Note on Multinational Company

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A multinational company is a large business organization which is established in one country as the parent company and which performs its manufacturing, trading and service business in other countries its subsidiaries or branches. The terms 'multinational' is created of two words, "multi" and "national". The word multi refer to many and the world national refers to the country. Hence, the terms of the multinational company refer to that business organization which operates its business activities in many countries. It is a large scale business organization, which carries on its production and distribution of goods and services at least in two or more than two countries. It is incorporated in one country as the parent company and carries its business in different countries through its branches or subsidiaries. It involves in mass scale production and distribution of a standard and specific line of product and services by using sophisticated technology. Coca-Cola Company, Pepsi, Unilever, Panasonic Corporation, Asian Paint, Nepal Lever Ltd, Standard Chartered Bank, Nepal Arab Bank, Surya Tobacco Co. Pvt. Ltd, Hotel Holiday Inn, Kwality Ice cream etc. are the example of a multinational company.

"A multinational corporation owns and manages a business in two or more countries." -Jacoby

"A multinational company is any firm which performs its main operation either manufacturing or the provision of service, in at least two countries." -Brook and Remmers

From the given definition, it is clear that multinational company is established in one country and operates its business in two or more countries through branches or subsidiaries for the production and distribution of quality goods and services for earning a profit.

Characteristics Of Multinational Company

  1. Large scale business: The capital of a multinational company is very large, its assets and sales are also quite large. The turnover of some multinational company is much more than the annual budget of many developing countries.
  2. Global operation: Multinational company operates its production and distribution activities in two or more countries. The Parent company manufactures and sells its products and services through its subsidiaries or branches established in different countries. Hence, it performs its business in the global market.
  3. Productive organization: Multinational company is a productive organization, which is involved in the production and distribution of standard goods and services at international level.
  4. Advanced technology: Multinational company used advanced and sophisticated technology for the production and distribution of goods and services at competitive prices.
  5. Mass production and distribution: Multinational company produces and distributes goods and services in a large scale. In order to produce and distribute goods and services in mass scale, multinational companies invest huge capital, hire expert manpower, use advanced technology and implement aggressive promotional strategies.
  6. Monopolistic market: A Multinational company produces high-quality products by using advanced technology and expert personnel, Its marketing strategies and distribution channel are very effective. hence, it occupies a competitive position and creates a monopolistic market.

Advantages:

  1. A multinational company transfers a huge amount of capital, advanced technology, and professional management to a developing country like Nepal through its branch or subsidiary.
  2. Through the multinational company people of developing country get the opportunity of consuming standard products at affordable prices.
  3. A multinational company offers excellent pay scale and career opportunities to managers, technical and clerical staff.
  4. A multinational company makes a large volume of sales in national and international markets, which enables it to generate a huge amount of revenues.
  5. A multinational company earns foreign currencies by exporting its products in the international markets.
  6. A multinational company maintains and develops good international relation among the countries.

Disadvantages:

  1. A multinational company invites its capital in the most profitable sectors and developed regions disregarding the national interest, priorities, and goals.
  2. Due to huge financial resources, advanced technology, professional management, aggressive promotion and standard product, it creates monopoly market.
  3. A multinational company promotes and sells the product in conformity with its value, custom, culture, and practice. It makes the people addict to consume such products. Ultimately, it spoils the cultural heritage of local people.
  4. In multinational company order to maximize profit, it tends to give low prices for materials and labor. Further, it is also responsible for the rapid depletion of natural resources.
  5. A multinational company produces goods at a lower cost by using local resources and manpower. But, it charges higher prices for its products to the consumer.
  6. A multinational company increases the dependence of the developing countries for the production and distribution of goods and services on foreigners.

  • A multinational company is a large business organization which is established in one country as the parent company and which performs its manufacturing, trading and service business in other countries its subsidiaries or branches.
  • Coca-Cola Company, Pepsi, Unilever, Panasonic Corporation, Asian Paint, Nepal Lever Ltd, Standard Chartered Bank, Nepal Arab Bank, Surya Tobacco Co. Pvt. Ltd, Hotel Holiday Inn, Kwality Ice cream etc. are the example of a multinational company.
  • The capital of a multinational company is very large, its assets and sales are also quite large. The turnover of some multinational company is much more than the annual budget of many developing countries.
  • A multinational company transfers a huge amount of capital, advanced technology and professional management to a developing country like Nepal through its branch or subsidiary.
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Very Short Questions

A multinational company is a large business organization which is established in one country as the parent company and which performs its manufacturing, trading and service business in other countries its subsidiaries or branches. It is a large scale business organization, which carries on its production and distribution of goods and services at least in two or more than two countries. It is incorporated in one country as the parent company and carries its business in different countries through its branches or subsidiaries. It involves in mass scale production and distribution of a standard and specific line of product and services by using sophisticated technology. Coca-Cola Company, Pepsi, Unilever, Panasonic Corporation, Asian Paint, Nepal Lever Ltd, Standard Chartered Bank, Nepal Arab Bank, Surya Tobacco Co. Pvt. Ltd, Hotel Holiday Inn, Kwality Ice cream etc are the example of a multinational company.

