A multinational corporation is a firm with extensive international business involvement.
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The traditional view of the multinational firm, from the early analyses in the 1960s and early 1970s, is one of a large industrial company with operations in multiple countries and a centralized chain of command. By definition, a multinational firm has activities
in more than two countries. Although this simple definition is not widely used, it is a reasonable baseline from which to begin thinking about such firms. If the firm has sales operations in multiple countries, production in multiple countries, or some other permutation of international business activities physically present in multiple countries, then it is multinational.
Grosse, R. (2004), "THE THEORY OF THE MULTINATIONAL FIRM", Hitt, M.A. and Cheng, J.L.C. (Ed.) "Theories of
the Multinational Enterprise: Diversity, Complexity and Relevance" (Advances in International Management, Vol. 16), Emerald Group Publishing Limited, Bingley, pp. 83-97. https://doi.org/10.1016/S0747-7929(04)16006-X Emerald Group
Publishing Limited Copyright © 2004, Emerald Group Publishing Limited Chapter 7: Competing in International Markets
A firm that has operations in more than one country is known as a .The largest MNCs are major players within the international arena. Walmart’s annual worldwide sales, for example, are larger than the dollar value of the entire economies of Austria, Norway, and Saudi Arabia. Although Walmart tends to be viewed as an American retailer, the firm earns more than one-quarter of its revenues outside the United States. Walmart owns significant numbers of stores, as of mid-2014, in Mexico (2,207), Brazil (556), Japan (437), the United Kingdom (577), Canada (390), Chile (386), Argentina (105), and China (400). Walmart also participates in joint ventures in China (328 stores) and India (5). Even more modestly sized MNCs are still very powerful. If Kia were a country, its current sales level of approximately $42 billion (in 2012) would place it in the top 75 among the more than 180 nations in the world (Wal-Mart Stores Inc., 2014). Multinationals such as Kia and Walmart have chosen an international strategy to guide their efforts across various countries. There are three main international strategies available: (1) multidomestic, (2) global, and (3) transnational (Figure 7.23 “International Strategy”). Each strategy involves a different approach to trying to build efficiency across nations while remaining responsive to variations in customer preferences and market conditions. Multidomestic StrategyA firm using a sacrifices efficiency in favor of emphasizing responsiveness to local requirements within each of its markets. Rather than trying to force all of its American-made shows on viewers around the globe, MTV customizes the programming that is shown on its channels within dozens of countries, including New Zealand, Portugal, Pakistan, and India. Similarly, food company H. J. Heinz adapts its products to match local preferences. Because some Indians will not eat garlic and onion, for example, Heinz offers them a version of its signature ketchup that does not include these two ingredients. Global StrategyA firm using a sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency. This strategy is the complete opposite of a multidomestic strategy. Some minor modifications to products and services may be made in various markets, but a global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market. Microsoft, for example, offers the same software programs around the world but adjusts the programs to match local languages. Similarly, consumer goods maker Procter & Gamble attempts to gain efficiency by creating global brands whenever possible. Global strategies also can be very effective for firms whose product or service is largely hidden from the customer’s view, such as silicon chip maker Intel. For such firms, variance in local preferences is not very important. Transnational StrategyA firm using a seeks a middle ground between a multidomestic strategy and a global strategy. Such a firm tries to balance the desire for efficiency with the need to adjust to local preferences within various countries. For example, large fast-food chains such as McDonald’s and KFC rely on the same brand names and the same core menu items around the world. These firms make some concessions to local tastes too. In France, for example, wine can be purchased at McDonald’s. This approach makes sense for McDonald’s because wine is a central element of French diets.
ReferencesStandard & Poor’s Ratings Services. (2014). Stock report on Walmart. Retrieved from http://www.standardandpoors.com/ratings/en/us?rpqSearch=NO&pageNav=No&searchText=Walmart%20stores%20Inc.&searchField=Entity Wal-Mart Stores Inc. (2014). Our Locations. Retrieved from http://corporate.walmart.com/our-story/our-business/locations/ Image descriptionFigure 7.23 International Strategy “What’ for dinner?” is a question Of interest to folks Of nations. The answer depends, in some part, on the international strategy of the corporations that provide foods, drinks, and condiments worldwide. Firms choose between the potential trade-offs between efficiency in production/distribution and responsiveness to local market preferences. Below we provide examples of how a firm’s decision may provide some answers to how you might fill your belly.
Return to Figure 7.23 What is the difference between a multinational corporation and an international business quizlet?Multinational firms design, produce, and market products in many nations, whereas international firms are based primarily in one nation.
Which description best defines a multinational company?A multinational corporation (MNC) is a company that has business operations in at least one country other than its home country. By some definitions, it also generates at least 25% of its revenue outside of its home country.
What is a multinational corporation quizlet?Multinational Corporation. An entity headquartered in one country that does business in one or more foreign countries.
Which of the following is an advantage of a multinational?Access to Lower Tax Rates
Intentionally locating manufacturing facilities in countries with cheap labor and low import/export costs gives the multinational a major advantage.
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