Multinational Corporations - MNC

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What Does It Mean By Multinational corporations?

As a college student, we all dream of working in big MNCs, but what does this term mean? Well, a small company with just over 50 people spread in different countries is considered a multinational corporation. The word MNC implies a company owned and controlled by one firm in multiple nations all across the globe. 

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(Google Corporate Office U.S.)

The main reason why companies try to set up their business abroad is due to cheap labour and the availability of other resources. With a multi-nation location, companies avail of low-cost production, which helps them earn more significant profits and reach quarterly revenue targets. 


Importance of Multinational Companies

We have written down some importance of MNC for a home country and how it helps improve the GDP of a nation:

  • First, when a multinational company forms in a country, it improves the balance of payments as investors from different countries will start to put their money in the home host country's market. The investment will work as a direct flow of capital from the international market. 

  • Also, the profits of multinational companies depend on the tax laws of the country in most cases. As a result, it will be a good source of revenue for the domestic government. 

  • When the company becomes multinational, it will create products for both national and international markets. The local population will gain a much wider choice of goods/ services at a lower price point than the imported substitutes. 

  • When a company becomes multinational, it is a proud moment for the company owners, investors and the country. The presence and development of multinational companies showcase advancements in the industry front and help the host country build its reputation. 

  • On the other hand, a bigger number of MNC companies list open gates for other large corporations to set up their subsidiaries in the host country. 


Example of MNC company

Here's the list of MNC examples that are also considered to be multinational corporations in India.

Coca-Cola

When we are talking about multinational corporation examples, Coca-Cola is the one name that will indeed appear in the conversation. Coca-Cola has made its place in our daily lives with its different flavours. Also, the marketing campaigns of Coca-Cola are the ones you should be looking for inspiration, as they always try to connect with the national community.

Microsoft

If you have a computer or a laptop, you have worked in Microsoft's Windows operating system. A company that used to be located only in America has its offices spread worldwide, including India, Srilanka and Japan. 

Nike

There's no denying that we all love cricket and football, and one of the biggest sports product manufacturers is Nike. Due to its vast collection of iconic sneakers, football jerseys and cricket jerseys, Nike has made its name in the Indian market like no other sports brand.  

KFC

When talking about the MNC list, we have to include one global food chain brand, KFC. KFC is among the few that has its outlets spread in some of the most remote locations in India. Also, the company runs 24x7 drive-through in some of the highway locations.

Starbucks

If you are looking for a merger of a homegrown international company and a famous global brand. In that case, you need to look for the story of Starbucks, which is now running successfully in India with the help of a 50:50 joint venture by Tata.


Features of MNC

If you are looking for MNC company details, you should be looking for their core features. Given below, we have pointed out two of the main features of MNC that make it different from other companies. 

High-cost Asset and Turnover

As these companies are doing business in the global market, MNCs have massive physical and financial assets. As a result, they are the ones with the highest turnovers at the end of the fiscal year. Some MNCs like Google, Apple and Facebook have annual turnover which is higher than some countries' national economics. 

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(Deloitte is one of the multinational companies that has a corporate office in India and abroad.)

Economic Powerhouses

MNCs are some of the most powerful financial entities. They are the ones that keep on adding constant mergers to keep adding economic power in their host countries. Reliance is an excellent example of this feature.

FAQ (Frequently Asked Questions)

Q1. What are the advantages and disadvantages of MNCs in the Home and Host Country?

Ans: Advantages of MNCs being present in the Host Country:

  • With the development of MNC in a host country, the country's investment level, employment level, and income level increases.

  • When it comes to technology, the host country's industry gets the latest technology from foreign countries through MNC's involvement.

  • The number of host country's businesses gets managed by experts that are working in MNCs.

Disadvantages to a Host Country for having MNCs:

  • MNCs may start to transfer technology, which has already become outdated in the home country.

  • MNCs don't work within the national autonomy. As a result, they have a specific threat of economic and political sovereignty for the host countries. 

  • If the company goes with the geocentric approach, it may not create employment opportunities for the people of the home country. 

Q2. How does a Multinational Company Form?

Ans: Many people have this misconception about a multinational company as a big business that is operating in dozens of countries. However, a company working only in three different countries is said to be a multinational company. To make a company multinational, you need to establish its parent corporation in the host country with its headquarters. The next two subsidiary corporations can be established in different countries, which allows a business with the host country. These two subsidiaries need to be owned by the parent corporation. Talking about India, after the financial liberation in 1991, the number of multinational companies in the country skyrocketed.