1 International Business: An Overview Chapter-01

2 International Companies and the terms to describe them 1.Multinational Corporation (MNC) : A multinational corporation is a firm that engages in foreign direct investment and owns and controls value-adding activities in more than one country. MNCs typically buy resources in a variety of counties, create goods and services in a variety of countries, and them sell those goods and services in a variety of countries.

3 2. Multinational Enterprise (MNE) : MNC and MNE are used interchangeably. But there are some internationally involved companies such as accounting partnerships, that are not organized as corporations.

4 International Companies and the terms to describe them On the basis of approach /strategy of operation of MNCs, they are categorized into four types: a) Multidomestic corporation : A Multidomestic corporation is one that views itself as a collection of independent operating subsidiaries, each of which focuses on a specific domestic market, is free to customize its products, marketing campaigns, and production techniques to serve the needs of local customers.

5 International Companies and the terms to describe them b) Global corporation : A global corporation views the world as a single market place and strives to create standardized goods and services that will meet the needs of customers worldwide. Pharmaceuticals and Tobacco companies are the examples of this category.

6 International Companies and the terms to describe them c) Transnational corporation : A transnational corporation seeks to combine the earlier two approaches: global-scale-efficiencies (global corporation) and local responsiveness (multidomestic approach). Sony, Uniliver are the examples of transnational corporation.

7 International Companies and the terms to describe them d) World Company : A world company is a firm that transcends national boundaries and in so doing loses its national identity. No company has actually reached this level, although some are moving toward it. Nestle, ABB (Asea Brown Boveri), a Swedish based electrical engineering firm, Royal Dutch/Shell are the examples.

8 International Companies and the terms to describe them 3. Multinational Organization (MNO) : MNO is a not-for-profit organization. That means, activities of the multinational organization is not aimed at earning profit such as International Red Cross, UNO, Oxfam, etc.

9 International Companies and the terms to describe them Home country/Parent country: The country of origin where the headquarters of the MNC is located. This is known as “parent” company. Host country: The country where MNC expands its operations. Such operation of is known as “subsidiary” of the MNC