Multinational Corporations Overview

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Questions and Answers

What percentage of revenue must a company derive from operations outside its home country to be considered a multinational corporation?

  • 20%
  • 30%
  • 25% (correct)
  • 35%

Which category of multinational corporation focuses on decentralized operations while maintaining a strong presence in its home country?

  • Global, centralized corporation
  • International company
  • Multinational, decentralized corporation (correct)
  • Transnational enterprise

Which type of multinational corporation combines attributes of the other three categories?

  • Transnational enterprise (correct)
  • Multinational, decentralized corporation
  • International company
  • Global, centralized corporation

What is one key factor that has led to the development of multinational companies?

<p>Development of new technology (A)</p> Signup and view all the answers

How many companies are noted to have direct investment in foreign countries according to UN data?

<p>35,000 (C)</p> Signup and view all the answers

What is a primary function of multinational companies in international trade?

<p>Eliminating trade barriers among friendly nations (D)</p> Signup and view all the answers

How is the equity capital for a subsidiary of a multinational company usually sourced?

<p>From a mix of the parent company and host country investors (A)</p> Signup and view all the answers

What role does the United Nations play in relation to multinational corporations?

<p>It recognizes and lists certain companies based on their transaction levels (A)</p> Signup and view all the answers

What is one of the main advantages of establishing a free market economy at the international level?

<p>It facilitates large-scale manufacturing to enter international markets easily (A)</p> Signup and view all the answers

What is a key characteristic of how multinational corporations manage their branches?

<p>They follow the operational system established by the parent company (D)</p> Signup and view all the answers

Flashcards

Multinational Corporation (MNC)

A company operating in multiple countries, but managed from a single home country.

Revenue Source for MNC

A significant portion (at least 25%) of a company's revenue must come from operations outside its home country to classify it as an MNC.

MNC Categories

Multinational corporations are grouped into four types: decentralized, global, international, and transnational, based on how they operate globally.

Decentralized MNC

This type of MNC has significant operations and presence in its home country.

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Global MNC

A global corporation, centrally focused on low-cost production by locating operations in regions with cheaper resources.

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International Company

An MNC that primarily relies on its parent corporation's technology and R&D; they export intellectual property.

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Transnational Enterprise

An MNC that combines features of decentralized, global, and international approaches.

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Multinational Corporation (MNC)

A company that operates in multiple countries, with its management and control centralized in the parent country.

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MNC Involvement

Large-scale production and distribution of products across international borders.

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Equity Capital (MNC)

Funding for MNC subsidiaries provided by both the parent company and the host country.

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MNC Management

Control and direction of MNC branches are coordinated according to the parent company's system.

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MNC Role (Present)

Multinational companies help reduce trade barriers between nations and facilitate international trade.

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Global Economy Foundation

The world body (UN) to some extent unifies the global economy, thus promoting MNC activities internationally without any barriers.

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Examples of MNCs

Companies like IBM, General Electric, Mercedes-Benz, Coca-Cola, Pepsi, Nestle, Hitachi, Dunlop, and Ford operate internationally.

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Study Notes

Multinational Corporations (MNCs)

  • MNC is a business operating in multiple countries, but managed from one home country.
  • A company is considered multinational if it derives at least 25% of its revenue from operations outside its home country.
  • There are four categories of multinational corporations:
    • Multinational, decentralized, with a strong home country presence.
    • Global, centralized, acquiring cost advantages through centralized production in areas with cheaper resources.
    • International companies building on the parent corporation's technology or R&D.
    • Transnational enterprises combining the previous three approaches.
  • UN data shows approximately 35,000 companies with foreign investments, and the top 100 control approximately 40% of global trade.
  • MNCs are involved in mass production and distribution of specific goods at an international level.
  • Equity capital for subsidiaries or branches is often contributed by both the host company and the parent company.
  • Management and control of branches are based on the parent company's system.
  • MNCs play a significant role in removing trade barriers between nations.
  • The free market model allows for easier international market entry for manufacturing, especially for developing countries.
  • The world body promotes global economic activity for multinational corporations.
  • The UN recognizes around 650 multinational corporations based on transactions volume above a certain level.

Examples of Multinational Corporations

  • IBM Corporation (USA)
  • General Electric (USA)
  • Mercedes Benz (Germany)
  • Coca-Cola (USA)
  • PepsiCo (USA)
  • Nestle (Switzerland)
  • Hitachi (Japan)
  • Dunlop (UK)
  • Ford Motor Corporation (USA)

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