MULTINATIONAL CORPORATIONS #1 - Introduction, Definitions and Characteristics
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This document discusses multinational corporations (MNCs) and provides definitions and characteristics. It defines MNCs as companies that operate in multiple countries and have considerable foreign business. Examples given include McDonald's, Toyota, Samsung, and Exxon Mobil. MNCs are then defined based on their size, structure, performance, and behavior. Their key characteristics are outlined as being giant in size, having international operations, centralized control, oligopolistic power, sophisticated technology, professional management, operating in international markets, and having multiple objectives.
MULTINATIONAL CORPORATIONS #1 - Introduction, Definitions and Characteristics
- 1. Sundar B. N. Assistant Professor
- 2. Introduction ● A Multinational Corporation/company is an organization doing business in more than one country. ● A corporation (MNC) engages in various activities like exporting, importing, manufacturing in different countries. ● MNCs have worldwide involvement and a global perspective in its management and decision making,
- 3. Introduction International business describes business or operations of firms having interests in multiple countries. Such firms are called multinational corporations (MNCs). Some of the as well known MNCs include fast food companies like McDonald’s and Yum Brands, Vehicle manufacturers such as General Motors and Toyota, Consumer electronics companies like Samsung, LG and Sony, and Energy companies such as Exxon Mobil and BP. Most of the largest corporations operate in multiple national markets. 3
- 4. Introduction (I) MNCs consider opportunities throughout the globe through they do the business in a few countries. (II) MNCs invest considerable portion of their assets internationally. (III) MNCs engage in international production and operate plans in a number of countries (IV) MNCs take managerial decisions based on a global perspective. The international operations are integrated into corporations overall business. (V) MNCs are huge industrial/business organizations. They extend their industrial / marketing operations through a network of branches or their majority owned foreign affiliates.
- 5. 5 • An ‘International Corporation’ may be defined as a company which has business operations in at least one foreign country IC • A ‘Multinational Corporation’ is a company which operates in several countries and a considerable share of its business is from foreign countries. MNC • A ‘Global Corporation’ is a company which views the entire world as a single homogenous market and caters to the global market through globally standardized products. GC TNC A ‘Transnational Corporation’ is a multinational, the ownership and control of which are dispersed internationally. It has no principal domicile and no single central source of power. Unilever, Shell and Royal Dutch are examples of transnational corporation.
- 6. Definitions of MNC ● Definition by Size ● Definition by Structure ● Definition by Performance ● Definition by Behaviour 6
- 7. Definition by Size MNCs refer to a company which is big in size, but this size has many dimensions. One company may be big in terms of turnover while another may be in terms of profit and still another in terms of market value. But corporate size in terms of ‘sales’ is primarily used to describe a company as a Multinational Corporation. The World Investment Report 1997 indicates that there were about 45,000 MNCs with some 2,80,000 affiliates, whereas According to the World Investment Report 2002, there were about 65,000 of them with about 8.5 lakh foreign affiliates. But corporate size alone cannot be used as a criterion to be classified as MNC. 7
- 8. Definition by Structure This definition measures MNCs by how many countries it is operating in and by the citizenship of its corporate owners and top managers. Example: Coca Cola operates in approximately 200 nations and has widespread share holdings. The boardroom and the top management of top companies is becoming global. 8
- 9. Definition by Performance Definitions by performance depend on such characteristics as earnings, sales and assets. These performance characteristics indicate the extent of the commitment of corporate resources to foreign operations and the amount of reward from that commitment. Example: A major chunk of Coca Cola’s revenue comes from overseas operations. In India, Ranbaxy is considered as a true MNC as half to its turnover comes from the overseas market. Human resource or overseas employees are customarily considered as part of the performance requirement rather than as part of the structural requirement. Company’s willingness to use overseas personnel is a significant criterion for multinationals. 9
- 10. Definition by Behaviour According to this definition, it is the behavioral characteristics of the top management which decides whether a firm is a multinational or not. Thus, a company becomes more multinational if its management is more international. If a management has a geocentric thinking then this firm is treated as a true MNC. In a geocentric approach, the firm considers the whole world rather than the particular country as its target market. 10
- 11. CHARACTERISTICS OF MNC Giant in Size International Operations Centralized Control Oligopolistic Power Sophisticated Technology Professional Management International Market Multiple objectives 11