Multinational Company

Concept of Multinational Company

Multinational companies refer to those business organizations which have their main operations in a country and subsidiary operations in many other countries. It also refers to the business organization having their headquarters in one country but operating branches, factories and assembly plants in others. Multinational companies establish a parent company in one country and subsidiaries in many countries to run the business of production, distribution or the provision of service for earning profits. For examples, Coca-Cola origins in the United States, but a worker drinks coke “Made in Nepal: to quench his thirst.”

Characteristics of Multinational Company

The following are the main characteristics of multinational company:

• Large scale business:

Multinational companies operate globally so that its capital is also considerably large. Its assets and volume of production are also quite large. The sales turnovers of some multinational companies are much greater than the annual budget of many developing countries.

• Productive Organizations:

Multinational companies are mostly engaged in the production of goods and services in many countries and they produce and sell goods and services in one brand name or trademark all over the world.

• Global operation:

Multinational companies operate all over the world. They produce qualitative products in the parent company and sells its products and services all over the world.

• Advanced technology:

In Multinational companies, they use modern scientific and advanced technology to produce goods at competitive price. For examples, the Coca-Cola Company in the USA has a unique blending formula which is inaccessible to any other companies of the world.

• Management and control:

Multinational companies establish a parent company which has control over the management and finance of the subsidiaries operated in many countries. However, enough autonomy is given to the subsidiary companies to perform their day to day activities.

• Monopolistic market:

Multinational companies produce high qualitative products using advanced technology and skilled workforce. Because this type of market would be comprised of one supplying firm, consumers would have no choice but to purchase solely from this firm.

Advantages of Multinational Company

Disadvantages of Multinational Company

The following are the demerits of multinational company:

• Affect the local resources:

Multinational companies produce high quality of goods and services because they are financially and technically strong so that they affect the local resources.

• Disregarded national priorities:

The multinational company usually invest their capital in profitable sectors and developed regions of the host countries as they use capital-intensive technology for the production and distribution of goods and services.

• Gain monopoly positions:

Multinational companies can establish their subsidiaries within the large business in the host countries. The economic power of the nation fully depends on multinational companies.

• Risk on national sovereignty:

Multinational companies are mega organizations having huge financial resources and high economic power, they may have great influence on the particular parties and government of subsidiaries.

• Outflow of Foreign Currency:

Multinational companies bring foreign capital for investment in the host countries. They generate huge profit from their activities but profits may be sent back to the parent country rather than kept.

References:

Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal. Business Studies. Kathmandu: Taleju Prakashan, 2067.

Pant, Prem R., et al. Business Studies. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.