An Overview of Multinational Companies

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What is MNC’s: 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. Very large multinationals have budgets that exceed those of many small countries. Sometimes referred to as a "transnational 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 Nearly all major multinationals are either American,…show more content…
In other words, MNCs exhibit no loyalty to the country in which they are incorporated. Three Stages of Evolution: 1. Export Stage: (i) initial inquiries ⇒ result in first exports. (ii) Initially, firms rely on export agents. ⇒ expansion of export sales (iii) ⇒ foreign sales branch or assembly operations are established (to save transport cost) 2. Foreign production stage: Why? (i) There is a limit to foreign exports, due to tariffs, quotas and transportation costs. (ii) Wage rates may be lower in LDCs. (iii) Environmental regulations may be lax in LDCs (e.g., China). Itai-Itai disease in Japan since the 1920s was caused by cadmium poisoning. Contaminated effluents flowed into rice paddies and water source.) Watch the movie, Erin Brochovich. (iv) meet Consumer demands in the foreign countries DFI versus Licensing: Once the firm chooses foreign production as a method of delivering goods to foreign markets, it must decide whether to establish a foreign production subsidiary or license the technology to a foreign firm. Licensing: Licensing is usually first experience (because it is easy) e.g.: Kentucky Fried Chicken in the U.K. Licensing does not require any capital expenditure
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