Thursday, September 30, 2010


The word Multinational is the combined word of Multi and national which gives meaning of
many countries.Hence multinational companies are those business organization which have head
office in one country and their operation are spread over several other countries.There are
two classes of companies under multinational companies.The head office is regarded as the parent
company and branches as subsidiary company. The parent company manages and control the activities
of subsidiary company. The subsidiary companies  are affiliated with parent companies through
investment, trade-mark, patent and technology. The multinational companies are operated with
huge investment and wide range of product or services. They cover large area of market.
Standard Chartered Bank,Coco-cola, SONY Electronics,etc are some examples of multinational companies.Computer is must in any multinational companies which can be clear through this link:
Education and technology is also necessary which can be clear through this link.
Or life is beautiful through this link:
Economists are not in agreement as to how multinational or transnational corporations should be defined. Multinational corporations have many dimensions and can be viewed from several perspectives (ownership, management, strategy and structural, etc.) The following is an excerpt from Franklin Root (International Trade and Investment, 1994) Ownership criterion: some argue that ownership is a key criterion. A firm becomes multinational only when the headquarter or parent company is effectively owned by nationals of two or more countries. For example, Shell and Unilever, controlled by British and Dutch interests, are good examples. However, by ownership test, very few multinationals are multinational. The ownership of most MNCs are uninational. (see videotape concerning the Smith-Corona versus Brothers case) Depending on the case, each is considered an American multinational company in one case, and each is considered a foreign multinational in another case. Thus, ownership does not really matter. Nationality mix of headquarter managers: An international company is multinational if the managers of the parent company are nationals of several countries. Usually, managers of the headquarters are nationals of the home country. This may be a transitional phenomenon. Very few companies pass this test currently. Business Strategy: global profit maximization
According to Howard Perlmutter (1969):
Multinational companies may pursue policies that are home country-oriented. or host country-oriented or world-oriented. Perlmutter uses such terms as ethnocentric, polycentric and geocentric.However, "ethnocentric" is misleading because it focuses on race or ethnicity, especially when the home country itself is populated by many different races, whereas "polycentric" loses its meaning when the MNCs operate only in one or two foreign countries. According to Franklin Root (1994), an MNC is a parent company that
  1. engages in foreign production through its affiliates located in several countries,
  2. exercises direct control over the policies of its affiliates,
  3. implements business strategies in production, marketing, finance and staffing that transcend national boundaries.
In other words, MNCs exhibit no loyalty to the country in which they are incorporated.


The multinational companies extend their operation to two or more countries.They establish
parent office in one country and extend branches ,subsidiary and affiliation to other countries.

The multinational companies are extended to many countries.People can grasp the opportunity
People  can join the multinational companies according to their capabilities. Manpower can be
well utilized in the multinational companies.
Multinational companies invest a huge amount of money on research and development of latest
technology. Therefore transfer advanced technology to developing countries through subsidiaries
and branches,

Advanced technology are used are for multinational companies. So, manpower can give well training
which increase efficiency of manpower. Due to this cause, the multinational companies can provide
large volume of quality products at cheaper price.

5.Monopolistic Market
Generally, multinational companies supply large quantities of quality products and services
in the international market.So they create a separate brand name and capture a large area of
foreign market. Sometimes they even control a huge market through trade marks and patent right.

6.Product/service organization
A multinational company is based on product/service which produces a mass production of
varieties of goods and services. The company consists own trade mark,patent right ,copy right and
technology for production and distribution of such goods in the international market.

7.Ownership and control
The ownership of such company is shared by both parent company and branch companies as per their capital
investment.However parent company manages and control the operation of its branches and
subsidiary through  trade mark, technology, and patent right.


The establishment of multinational companies has been good boon all over the world..Some of its
importance are as follow:

The multinational companies transfer investment ,advance technology to developing countries through establishing branches
and subsidiaries. Therefore developing countries like Nepal get benefited of receiving Advanced technology and capital
 investment through such companies.

2.Mass production
With help of advanced technology, the  can produce quality goods and products at cheaper price.Due to Job innovation and
specialization help to produce more consumption increase as production in more unit reduce cost.

A multinational company requires a large number of skilled as well as unskilled employees to operate its activities.
Thus it provides employment opportunity to the people of host country as a result economic standard of society is improved.

A multinational company is a large scale business.It pays a large amount of duties ,income tax, vat,etc to government.
Therefore Government revenue is increased due to operation of such companies.

In complete world, it is need of Research and Development. To meet international standard of its products and services ,a
multinational company conducts several research and development activities.Constantly such programs are beneficial to society.
It helps to develop better equipments, quality products and advanced technology in production.

A multinational company recognizes the country in the international market. It creates harmonious relation between parent company
and subsidiary countries. It recognizes exporting country to all over the world....