In the words of Jacoby, "A multinational corporation owns and manages a business in two or more countries."

According to Brook and Remmers, "A multinational company is any firm which performs its main operation either manufacturing or the provision of service, in at least two countries."

From the given definition, it is clear that multinational company is established in one country and operates its business in two or more countries through branches or subsidiaries for the production and distribution of quality goods and services for earning profit.

The characteristics of multinational company are as follows:

  1. Large scale business: The capital of a multinational company is very large, its assets and sales are also quite large. The turnover of some multinational company is much more than the annual budget of many developing countries.
  2. Global operation: Multinalitonal company operates its production and distribution activities in two or more countries. The Parent company manufactures and sells its products and services through its subsidiaries or branches established in different countries. Hence, it performs its business in the global market.
  3. Productive organization: Multinational company is a productive organization, which is involved in the production and distribution of standard goods and services at international level.
  4. Advanced technology: Multinational company used advanced and sophisticated technology for the production and distribution of goods and services at competitive prices.
  5. Mass production and distribution: Multinational company produces and distributes goods and services in a large scale. In order to produce and distribute goods and services in mass scale, multinational companies invest huge capital, hire expert manpower, use advanced technology and implement aggressive promotional strategies.
  6. Monopolistic market: A Multinational company produces high-quality products by using advanced technology and expert personnel, Its marketing strategies and distribution channel are very effective. hence, it occupies a competitive position and creates a monopolistic market.

The following are the advantages of multinational company:

  1. A multinational company transfers a huge amount of capital, advanced technology, and professional management to a developing country like Nepal through its branch or subsidiary.
  2. Through the multinational company people of developing country get the opportunity of consuming standard products at affordable prices.
  3. A multinational company offers excellent pay scale and career opportunities to managers, technical and clerical staff.
  4. A multinational company makes large volume of sales in national and international markets, which enables it to generate a huge amount of revenues.
  5. A multinational company earns foreign currencies by exporting its products in the international markets.
  6. A multinational company maintains and develops good international relation among the countries.

The following are the disadvantages of multinational company:

  1. A multinational company invites its capital in the most profitable sectors and developed regions disregarding the national interest, priorities, and goals.
  2. Due to huge financial resources, advanced technology, professional management, aggressive promotion and standard product, it creates monopoly market.
  3. A multinational company promotes and sells the product in conformity with its value, custom, culture and practice. It makes the people addict to consume such products. Ultimately, it spoils the cultural heritage of local people.
  4. In multinational company order to maximize profit, it tends to give low prices for materials and labor. Further, it is also responsible for the rapid depletion of natural resources.
  5. A multinational company produces goods at a lower cost by using local resources and manpower. But, it charges higher prices for its products to the consumer.
  6. A multinational company increase dependence of the developing countries for the production and distribution of goods and services on foreigners.

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  • ______ is a large scale business organization, which carries on its production and distribution of goods and services at least in two or more than two countries.

    Joint stock company


    Public enterprises


    Partnership firm


    Multinational company


  • " A multinational corporation owns and manages a business in two or more countries." Who gave this definition?

    L.H. Haney


    Brook and Remmers


    Jacoby


    M.N. Mishra


  • Which one of them is the advantage of multinational company?

    A multinational company maintains and develops good international relation among the countries.


    In multinational company order to maximize profit, it tends to give low prices for materials and labor.


    A multinational company increase dependence of the developing countries for the production and distribution of goods and services on foreigners.


    A multinational company promotes and sells the product in conformity with its value, custom, culture and practice.


  • Which one of them is not the characteristic of multinational company?

    Easy to establish and disclose


    Monopolistic market


    Productive organization


    Global operation


  • Which one of them is the disadvantage of multinational company?

    Due to huge financial resources, advanced technology, professional management, aggressive promotion and standard product, it creates monopoly market.


    A multinational company increase dependence of the developing countries for the production and distribution of goods and services on foreigners.


    A multinational company invites its capital in the most profitable sectors and developed regions disregarding the national interest, priorities, and goals.


    A multinational company makes large volume of sales in national and international markets, which enables it to generate a huge amount of revenues.


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