VERITAS UNIVERSITY, ABUJA

AN ASSIGNMENT COMPLETED IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS OF
THE COURSE BUS 401 – INTERNATIONAL
BUSINESS
SUBMITTED TO: DR. CAROL
BY: GROUP 3
1. UZU IKE OBIOMA - VUG/BUS/19/3321
2. GWAZA DAVID USHA – VUG/BUS/19/3228
3. KARIBI-BOTOYE PRINCESS OWANARI –
VUG/BUS/19/3369
4. JOANNA DANGWARAM – VUG/BUS/19/3149
5. KARL UGOCHUKWU – VUG/BUS/19/
DEPARTMENT: BUSINESS ADMINISTRATION
MULTINATIONALISM

INTRODUCTION

Business leaders, managers and executive team members are always seeking new ways to
expand their influence in order to reach new customers and increase their revenue. One good
way of doing this is by becoming a Multi-National Corporation (MNC).

MULTI-NATIONAL CORPORATIONS

A Multinational Corporation is created when a company expands into the global market,
thereby becoming capable of owning assets and facilities in two or more countries. This is
important, as a company can only become an MNC if it has at least one location or office in
another country, even if they already export goods abroad. They typically build their
management headquarters in their country of origin, appropriately called the home country,
while the other countries they are allowed to operate in are called host countries.

Becoming an MNC helps an organisation grow in size and influence, allowing them to
produce goods and deliver services in more than one country. They gain international
exposure, and their activities tend to have a positive impact on the countries they operate in.

MNCs have been on the rise as a result of the phenomenon called globalization – a trend that
aims for complete cultural and economic integration across the world through the use of
advanced technology. The benefits of MNCs go a long way to showing the world just how
useful globalization is; the existence of diverse cultures creates a highly competitive working
environment and allows the company to gain valuable experience from individuals from
various works of life.

Examples of MNCs include;

 Google
 Amazon
 Toyota
 Zara, etc.

Examples of MNCs currently operating in Nigeria include;

 Unilever
 MTN
 Dstv
 British American Tobacco (BAT)
WHY WOULD A BUSINESS WANT TO BECOME A MULTINATIONAL
COMPANY?

Usually, the primary goal of a business is to increase profits and growth. If it can grow a
global customer base and increase its market share abroad, it may believe that opening offices
in foreign countries is worth the expense and effort. Companies may also see a benefit in
certain tax structures or regulatory regimes found abroad.

HOW DO MULTINATIONAL CORPORATIONS WORK?

The structure and operations of an MNC tends to vary depending on the size of the
organisation, the goods and services they produce, and the industry they operate in. Some
may consider any company with a foreign branch to be an MNC, while others believe a
company has to derive at least a quarter of its revenue from outside their home country. Most
agree, however, that the key requirement to be called a Multinational Corporation is to make
a direct investment into a foreign country by operating a part of one’s business there.

FEATURES OF MULTINATIONAL CORPORATIONS

Here are some characteristics common to various types of multinational corporations:

1. Large number of assets: To be successful, an MNC needs a high number of both

tangible assets (like employees) and financial assets.
2. Broad networks: Many MNCs have a broad network that stretches to many places on
the globe. A company operates each branch to manage manufacturing, production and
sales operations.
3. Constant growth: A successful MNC may experience constant growth. These
corporations might try to expand their impact by placing one or more branches in the
same location, or by placing several branches in various countries.
4. Economic power: MNCs tend to have significant economic power due to their large
sizes and high turnover. They grow their power by setting up subsidiaries or acquiring
businesses in foreign countries.
5. High-quality products: Multinational companies enjoy a worldwide reputation. To
keep that reputation intact, they need to maintain a superior quality of their goods and
services.
6. A worldwide business presence
7. Typically, large and powerful organizations
8. Business conducted in various languages
9. Direct investments in foreign countries
10. Has substantial expenses associated with navigating rules and regulations of foreign
countries
11. Pays taxes in countries in which it operates
12. Reports financial information according to International Financial Reporting
Standards (IFRS)
TYPES OF MULTINATIONAL CORPORATION

There are four main types of MNCs;

1. Decentralized Corporation
Though they may have multiple facilities and operations in different host countries,
decentralized corporations tend to maintain a powerful presence in their home
country. They lack a central headquarters, and each office is capable of operating
independently with their own management structure and making their own decisions.
A key example is McDonald’s, a fast-food company that has a presence in over 100
countries, yet has the largest operations in its home country, the United States. Each
McDonald's store runs on its own and can adapt the menu and marketing strategies to
attract regional customers. The franchising business model also allows new
restaurants to be set up quickly in any part of the world at no cost to the main office.

