Multinational corporations are profit seeking enterprises having international power, capital, manpower, and resource-seeking practices. We can say that an organization that performs its business in two or more countries is a multinational company. These companies operate worldwide through their own branches and subsidiaries or through agents who represent them.
All the business activities are managed and controlled by the central head office of the organization, which is usually situated in the home country of the company.
The equity capital of the subsidiaries or branches in various countries is contributed by both the host company and the parent company. However, management and control of the branches is governed and controlled by the parent company.
As these organizations coordinate production and distribution on a global scale, they become enormous in size and wield enormous power, both economically and politically.
Multinational firms arise:
– Because capital as a resource is mobile and can be used across geographies.
– The growing global marketplace has created enormous consumerism.
– The mutual cooperation among friendly nations and development of new technology has facilitated mass production.
– Inexpensive labor and skills are available in many countries.
– Raw materials availability is spread across geographically.
Managers working in multinationals are required to understand and operate in multi- cultural international environment. As a result, they are required to constantly monitor the political, legal, sociocultural, economic, and technological environments across international markets.