What is a Multinational Corporation?

Our word of the day is “Multinational Corporation”
A multinational corporation is a business that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management.
Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
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, (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.
In economic terms, a firm’s advantages in establishing a multinational corporation include both vertical and horizontal economies of scale and an increased market share. Although cultural barriers can create unpredictable obstacles as companies establish offices and production plants around the world, a firm’s technical expertise, experienced personnel, and proven strategies usually can be transferred from country to country. Critics of the multinational corporation usually view it as an economic and, often, political means of foreign domination.

By Barry Norman, Investors Trading Academy

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