Multi National Corporation

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Multi National Corporation (MNC)

Definition:

A Multi National Corporation (MNC) or Trans National Corporation (TNC), also called multinational enterprise (MNE), is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries.

The first modern multinational corporation is generally thought to be the East India Company. Many corporations have offices, branches or manufacturing plants in different countries from where their original and main headquarters is located.

Some multinational corporations are very big, with budgets that exceed some nations' GDPs. Multinational corporations can have a powerful influence in local economies, and even the world economy, and play an important role in international relations and globalization.

What Are Multinational Enterprises (MNEs)?

1. MNEs have a number of characteristics, including:

(a) Responsiveness to environmental forces such as competitors, customers, suppliers, financial institutions, and government;

(b) Drawing on a common pool of resources, including assets, patents, trademarks, information, and human resources; and

(c) Affiliates that are linked by a common strategic vision.

2. Under the premise that foreign markets are risky, companies expand their operations abroad incrementally and cautiously. Setting up a wholly-owned subsidiary is usually the last stage of doing business abroad. A typical internationalization process for a firm producing a standardized product might begin with a licensing agreement: a contractual arrangement in which one firm provides access to some of its patents, trademarks, or technology to another firm in exchange for a fee or royalty. Apart from a licensing agreement, a firm might export via an agent or distributor. This might be followed by the direct hiring of a domestic representative or the establishment of a foreign sales subsidiary. The next step might be the establishment of local packaging and/or assembly operations. This is typically followed by foreign direct investment.

3. Firms become multinationals for a number of reasons. Some of these include:

(a) A desire to protect themselves from the risks and uncertainties of the domestic business cycle;

(b) A growing world market for their goods or services;

(c) A response to increased foreign competition;

(d) A desire to reduce costs;

(e) A desire to overcome tariff barriers; and

(f) A desire to take advantage of technological expertise by manufacturing goods directly rather than allowing others to do it under a license agreement.

4. Multinational enterprises are different from companies that confine their activities to the domestic market. MNEs make decisions based primarily on what is best for the company, even if this means transferring funds or jobs to other countries.

History of Multinational Enterprise

East India Company
The East India Company (also the East India Trading Company, English East India Company, and then the British East India Company) was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China. The oldest among several similarly formed European East India Companies, the Company was granted an English Royal Charter, under the name Governor and Company of Merchants of London Trading into the East Indies, by Elizabeth I on 31 December 1600. After a rival English company challenged its monopoly in the late 17th century, the two companies were merged in 1708 to form the United Company of Merchants of England Trading to the East Indies, commonly styled the Honourable East India...
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