world and operates facilities such as warehouses or distribution centres in at least one foreign country. Although the company does business in other countries, its primary focus is the domestic market.

What is the definition of a multinational corporation? ›

multinational corporation (MNC), also called transnational corporation, any corporation that is registered and operates in more than one country at a time. Generally the corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in other countries.

What is the 4 pillars of corporate strategy? ›

The four most widely accepted key components of corporate strategy are visioning, objective setting, resource allocation, and prioritization.

What is the 4th characteristic of corporation? ›

Tip. The five main characteristics of a corporation are limited liability, shareholder ownership, double taxation, continuing lifespan and, in most cases, professional management.

What are the different types of multinational company? ›

There are four types of multinational companies: decentralised multinational corporations, global centralised corporations, international companies, and transnational enterprises.

What is multinational corporation and its characteristics? ›

A multinational corporation is one that has business offices and operations in two or more countries in the world. These companies are often managed from a central office headquartered in the home country. Simply exporting goods for sale abroad does not make a business a multinational company.

What are 3 strategies used by multinational companies? ›

Multinational corporations choose from among three basic international strategies: (1) multidomestic, (2) global, and (3) transnational. These strategies vary in their emphasis on achieving efficiency around the world and responding to local needs.

What is a multinational corporation example? ›

What Are Examples of Multinational Corporations? Examples of multinational corporations include Apple, Amazon, Microsoft, McDonald's, and Volkswagen. These companies are headquartered in one nation but operate divisions in many other countries in order to expand their business and reach more customers.

What is a multinational state simple definition? ›

The multinational state is a state containing national plurality in a particular form, where a national minority is only within that state forming a kind of internal state. According to Alain Dieckhoff the term 'multinational' state is often used to cover too wide a range of states.

What are the 4 four strategy elements in marketing? ›

What are the 4Ps of marketing? (Marketing mix explained) The four Ps are product, price, place, and promotion. They are an example of a “marketing mix,” or the combined tools and methodologies used by marketers to achieve their marketing objectives. The 4 Ps were first formally conceptualized in 1960 by E.

What are the 4 stages involved in incorporation of a company explain? ›

Company Formation – Promotion Stage, Incorporation Stage, Capital Subscription and Commencement of Business Stage. Since a company is an artificial person, it has to be formed according to legal provisions.

What are at least four 4 dimensions of corporate citizenship? ›

Corporate social responsibility is traditionally broken into four categories: environmental, philanthropic, ethical, and economic responsibility.

What are the 4 advantages of a corporation? ›

There are several advantages to becoming a corporation, including the limited personal liability, easy transfer of ownership, business continuity, better access to capital and (depending on the corporation structure) occasional tax benefits.

What are the 3 types of companies? ›

There are three principal categories of business organizations; that is; sole proprietorship, partnership and a company.
  • Private Company: A private company allows its shareholders to transfer its shares. ...
  • Public Company: ...
  • Companies Limited by Guarantee: ...
  • Companies Limited by Share: ...
  • Unlimited Company:
Jan 2, 2019

How many multinational corporations are there? ›

An MNC is a very large company possessing subsidiaries in several countries, and its organization, production and sales strategy, are conceived on a global scale. At the present time, there are some 60,000 MNCs worldwide, controlling more than 500,000 subsidiaries.

What are the 5 biggest MNCs in the world? ›

To skip our detailed analysis, you can go directly to see the 5 Biggest Multinational Companies in the World.
  • Exxon Mobil Corporation (NYSE:XOM) ...
  • Shell plc (NYSE:SHEL) ...
  • Samsung Electronics. ...
  • Alphabet Inc. ...
  • Sinopec Group. ...
  • Toyota Motor Corporation (NYSE:TM) ...
  • Walmart Inc.
Nov 19, 2022

What are two benefits of multinational corporations? ›

Some of the advantages of Multinational companies (MNC's) are 1) it will help in increasing the trade of the nation 2) It will help in improving the economy of a nation 3) It will increase employment opportunities for the people of a nation.

What is the importance of multinational? ›

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.

What are the 3 disadvantages of multinational corporations? ›

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.

What are the 3 types of strategy? ›

Three Essential Types of Business Strategy - How You Can Apply Them
  • Business strategy.
  • Operational strategy.
  • Transformational strategy.

What are the main types of strategies? ›

Deriving a competitive advantage against competitors in the marketplace is the heart of this strategy. This strategy aims to create market uniqueness that can lead to a sustainable competitive advantage. Few examples of competitive strategies are low-cost strategy, contrast strategy, and market-niche strategy.

What are the 5 strategies? ›

Mintzberg developed his 5 Ps of Strategy as five different definitions of (or approaches to) developing strategy. He first wrote about the 5 Ps of Strategy in 1987. Each of the 5 Ps is a different approach to strategy. They are Plan, Ploy, Pattern, Position, and Perspective.

What is a multinational company quizlet? ›

multinational corporation. an entity headquartered in one country that does business in one or more foreign countries.

What are the 5 biggest global multinationals? ›

These are the world's largest corporations, compiled by market capitalization (the total market value of a company's outstanding shares).
Alex Gray
  • Amazon. HQ: US.
  • Facebook. HQ: US. ...
  • Johnson and Johnson. HQ: US. ...
  • General Electric. HQ: United States. ...
  • China Mobile. HQ: China. Age of company: 20 years. ...
Jan 16, 2017

What are the 5 global corporations? ›

This can lower or even outweigh potential returns.
  • #1 Walmart Inc. (WMT)
  • #2 China Petroleum & Chemical Corp. (SNP)
  • #3 Inc. (AMZN)
  • #4 PetroChina Co. Ltd. (PTR)
  • #5 Apple Inc. (AAPL)
  • #6 CVS Health Corp. (CVS)
  • #7 Royal Dutch Shell PLC (RDS. A)
  • #8 Berkshire Hathaway Inc. (BRK. A)

What are some examples of multinational corporations? ›

What Are Examples of Multinational Corporations? Examples of multinational corporations include Apple, Amazon, Microsoft, McDonald's, and Volkswagen. These companies are headquartered in one nation but operate divisions in many other countries in order to expand their business and reach more customers.

What are the 3 biggest corporations? ›

Companies' values are often measured by market capitalization, or the value of all of the shares in the market. As of 2022, Apple, Saudi Aramco, and Microsoft hold the top three positions, each with market caps in excess of $2 trillion.

How many MNC are in USA? ›

The 719 US-based MNCs operate 87,404 subsidiaries, an average of 122 subsidiaries per company.

What are the types of multinational business? ›

There are four types of multinational companies: decentralised multinational corporations, global centralised corporations, international companies, and transnational enterprises.

What are the 4 types of companies? ›

The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation.

What are the three 3 periods of global corporations? ›

Geriffi, for example, emphasizes three structural periods: investment-based globalization (1950–70); trade-based globalization (1970–95); digital globalization (1995 onwards).

How many types of corporations are there? ›

There are 7 types of entities recognized under the Indian Law namely Private Limited Company, Public Company, Sole Proprietorship, One Person Company, Partnership, Limited Liability Partnership (LLP). The type of entities are described in detail below.

What are 3 examples of corporations today? ›

What is an example of a corporation? Apple Inc., Walmart Inc., and Microsoft Corporation are all examples of corporations.

What are multinational corporations quizlet? ›

multinational corporation. an entity headquartered in one country that does business in one or more foreign countries.

What is the key goal of multinational corporations? ›

Like many businesses, the primary goal of many multinational corporations is to make a profit and reach their financial goals. However, unlike many other businesses, multinational corporations have to navigate different geographical distances, cultures and target markets while selling their products and services.


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