Multinational Companies (MNCs) Defined

Oct 02

Many authorities, scholars, and authors have variously defined multinational companies from different perspectives. Some of these definitions are meticulously written below:

The Research Machines (2004) gives four definitions to MNCs. First, it defines MNC as a corporation that has its facilities and other assets in at least one country other than its home country, or that, which has offices and/or factories in different countries and usually has a centralized head office where they coordinate global management. Second, it defines MNCs as a business enterprise with manufacturing, sales, or service subsidiaries in one or more foreign countries, also known as Transitional or International Corporation (TNC or INC).

The third definition given by Research Machines is that which sees MNC as a company or enterprise operating in several countries, usually defined as one that has 25 percent or more of its output capacity located outside its country of origin. The last definition as given sees MNC as a corporation or enterprise that manages production establishment located in at least two countries.

All these definitions, as given by Research Machines (2004) identify that MNCs operate outside its own home country. Research Machine’s first definition point out to a crucial point that MNCs also acquire assets in these foreign countries where they operate and possibly own offices/factories to ease achievement of objectives. This means that they do prefer to make use of the available resources of the host country. Likewise, it added that MNCs do have a place; usually the global headquarters are also put in place. This means that reports on finances, sales, purchases, marketing, etc are properly coordinated and accounted for at the headquarters.

Research Machines’ second definition points to another vital point about MNC stating that their services is not limited to manufacturing alone but also includes selling and reminding services through sales and service subsidiaries. Research Machines’ third definition goes further to allocate percentage to MNCs output. It stated that for a corporation to be termed multinational, it should have gotten its output of 25 percent exported to other countries. What could be deduced from this is that a corporate may be operating outside its country of origin but cannot be referred to as MNC except it has disposed 25 percent or more of its output to outside countries.

The Encyclopedia of Management (2005) put multinational companies as businesses concern with operation in more than one country. These operations outside the company’s home country may be linked to the parent by merger, operated as subsidiaries or have considerate autonomy. According Drucker (1974), THE multinational company grew from the emergence of a genuine world market demand transcending national, cultural and ideological boundaries, due to the information explosion.

Iyayi, Agbonifoh and Ehiametalor (1984) see multinational companies as multi-management with several layers of management decision making bases from local to regional to global. In the words of Hodgetts and Luthans (1997), multinational companies are firms having operations in more than one country, international sales, and nationality mix of managers and owners. Coventry (1981) and Johansson (2000) give the same definition to MNCs, as companies that usually have a number of foreign production sites and thus a number of international markets.

Going by all these definitions highlighted above, it could be asserted that they all took a multinational company and defined it from structural, functional and geographical perspectives and from the point of scope covered geographically.



Source by Oluwanisola Seun

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