Chapter seven

Multinational Corporations
 Multinational Company…

• MNC - any business that has productive activities in

two or more countries
– an organization that attempts to standardize and integrate
operations worldwide in most of all functional areas
– an organization with multi-country affiliates
formulates its own business strategy on perceived market
differences
• Since the 1960s;
– the number of non-U.S. multinationals has risen
– the number of mini-multinationals has risen
 The Role Of Multinational Companies In
International Business
• MNCs have contributed significantly to the development of world economy
at large.
• They have also served as an engine of growth in many host countries.
• Their importance in a developing country may be traced as follows:
MNCs help a developing host country by increasing investment, income and
employment in its economy.
They contribute to the rapid process of development of the country through transfer
of technology, finance and modern management.
MNCs promote professionalisation management in the companies of the host
countries.
MNCs help in promoting exports of the host country.
MNCs by producing certain required goods in the host country help in reducing its
dependence on imports.
MNCs due to their wide network of productive activity equalise the cost of
production in the global market.
Entry of MNCs in the host country makes its market more competitive and break the
domestic monopolies.
cont’
MNCs accelerate the growth process in the host country through
rapid industrialisation and allied activities.
The growth of MNCs creates a positive impact on the business
environment in the host country.
MNCs are regarded as agents of modernisation and rapid growth.
MNCs are the vehicles for peace in the world. They help in
developing cordial political relations among the countries of the
world.
MNCs bring ideas and help in exchange of cultural values.
MNCs through their positive attitude and efforts work for the
establishment of social welfare institutions and improvement of
health facilities in the host countries.
Growth of MNCs help in improving the balance of payment status of
the host country.
The MNCs integrate national and international markets. Their
growth in these days has remarkably influenced economic,
industrial, social environment and business conditions.
 2022 Top 10 Multinational Companies
(as of July 1, 2022)
RANK COMPANY HEADQUARTERS
1 AIA Group Hong Kong, China
2 Prudential plc United Kingdom
3 Manulife Financial Canada
Corporation
4 Prudential Financial United States
5 MetLife United States
6 FWD Group Hong Kong, China
7 New York Life United States
8 AXA Group France
9 Great Eastern Group Singapore

10 Cathay Financial Holdings Taiwan Area

Co Ltd
MULTINATIONAL ORGANIZATIONS

MNC Issues
 The Changing World Order
• Many former Communist nations in Europe and Asia
are now committed to democratic politics and free
market economies
– creates new opportunities for international
businesses
– but, there are signs of growing unrest and
totalitarian tendencies in some countries
• China and Latin America are also moving toward
greater free market reforms
– between 1983 and 2010, FDI in China increased
from less than $2 billion to $100 billion annually, but
– China also has many new strong companies that
could threaten Western firms
 Is An Interdependent Global Economy A Good
Thing?
• Supporters believe that increased trade and cross-
border investment mean,
– lower prices for goods and services

– greater economic growth

– higher consumer income, and more jobs
• Critics worry that globalization will cause
– environmental degradation

– the cultural imperialism of global media and MNEs

– job losses
 How Does The Global Marketplace Affect
Managers?
• Managing an international business differs from
managing a domestic business because
– countries are different
– the range of problems confronted in an international
business is wider and the problems more complex
than those in a domestic business
– firms have to find ways to work within the limits
imposed by government intervention in the
international trade and investment system
– international transactions involve converting money
into different currencies
 Challenges and Opportunities of International
Business
o Difficulties in Operating Borderless World
Challenges
Economic
Legal-political
Socio-cultural
International company structure
Foreign laws and regulations
International accounting
Cost calculation and global pricing strategy
Universal payment methods
Currency rates
Choosing the right global shipment methods
Communication difficulties and cultural differences
Political risks
Supply chain complexity and risks of labor exploitation
Worldwide environmental issues
Foreign Markets- Entrance
• Opportunities -Reasons to Pursue International
Business

Expanded profit potential

More customers

More capital
Lower cost of suppliers

Lower costs of labor