CONCEPT OF MULTINATIONAL CORPORATION

A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. They play an important role in globalization. A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management.

From above we can summarize it as

·        Large in size

            Simultaneous Operations in Multiple countries:

·       Factors of production from multiple countries:

·       System form the home country applied to the host countries:

·       Virtual independence of subsidiaries.

Types of MNC’s

On the basis of Management Orientation:

1.     Ethnocentrism: Home country system is superior, sees similarities in foreign countries and looks foreign market as an extension of home market and tries to impose home country strategies in the foreign operations.

2.     Polycentrism: Each host country unique and sees vast differences in foreign countries. Things are largely decentralized to cater the need of the country as single entity and individual strategies are worked out accordingly.

3.     Regio-centrism: Sees similarities and differences in a world region; it is ethnocentric or polycentric. Operational strategies are formed for entire region rather than individual countries and production and distribution facilities are created to serve the whole region.

4.     Geo-centrism: It is a worldwide view and sees both similarities and differences in home and the host countries. The firm establishes manufacturing and processing activities at specific points around the world having heterogeneous characteristics.

On the basis of Purpose of organization

       i.          Raw Material Seeker

It is the MNC’s established in search an availability of raw material required for production .The aim of these multinationals is to exploit raw materials available in foreign countries. They are the earliest MNC’s Colonial empires started them. Examples are East India  company in India and Hudson Bay trading company in the USA.

     ii.          Market Seeker

The aim of these multinationals is to expand their market .They go in foreign countries to produce and sell .Restriction on exports and imports can also be reasons for such companies to start overseas operations. Such companies invest in production facilities .They spends heavily for market development .They provides intense competition to domestic industries.

    iii.          Cost minimizing MNC’s

The aim of these multinationals is to minimize cost .They invest in low cost of production locations in foreign countries. Low cost of labor

or energy is an attraction for such MNC’s. Textile, electronics consumer products tend to be their areas of operation.

So we can categories the MNC’s in two ways as  on the basis of Management Orientation and

on the basis of Purpose of organization.