Billie Nordmeyer works as a consultant advising small businesses and Fortune companies on performance improvement initiatives, as well as SAP software selection and implementation. During her career, she has published business and technology-based articles and texts. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance.
Share on Facebook. Economies of Scale Converting a small manufacturer to a multinational may give the business an opportunity to achieve increased production efficiency as the quantity produced rises. Market Growth Becoming a multinational helps a small business expand its reach, which enables the company to exploit new growth markets, such as the Mexican economy.
Product Sourcing Operating as a multinational provides a small business the option of conducting some of the company's offshore sourcing through subsidiaries, rather than independent contractors. Limit Transport Costs High transportation costs can significantly raise the prices of products offered by a small business. Firms, then, produce and internalize know-how that is not easily transferred to or replicated by other firms in order to gain a competitive edge over other competing firms.
By creating new knowledge, and coding it in a way that is easily replicated within the firm, firms are able to expand their market. Clearly, multinational corporations gain much of their power from their ability to efficiently operate, coordinate, and manage transactions between states. In the name of efficiency MNCs can and will shift production from states with high costs to states with low costs. States, then, should be concerned with the power that MNCs have because of their ability to determine employment and, ultimately, the prosperity of the state.
After all, the only thing more alarming to a state than the presence of a MNC is its absence. Political action by MNCs also allows MNCs to minimize the extent to which governments can regulate MNCs by taking advantage of legislative processes that are often easily manipulated.
There are four categories of multinationals that exist. They include:. There are subtle differences between the different kinds of multinational corporations. For instance, a transnational—which is one type of multinational—may have its home in at least two nations and spread out its operations in many countries for a high level of local response.
Meanwhile, a multinational enterprise controls and manages plants in at least two countries. This type of multinational will take part in foreign investment, as the company invests directly in host country plants in order to stake an ownership claim, thereby avoiding transaction costs. Apple Inc. There are a number of advantages to establishing international operations. Having a presence in a foreign country such as India allows a corporation to meet Indian demand for its product without the transaction costs associated with long-distance shipping.
Corporations tend to establish operations in markets where their capital is most efficient or wages are lowest. By producing the same quality of goods at lower costs, multinationals reduce prices and increase the purchasing power of consumers worldwide. Establishing operations in many different countries, a multinational is able to take advantage of tax variations by putting in its business officially in a nation where the tax rate is low—even if its operations are conducted elsewhere.
The other benefits include spurring job growth in the local economies, potential increases in the company's tax revenues, and increased variety of goods. A trade-off of globalization —the price of lower prices, as it were—is that domestic jobs are susceptible to moving overseas.
In this respect, education and the cultivation of new skills that correspond to emerging technologies are integral to maintaining a flexible, adaptable workforce. Those opposed to multinationals say they are ways for corporations to develop a monopoly for certain products , driving up prices for consumers, stifling competition, and inhibiting innovation.
They are also said to have a detrimental effect on the environment because their operations may encourage land development and the depletion of local natural resources. The introduction of multinationals into a host country's economy may also lead to the downfall of smaller, local businesses. Activists have also claimed that multinationals breach ethical standards , accusing them of evading ethical laws and leveraging their business agenda with capital.
A multinational corporation MNC is one that has business operations in two or more countries. These companies are often managed from and have a central office headquartered in their home country, but with offices worldwide. Simply exporting goods to be sold abroad does not make a company a multinational. A company may seek to become an MNC in order to grow its customer base around the globe and increase its market share abroad.
The primary goal is therefore to increase profits and growth. View mytutor2u. Account Shopping cart Logout. Explore Business Business Search. Explore Blog Reference library Collections Shop.
Share: Facebook Twitter Email Print page. A multinational company MNC is a business that has operations in more than one country. These reasons include: To Operate Closer to Target International Markets Producing closer to target markets has several potential advantages, including reduced transport costs which will be important for bulky goods and improved market information and intelligence.
Gaining access to lower costs of production Many MNCs have taken advantage of lower production costs from operating in developing economies.
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