What is MNC?
MNCs or “multinational corporations” are businesses that operate in more than one country. Usually these companies have a center of operations or some head office in one country, with sub-offices and/or other facilities located in other countries. These facilities may be connected to the head office or parent company through a merger or as some form of subsidiary company. Multinational Corporations are large companies that can do business locally and internationally.
Most multinational corporations operating today come from the US, Japan, and Western Europe. Popular brands we know today are products of multinational corporations. These brands include Coca-Cola – the best known softdrink brand in many countries, Nike – known worldwide for quality shoes and apparel, Honda – car and motorcycle maker from Japan, and many others.
Multinational corporations penetrate new markets or countries through business mergers or acquisitions, sequential market entry, and/or joint ventures with other smaller businesses. Coming in as a foreign investment, MNCs capitalize on their size and resources to take over companies in a new country. With tightening competition, many MNCs are in the lookout for companies to acquire or merge with, not only to boost sales but also to gain market share from other industry players. Sequential Market Entry is also one option for MNCs to gain presence in a new market. In this way, one MNC may opt to start small and invest in one product at a time. Little by little, the product line will be increased to boost presence in the area. MNCs also do joint ventures with existing players in a particular country. In this way, the venture partner may retain some autonomy from the ‘parent’ MNC while enjoying the benefits of technology and/or expertise transfer.
Many agree that the entry of multinational corporations can greatly help the economy of a particular country. But skeptics also believe that MNCs are selfish and are only concerned of their business bottom line. They are seen as too large and too powerful as many of them have some sort of influence over governments, which will lead to exploitation especially to developing economies.