What is a Multinational Company?

A multinational company, it is also commonly known as multinational corporation or transnational corporation, is about a business that has branches, offices or production facilities in various countries around the world.

Multinationals are companies that own or control production in more than one nation. Also, their objectives may be to install offices and factories for production where they can obtain cheap labor and other resources. In addition, they opt for that multinational location to take advantage of the low cost of production and thus obtain higher profits.

The headquarters of each multinational company is in its country of origin. In fact, the activities are controlled and operated from the parent company to the world. The products and services of multinational companies are sold in various countries that require global management.

Characteristics of multinationals

Regarding the main characteristics of corporations or multinational companies, the following are found:

• Location: As previously mentioned, multinationals are based in the country of origin and their operational division extends to other countries in order to minimize production costs.
• Capital assets- Most of the capital assets of the parent company are owned by citizens of the company's home country.
• Board of Directors: Most of the members of the Board of Directors are citizens of the country of origin.

Continuous growth within multinational corporations is all the time on the rise, even while operating in other countries, they continue to strive to increase their economic size by updating constantly.

It is a bit difficult to become a multinational company, however the goal can be achieved. Because they use modern technology capital intensive use, they get to have good quality products, therefore, they get to grow economically to the top.

The multinational companies that are in the top 10 today are known for that, because they are able to produce top-of-the-line products. Likewise, it is well known that multinationals are large and very important corporations within the Global economy, since they exercise a high degree of dominance in the world.

Some of the most important are:

• Coke
• Sony
• Intel
• Unilever
• Nestle
• Apple, among others

Advantages of multinational companies

• Access to consumers, on companies with operations limited to a smaller region. Increasing accessibility to wider geographic regions enables multinational companies to have a broader pool of potential customers and help them expand and grow at a faster rate compared to others.
• Allows access to workThey enjoy access to cheap labor, which is a great advantage over other companies. A company with operations in different geographic areas may have its production unit established in countries with cheap labor. Some of the countries where cheap labor is available are China, India, Pakistan, etc.
• Taxes and other costs. Many countries offer reduced taxes on exports and imports to increase their foreign exposure and international trade. In addition, countries impose lower excise taxes and customs duties, resulting in a high profit margin for multinationals. Therefore, taxes are one of the areas of making money, but again it depends on the country of operation.
• General development: the level of investment, the level of employment and the level of income of the country increase due to the operation of multinationals. The level of industrial and economic development increases due to the growth of multinational companies.
• Technology: the industry obtains the latest technology from foreign countries through multinational companies that help them improve their technological parameter.
• Exports and imports: multinational operations also help improve the balance of payments. This can be achieved by increasing exports and decreasing imports.

Disadvantages

• Laws- One of the main disadvantages is the strict and strict laws applicable in the country. Multinational companies are subject to more laws and regulations than other companies. It is seen that certain countries do not allow companies to run their operations as they have been doing in other countries, which results in conflict within the country and generates problems in the organization.
• Intellectual property: multinational companies also face problems related to intellectual property that are not always applicable in the case of purely national companies.
• Political risks: since the operations of multinational companies extend widely across borders nationals of several countries, may result in a threat to the economic and political sovereignty of the countries hosts.
• Loss of local business: The products of multinational companies sometimes lead to the death of the operations of the national company. Multinationals establish their monopoly in the country where they operate, thus killing local companies that exist in the country.
• Loss of natural resourcess: Multinational companies use the natural resources of the country of origin to obtain large profits, which which results in the depletion of resources and therefore a loss of natural resources for the economy.
• Money flows: As multinationals operate in different countries, a large sum of money flows to foreign countries as payment for profit results in less efficiency for the host country where the operations of the companies are based. multinationals. The transfer of capital is made from the country of origin to abroad, which is unfavorable for the economy.

Types of multinational corporations

You can get three different models of multinational companies, they are between them:

1. The centralized model: This is when corporations establish an executive headquarters in their home country and then build several manufacturing plants and production facilities in other countries. Its most important advantage is being able to avoid import duties and quotas and take advantage of lower production costs.
2. Regional: known when a company maintains its headquarters in a country that oversees a collection of offices located in other countries. Unlike the centralized model, the regionalized model includes subsidiaries and affiliates that all report to headquarters.
3. Multinational: In the multinational model, a parent company operates in the country of origin and establishes subsidiaries in different countries. The difference is that subsidiaries and affiliates are more independent in their operations.