Multinational Corporation

Historically, international trade simply involved export or import of goods across national boundaries. The production took (8) place in the country of exporter. The advent of multinational corporations has led to structural changes in the way business operations take place. The MNCs set up their own production facilities in other countries and cater the domestic markets.

Some of the characteristics of a multinational company are:

1. An MNC operates in a number of countries.
2. An MNC has global orientation in investment and profit making
3. An MNC essentially thrives on managerial, technical and financial resources from more than one country
4. The top management of an MNC may have a multicultural composition.
5. The MNCs derive synergies from global sourcing of inputs.
6. The MNCs may create oligopolistic competition in particular industries and thus operate as a predominant seller in selected markets.
7. The MNCs have originated in developed and free market economies though a few companies from developing countries have also assumed the MNC status.
8. Historically, MNCs have been engaged in extractive industries involving exploitation of the natural resources and consumer goods. Recently, MNCs are making a dent in tertiary sector also..
9. Instead of being factor driven, the MNCs are predominantly innovation and investment driven enterprises.
10. The MNCs exercise market power by virtue of their enormous size and resources.
11. The MNCs have predominantly concentrated on building strengths around their core businesses. Even where diversification has been practiced, it has been done into the areas where the existing resources can be used
12. The MNCs have been actively instrumental in the process of liberalization and globalization of world economy, that has relegated the concept of centrally planned economy to a great extent.