Meaning: - The term ‘Multinational’ is widely used all over the world to denote large companies having vast financial, managerial and marketing resources. MNCs are like holding companies having its head office in one country and business activities spread within the country of origin and other countries.
IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from Japan Philips from Holland etc., are some of the MNCs operating at international levels.
Definition:-According to ILO report (i.e. International Labour Organisation) “The essential nature of the multinational enterprises lies in the fact that its managerial headquarters are located in one country, while the enterprise carries out operations in number of other countries’.
Following are the some of the important features/characteristics of MNCs:
1. Area of operation: - The MNCs operate in many countries with multiple products on large scale. A MNC may operate both manufacturing and marketing activities in a number of countries. Some MNCs operate in several countries, whereas, others may operate in a few countries. Mostly MNCs from developed countries dominate in the world markets.
2. Origin:-The development of MNCs dates back to several centuries, but their real growth started after the Second World War Majority of the MNCs are from developed countries like U.S.A, Japan, UK, Germany and European countries. In recent years MNCs from countries like Korea, Taiwan, India, China, etc. are operating in the world markets.
3. Comprehensive Term: - In general, the term ‘MNC’ is a Comprehensive term and includes international and transnational corporations. The term global corporation is also included in the list of ‘MNC’.
4. Profit Motive: - MNCs are profit oriented rather than social oriented. Such corporations do not take much interest in the social welfare activities of the host country.
5. Management: - The Parent company works like a holding company. The subsidiary companies are to operate under control and guidance of parent company. The subsidiaries functions as per the policies and directions of parent organisation.
6. Manufacture and Marketing Activities: - MNCs undertake both Manufacturing and Marketing Activities and they are predominantly engaged in hi-tech and consumer good industries. Majority of the MNCs are engaged in pharmaceutical, petrochemicals, engineering, consumer goods, etc.
7. Quality Consciousness: - MNCs are quality and cost conscious and managed by professionals and experts. They have their own organisation culture and systems. MNCs believe in the concept of total quality management.