Multinational Corporations (MNC) PART I Multinational Corporations (MNC) Session 1 Dr. Soha Ferra

Defining Multinational Corporations PART I Defining Multinational Corporations MNC is an enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation. Dr. Soha Ferra

Categories of Multinational Corporations PART I Categories of Multinational Corporations There are four categories of multinational corporations: (1) a multinational, decentralized corporation with strong home country presence, (2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available, Dr. Soha Ferra

Categories of Multinational Corporations PART I Categories of Multinational Corporations There are four categories of multinational corporations (continued ): (3) an international company that builds on the parent corporation's technology or R&D, or (4) a transnational enterprise that combines the previous three approaches. According to UN data, some 35,000 companies have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade. Dr. Soha Ferra

Basic Definition of a Multinational Corporation PART I Basic Definition of a Multinational Corporation A corporation with operations in two or more countries. An entity managed from one home country and in business in several countries. A company or group is considered a multinational corporation if deriving 25% of revenue from out-of-home-country operations. Dr. Soha Ferra

The Concept of a Multinational Corporation PART I The Concept of a Multinational Corporation The concept of multinational company is the outcome of the development of the mutual cooperation among friendly nations, development of new technology, mass production and the development of global economy. Generally, a company that performs its business in two or more countries is a multinational company. Dr. Soha Ferra

The Concept of a Multinational Corporation PART I The Concept of a Multinational Corporation Multinational companies are incorporated in a country but they perform their business in many countries of the world. Especially, they perform business operations throughout the world through their branches, subsidiaries or agents. The business activities are managed and controlled by the head office of the company which is situated in the mother country. Dr. Soha Ferra

The Involvement of a Multinational Corporation PART I The Involvement of a Multinational Corporation Multinational companies involve in mass scale production and distribution of specific products. They involve in mass production by taking the scope of distribution at the international level. The equity capital of the subsidiaries or branches is contributed by both the people of the host company and the parent company. Dr. Soha Ferra

The Involvement of a Multinational Corporation (continued) PART I The Involvement of a Multinational Corporation (continued) However, management and control of the branches is done according to the system of the parent company. Therefore, we may conclude that a multinational company is corporation which performs business at the international level under its ownership, management and control. Dr. Soha Ferra

The Present Role of a Multinational Corporation PART I The Present Role of a Multinational Corporation At present, multinational companies are being taken as an important aspect which helps eliminate the trade barriers among friendly nations. The development of the free market economy concept at the international level helps large scale manufacturing to enter the international market without much hassles. Therefore, many multinational companies are established in the world especially in developing countries. Dr. Soha Ferra

The Foundations of Global Economy PART I The Foundations of Global Economy The world body brings global economy into, one foundation to some extent. This contributes more to promoting business activity of multinational companies throughout the world without any administrative barriers. The United Nations recognizes around 650 companies or corporation as multinational companies in the world, whose transactions were above a certain level specified by the UN. Dr. Soha Ferra

The Foundations of Global Economy PART I The Foundations of Global Economy Some of multinational corporations are: •IBM corporation, United States of America (USA) •General Electric, United States of America (USA) •Mercedes Benz car company, Germany •Coca Cola Company, United States of America (USA) •Pepsi Cola Company, United States of America (USA) •Nestle Company, Switzerland •Hitachi, Japan •Dunlop, United Kingdom (U)) •Ford Motor Corporation, United States of America (USA) •Panasonic Corporation, Japan Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 1. Large scale operation:   Large scale operation is the most important feature of a multinational company. It performs large scale business operation by investing a huge capital. And it also performs activities in large scale, like production, distribution, organization, employees and promotional activities. The large scale production minimizes per unit cost and helps to face competition in the market. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 2. Advanced Technology: Advancement in modern science and technology is one of the major features of a multinational company. Multinational companies establish research and development departments for the research and invention of new technology in production, distribution and for promotion of business activities. Monopoly in new scientific technology is one of the main reasons for the development of some multinational companies. Such multinational companies can get easy entry in developing countries. They also transfer new technology in to developing countries through their branches and subsidiaries which are helpful for industrialization. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 3. International Operations: One of the important features of a multinational company is its operation in two or more countries. It performs production and distribution activities at the international level through its branches or subsidiaries. Examples companies are coca cola, IBM, National Panasonic, Toyota, Pepsi Cola etc. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 4. Efficient Management: Efficient management is one of the main reasons for the successful operation of a multinational company. It hires efficient and skilled manpower. It has the capacity to hire professional by paying high remuneration. It also blends technology and manpower to give better management. It is thus essential for their successful operation. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 5. Ownership & Control: The ownership of multinational companies remains both with the parent company and the subsidiary company. However, major shares of the subsidiary companies established in various countries are contributed by the parent company. Therefore, the parent company plays a major role in the management and control of the subsidiary companies. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 6. Productive Organization: Multinational companies are known as productive organizations. They produce goods and services of a specific nature both in the parent company and the subsidiary companies in various countries. This is done to spread their products at the international level. The parent company uses its own technology, brand, trademark and method of production. Dr. Soha Ferra

The 7 Characteristics of a Multinational Corporation PART I The 7 Characteristics of a Multinational Corporation 7. Monopolistic Market: The product specialization and efficient management system of multinational companies contribute to developing their monopoly power even in a competitive market. The use of latest technology, own trade mark, goodwill, along with better distribution system and promotional network are the main components of multinational companies. Dr. Soha Ferra

PART I End of Session 1 Dr. Soha Ferra