A multinational corporation, or MNC, refers to any organization or business which has an international presence spread over many different countries. It doesn’t necessarily indicate that the company has over a thousand employees. It simply means that the company has established its business worldwide.
MNCs became popular after globalization got a hold over world economics. Business owners realized the underutilized potential that was the labor force in other countries of the world, particularly the ones in Asia and Africa. One of the easiest ways to access that labor pool and mold it into a profit-making enterprise was expanding the business to other parts of the world.
It may sound like having operations in multiple countries around the world is a very expensive venture, but in reality, this is very cost-effective. This is because setting up offices in countries with a good labor force and low cost of production will automatically generate a greater net profit.
What Are Some Popular MNCs?
Some of the biggest names in business are all MNCs with a head office in their country of origin and numerous branches in other parts of the world. Google is one of the most popular MNCs today, and every engineer’s dream. Similarly, other MNCs include Twitter, IBM, HP, PepsiCo, Microsoft, Sony and so on.
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.
What Are The Features Of MNCs?
Some of the most commonly observed features of all MNCs include:
Sister Branches Present Internationally:
Most MNCs have roots in one country and then expand to other parts of the world in search for cheap labor and low cost of production. For example, Google will be more likely to pay an employee from the USA a greater salary than one who resides in India. This considers the overall cost of living in different parts of the world. However, the employees in both the USA and India are likely to offer very similar services.
Impressive Turnover Rates:
In order to expand business to different parts of the world, the company needs to have enough capital to begin with. Only then will it see an increase in revenues and higher turnovers.
Aggressive Advertising:
Another characteristic seen across all MNCs is the way they network their business. This is done to attract more and more people to join their organization. This advertising also helps them build trust and loyalty with consumers, who are likely to be swayed by impressive advertising into consuming their products.