The method of business that we use today is driven by multinational corporations which in short are called MNC’s. Multinational corporations (MNC’s) are businesses with operations in more than one country.
These companies are known to expand their business over a wide range of countries, which allows them to market products and services throughout the world.
This article will provide the detailed information about what is a multinational corporation, the types of multinational corporations as well as how MNC’s affect the global economy.
What is a Multinational Corporation?
A Multinational Corporation, officially called a “MNC” (Multinational Company), is a corporation that operates in more than one country and is managed by an executive board or board of directors that is made up of members from two or more countries.
MNC’s can be either privately owned or government-owned. Such companies have many benefits like bringing technology, skilled professionals and knowledge to foreign markets and thus improving their local economies.
However, they are also known for exploiting the cheap workers and poor working conditions in the developing countries where they operate.
Types of Multinational corporations (MNC’s)
Multinational corporations (MNC’s) are businesses that are multinational in scope. This means that they operate in more than one country. There are a variety of types of MNC’s, each with its own unique set of challenges and opportunities. This section will discuss the different types of MNC’s and their benefits and drawbacks.
There are four main types of MNC’s: Decentralized, Centralized, Global and Transnational.
- Decentralized MNC’s:
A Decentralized type of MNC’s are comprised of multiple subsidiaries, each operating in their own country, who then report to the parent company. This type of corporation is very common in developing countries and can be a more successful approach if the owner/manager is able to identify a niche within the local market. However, it does present some challenges when it comes to controlling costs.
- Centralized MNC’s:
A Centralized is a type of MNC’s which has a international headquarters that controls multiple subsidiaries with each subsidiary reporting directly to this headquarters. Again, there are many benefits associated with this form of MNC that include centralized control over financial management and tax issues but also risks due to less knowledge about local market conditions by the manager/owner at the top.
- Global MNC’s:
Global MNC’s has the head office located in one of these countries for ease of control. This type has most recently gained momentum in the world and is the most common form of MNC’s today. A Global MNC does the R&D for any new product in the headquarter, even though they typically have separate legal entities for each country. Global MNC’s will typically have two levels of management. The top management controls the overall direction of the operation in each country and the bottom level manages only that country’s operation. In addition to having multiple subsidiaries, Global MNC’s are also able to operate through cross-license agreements such as joint ventures.
- Transnational MNC’s:
A Transnational MNC is one that is engaged in international production as well as market and trade activities. Transnational MNC’s does use the blend of above mentioned types of MNC’s for which the parent company may guide the branches in other countries but does not actually control their functions. The key to the distinction between Global MNC’s and Transnational MNC’s is the degree of control the corporation exerts on each subsidiary.
The closer the subsidiaries are to being independent, the more of a Transnational MNC’s we are talking about. Some Global and Transnational MNC’s operate through subsidiaries that may be owned by other companies or even by non-corporate investors such as governments. How do you determine how much control a corporation has exerted before an entity can be considered separate? There is no simple answer to this question.
Pros and Cons of a Multinational corporations (MNC’s)
Multinational corporations (MNC’s) have become an increasingly popular form of business. They offer a number of benefits and drawbacks, so it’s important to understand the pros and cons of MNC’s
- The main pros of operating as an MNC are that they can achieve a high level of efficiency and scale.
- They can produce products more cheaply than small businesses can, and they can sell their products in a wider range of countries.
- MNC’s also tend to be better positioned to respond to changes in the market, as they have greater resources and flexibility.
However, there are also some main cons to consider when operating as an MNC.
- First, MNC’s often experience higher levels of competition than smaller businesses do. This means they must work hard to maintain their competitive edge, which can be difficult if their competitors are stronger than they are.
- Second, MNC’s can be more prone to corruption and bribery than smaller businesses are. This is because they have greater resources available to them, and their officials may be more likely to give bribes in order to gain advantages in the marketplace.
- Finally, MNC’s may face higher levels of taxes than smaller businesses do. This is because the government can more easily manipulate the MNC’s than it can smaller businesses, through the foreign policies and import duties.
Levels of Power in MNC’s
Multinational corporations (MNC’s) are powerful entities with a large reach and influence. They can have a significant impact on the economy, society, and culture around the world. This power comes from the complex network of relationships between different divisions within the MNC’s and with other entities, including government officials and business partners.
There are three main levels of power in a MNC’s: corporate, divisional, and individual.
- Corporate Power:
Corporate power is derived from the overall size and resources of the MNC. Corporate power is the most important level of power in a MNC. It enables the MNC’s to make decisions that affect the entire company and affects how other divisions operate. Corporate power is also used to control costs and manage risk.
- Divisional Power:
Divisional power is derived from the ability of divisions to make decisions independently or override decisions made by other divisions. Divisional power is important because it allows different divisions to work independently while still benefiting from the resources and assets of the MNC as a whole. It can also be used to compete with other companies or develop new products or services that can be sold outside of the MNC.
- Individual Power:
Individual power is derived from the ability of top executives to make decisions that have a significant impact on the company. Individual power is important because it allows a division to function more efficiently and effectively. The division can determine the way that they sell their products or services, as well as hire salespeople.
A company’s power is determined by how the balance of power within the company is shared among all levels of authority. This type of organizational structure allows each individual to carry out his or her responsibilities in the best possible manner.
Effects on the Global Economy
Multinational corporations (MNC’s) are businesses that are headquartered outside of the country in which they operate. MNC’s have a significant impact on the global economy and can have a variety of effects on different countries and regions.
One of the most important aspects of MNC’s is their ability to create jobs and promote economic growth.
In addition, MNC’s can have a negative effect on certain countries if they engage in unfair trade practices or if they outsource jobs to cheaper countries. MNC’s also have a significant impact on the environment by producing goods that use more resources than necessary.