WK7 - Introduction to MNCs

Multinational Corporation (MNC)

A company that operates in its home country as well as in other countries around the world.

Foreign Direct Investment (FDI)

An international capital flow undertaken by an MNC, which can be either Greenfield (new facility) or Brownfield (existing facility).

Transnational Corporation (TNC)

A type of MNC that operates on a borderless basis, usually not identified with one national home.

Ethnocentric

Type of MNC that operates with strict headquarters control over foreign operations as if they operate at home.

Polycentric

Type of MNC that grants foreign operations more freedom and respects market differences among countries.

Geocentric

Type of MNC that seeks total integration of global operations using executives from various countries.

Vertical Integration

A firm-specific motivation for MNC growth that enhances stable supply chains.

Horizontal Integration

A strategy for MNC growth focused on achieving economies of scale.

Advantages of MNCs

Include enhanced investment in host countries, tax revenue for home countries, job creation, and better consumer consistency.

Disadvantages of MNCs

Includes preferential treatment over local industry, job losses at home, environmental concerns, and monopoly opportunities.

Host Country Complaints about MNCs

Include profit extraction, local economy domination, government interference, hiring of the best local personnel, and failure to transfer advanced technologies.

MNC Complaints about Host Country

Include limitations on profit-making, overpriced resources, and government rule exploitation.