Multinational corporations operate in multiple countries across one or more than one regions. Being global is way different from functioning in one country. The operations and finances broaden, and you have to manage a larger workforce. However, the company also generates high revenue and provides employment opportunities to the locals.
Multinational companies make at least 25% of their revenue from branches in other countries.
MNCs work in different ways and organizational structures. Each company could have its particular structure and objectives. Multinationals have a central office in their home country while operating in others. There are four common types of Multinational Corporations. They are divided according to their management structure, objectives, and growth phases.
Decentralized corporations do not have a central office and operate in many locations worldwide. Despite not having a headquarter in the home country, their presence is quite significant. Decentralized corporations are typically seen to have fast growth as each subsidiary has its own management system. Each unit operates individually and interacts with the local market. The branches are not dependent on the parent branch for everyday functions and manage on their own.
Global Centralized Corporations
Opposed to decentralized, global centralized corporations function by all decisions from the central office. They have their headquarters in the home country where the CEOs and major stakeholders of the corporation reside. The domestic and international operations are all managed under the same roof, especially when it comes to decision-making. Such organizations typically purchase raw materials through cheap resources to manufacture in their best-technology facility. However, any decisions to be made in any subsidiary branches have to be approved by the head office in the home country.
International corporations are different from others in the way that they do not work under the same umbrella as local. While global centralized and decentralized organizations have all the decision-making in one place, international corporations have a specific internal division to manage the business in other countries. This department oversees all operations internationally. It is typically created to research international markets and create new relevant products. International corporations enable companies to make decisions that various cultures appreciate to avoid conflict. Yet, it may be challenging to build a unified brand image when the division works independently.
Transnational corporations work as a parent-subsidiary relationship where the parent company or the head office instructs the subsidiary companies. The structure is generally decentralized, and the headquarters do not make all decisions for the subsidiary branch. Though sometimes you might also find centralized transnational corporations. These multinational corporations are gaining more popularity as they help add value to the business and expand it swiftly.
What you should know more
What is the global presence of multinational corporations?
Multinational corporations are among the most revenue-generating corporations globally. 52 out of the top 100 largest economies worldwide are MNCs.
What are some multinational companies’ examples?
The most common examples of multinational corporations are Amazon, Apple, and Microsoft. They are the top organization with a presence in multiple countries across continents.
Multinational companies offer various advantages like employing the local people, reaching the target market and researching new products, removing monopolies and providing more options to buyers, and improving the host country’s economy.
The Bottom Line
Multinational corporations grow rapidly as their presence in multiple countries allows them to reach a wider customer base. MNCs are of four types, generally based on their objectives and managerial structures. They work as parent-subsidiary where the parent branch makes the decision or as decentralized corporations where each office works independently. If you want to expand your business, converting your company into a multinational can be beneficial.
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.