2. Centralized Corporation
A centralized global corporation has a central headquarters in the home country.
Executive officers and management located there oversee the global offices and
operations as well as domestic operations. They, rather than managers at local offices
in foreign countries, make the key business decisions. The offices typically must
report to and obtain approval from headquarters personnel for major activities. They
may also outsource production to developing countries to save time and production
costs while making use of local resources. Apple, for example, tends to outsource the
production of iPhone components to countries like China, Mongolia, Korea, and
Taiwan.

3. An International Division Within a Corporation

Corporations may keep their domestic operations separate from their international
operations by creating an international division. This new division oversees all the
corporation’s operations in foreign countries and makes decisions on their behalf.
They may also utilise the resources of the parent company to develop new products or
features that will help them gain a competitive edge in local markets. For example,
each Coca-Cola branch can develop its own product design and marketing campaigns
to attract local customers.
However, operating independently can pose problems when overall corporate
consensus and action is required. Maintaining and presenting the carefully nurtured,
enterprise-wide brand image established by the multinational may also be a challenge.

4. Transnational Corporation
A transnational corporation involves a parent-subsidiary structure whereby the parent
company oversees the operations of subsidiaries in foreign countries as well as in the
home country. Subsidiaries can make use of the parent's assets, such as research and
development data. Subsidiaries may be different brands, as well. The parent usually
 maintains a management role directing the operations of its subsidiaries, domestic and
foreign.

ADVANTAGES OF MULTINATIONAL CORPORATIONS

MNCs have many benefits which are not only good for people but also help in the growth of
the country, some of the advantages are:

1. Production cost can be reduced: MNCs set up their manufacturing plants in various

countries that help them to make production cost-efficient. They get the benefits of
increased production and can grow their brand.
2. Good quality products: Due to global manufacturing access companies get a chance
to get good raw material which helps them to come up with good quality products.
Great products grow their brand’s name in the local as well as global market.
3. Growth is high: As compared to other local companies MNCs pay more to their
employees which attracts more labour force. MNCs give local taxes that also help in
the country’s economic development.
4. More employment: MNCs give chances to local labourers as they know the culture
of their places that help to manufacture products according to the needs of the locals.
Thus there is more hiring of local labourers who help companies to grow.
5. New inventions: More products that are useful are invented as the local labourers
help them to give more understanding of local equipment with the help of other
company employees.
6. New opportunities: Developing an international presence can open up new markets
and sales opportunities unavailable or not feasible when operating just domestically.
For example, a presence in a foreign country such as India can allow a corporation to
meet widespread Indian demand for particular products without the transaction costs
associated with long-distance shipping.
7. Price stability: Input costs can vary for reasons such as variations in exchange rates,
resource scarcity, and changes in labour costs. The goal is not necessarily to find the
lowest input costs but to find a location where the price of relatively low input costs
has the potential to remain stable for a period of time. Therefore, it is considered risky
to invest in locations that may have low input costs, but could be subject to some form
of instability (e.g. political) where market conditions could change.
8. Lower tax rates: Multinational companies can also take advantage of lower tax rates
available in countries eager for their direct investments and the jobs that they'll create.
Note, however, that the European Union has a plan to implement a minimum tax of
15% on corporate profits, to become effective in 2023.

DISADVANTAGES OF MULTINATIONAL CORPORATIONS

1. Loss of domestic labour: A trade-off of globalization—the price of lower prices—is

that domestic jobs move overseas. This can increase unemployment in the home
 country and make it difficult for long time employees in outsourced industries to find
new jobs.
2. Monopoly over certain products: Those opposed to multinational corporations point
to the potential they may have to develop a monopoly (for certain products). This can
drive up prices for consumers, stifle competition, and inhibit innovation.
3. Harms the environment: Multinational corporations are also said to have a
detrimental effect on the environment because their operations may encourage land
development and the depletion of local and natural resources.
4. Harms local businesses: Multinational companies may also cause the downfall of
small, local businesses. Activists have also claimed that multinational companies
breach ethical standards. They accuse them of evading laws to advance their business
agendas.

CONCLUSION

Multinational corporations conduct business in two or more countries. Some consider a

multinational company to be one that generates 25% or more of its revenue outside the home
country. Becoming a multinational corporation is a way to add international exposure to a
portfolio. They tend to be large, with broad networks, significant economic power and
produce high quality products. They also benefit from a worldwide presence while creating
jobs in their home and host countries, though their activities may result in a loss of domestic
labour and may prove detrimental to the environment.

REFERENCES

Multinational Company -
https://www.studysmarter.us/explanations/business-studies/influences-on-business/
multinational-company/

Competitive Advantages of Multinational Corporations -

https://transportgeography.org/contents/chapter7/freight-transportation-value-chains/
competitive-advantages-multinational-corporations/

What is a Multinational Corporation - https://www.indeed.com/career-advice/career-

development/what-is-multinational-corporation

Multinational Companies in Nigeria: The Ultimate List -

https://nigerianfinder.com/multinational-companies-in-nigeria/