MNC Concept PDF

PART I Multinational Corporations (MNC) Session 1 Dr. Soha Ferr  PART I Defining Multinational Corporations MNC is an enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarte...

PART I Multinational Corporations (MNC) Session 1 Dr. Soha Ferr  PART I Defining Multinational Corporations MNC is an enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation. Dr. Soha Ferr  PART I Categories of Multinational Corporations There are four categories of multinational corporations: (1) a multinational, decentralized corporation with strong home country presence, (2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available, Dr. Soha Ferr  PART I Categories of Multinational There are fourCorporations categories of multinational corporations (continued ): (3) an international company that builds on the parent corporation's technology or R&D, or (4) a transnational enterprise that combines the previous three approaches. According to UN data, some 35,000 companies have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade. Dr. Soha Ferr  PART I Basic Definition of a Multinational Corporation A corporation with operations in two or more countries. An entity managed from one home country and in business in several countries. A company or group is considered a multinational corporation if deriving 25% of revenue from out-of- home-country operations. Dr. Soha Ferr  PART I The Concept of a Multinational Corporation The concept of multinational company is the outcome of the development of the mutual cooperation among friendly nations, development of new technology, mass production and the development of global economy. Generally, a company that performs its business in two or more countries is a multinational company. Dr. Soha Ferr  PART I The Concept of a Multinational Corporation Multinational companies are incorporated in a country but they perform their business in many countries of the world. Especially, they perform business operations throughout the world through their branches, subsidiaries or agents. The business activities are managed and controlled by the head office of the company which is situated in the mother country. Dr. Soha Ferr  PART I The Involvement of a Multinational Corporation Multinational companies involve in mass scale production and distribution of specific products. They involve in mass production by taking the scope of distribution at the international level. The equity capital of the subsidiaries or branches is contributed by both the people of the host company and the parent company. Dr. Soha Ferr  PART I The Involvement of a Multinational Corporation (continued) However, management and control of the branches is done according to the system of the parent company. Therefore, we may conclude that a multinational company is corporation which performs business at the international level under its ownership, management and control. Dr. Soha Ferr  PART I The Present Role of a Multinational Corporation At present, multinational companies are being taken as an important aspect which helps eliminate the trade barriers among friendly nations. The development of the free market economy concept at the international level helps large scale manufacturing to enter the international market without much hassles. Therefore, many multinational companies are established in the world especially in developing countries. Dr. Soha Ferr  PART I The Foundations of Global Economy The world body brings global economy into, one foundation to some extent. This contributes more to promoting business activity of multinational companies throughout the world without any administrative barriers. The United Nations recognizes around 650 companies or corporation as multinational companies in the world, whose transactions were above a certain.level specified by the UN Dr. Soha Ferr  PART I Some of multinational The Foundations ofcorporations are: Global Economy IBM corporation, United States of America (USA) General Electric, United States of America (USA) Mercedes Benz car company, Germany Coca Cola Company, United States of America (USA) Pepsi Cola Company, United States of America (USA) Nestle Company, Switzerland Hitachi, Japan Dunlop, United Kingdom (U)) Ford Motor Corporation, United States of America (USA) Dr. Soha Ferr