MULTINATIONAL CORPORATIONS (MNCS)
Meaning and Definition of MNCS
(MNCS) or Multinational Enterprises (MNES) are companies that manufacture and market the products or services in several countries. Typically a multinational corporation operates in a number of plants abroad and markets products through a large network of fully owned subsidiaries. Although the multinational corporation took birth in the early 1860s, it was after World War II that the multinationals have grown rapidly. The first MNC came to India in 1921. In the early days, the United States was the home of most of the MNCS. Now there are a number of European and Japanese multinationals. Multinationals have been emerging from the developing countries too.
A multinational corporation has been defined as follows: "An enterprise which allocates company resources without regards to national frontiers, but is nationally based in terms of ownership and top management. "
" An enterprise which own or control production or service facilities outside the country in which they are based.
According to James C. Baker the multinational corporation is a company
1) Which has a direct investment base in several countries,
2) Which generally derives from 20 percent to 50 percent. or more of its net profits from foreign operations, and
3) Whose management makes policy decision based on the alternatives available anywhere in the world.
Terms such as International Corporation, Multinational Corporation, Transnational and Global Corporation are often used as synonyms. However, several multinationals have evolved into a certain advanced stage of transnational organization and operations so that it becomes necessary to draw some distinction between these terms.
It is an enterprise, which allocates company resources without regards to national frontiers, but is nationally based in terms of ownership and top management. It comprise of three words multi, national and corporations. These words together means that corporations which have established their offices to increase the interaction either by their own efforts or by collaborations with other companies. Thus Multinational represents the highest level of overseas involvement and is characterized by global strategy of investment, production and distribution. MNCS are enterprise which owns or controls production or service facilities outside their home country.
Features of MNCS
The following interrelated features are of MNCS are as follows:
1) Giant Size: The assets and sales of MNCS are immense, running into billions of dollars and they make supernormal profits. For example, the physical assets of IBM are around eight billion dollars. ITT has about 800 subsidiaries in more than 70 countries and is the biggest multinational corporation. In certain cases, the sales turnover of some MNCS far exceeds the gross national product of many developing nations.
2) International Operations: The operations of an MNC are in many countries through a parent corporation in the home country. The operations are managed throuch a network of branches and subsidiaries in host countries. Production, marketing and other operations are dispersed in different nations to benefit from the economics of local operations.
3) Oligopolistic Power: An MNC acquires a huge economic power through the process of merger and takeover of other firms, during its operations. This together with its giant size makes it an oligopoly due to which it dominates the market.
4) Collective Transfer Resources: An MNC provides a bridge to enable a multilateral transfer of resources between countries. This transfer takes place in the form of a "package" which includes exchange of latest technology, machinery, equipment, raw materials, managerial expertise, and so on.
5) International Market: MNC's have vast access to international markets on account of their vast resources and superlative marketing skills. As a result of this, MNCS are in a passion to sell any product they choose to manufacture in different nations.
6) Sophisticated Technology: An MNC commands advanced technology which provides world class products and services. Implementation of capital intensive technology is made in manufacturing and marketing, as well as other areas of business.
7) Professional Management: MNCS employ professional skills to integrate and manage worldwide operations. Furthermore, professionally trained managers are employed to handle advanced technology, vast funds and international business operations.
8) Single Managerial Control: A MNC is ultimately controlled by a single managerial authority (typically the top management group of the parent company), which makes the key; Strategic decisions relating to the operations of the parent firm and all its affiliates.
9) Global Perspective: The managers of a MNC, especially the central management group, are presumed to possess a global perspective. It implies the absence of any preferential emphasis upon the parent country's home market on the part of those managers.
10) Offers Economies of Scale: Multinational marketing offers additional economies of scale that is reduction of unit casts through producing more units - and ways to spread costs.
11) Integrated Worldwide Business System: A multinational corporation is an integrated worldwide business system. This means that the parent company and its foreign affiliates act in close alliance and co-operation with one another, as distinct from functioning separately and autonomously.
12) Offers New Markets for Products: Multinational marketing offers a market for products where none (or only a small one) currently exists.
