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How to Describe the Four Basic Levels of International ... Global Concerns of Strategic Management What Is the Key Feature of a Multinational Corporation?

by Billie Nordmeyer 
Multinationals tap into areas of emerging market growth, such as that in Asian nations including China and Vietnam. These companies don't originate solely in core economies, such as the United States, Japan and Europe, but also in the emerging nations that U. S., Japanese and European companies have historically “gone multinational” to exploit. For example, Infosys originated in India but has offices in U.S., Germany and other countries, and JBS, a Brazilian company, has purchased processing plants in the U.S., such as Pilgrim's Pride and Swift and Company. However, becoming a multinational is not limited only to large corporations.

Key Characteristic of Multinational

Size, organizational structure, performance and behavior are attributes that some use to characterize a multinational. However, a more accurate description is a company whose managerial headquarters reside in one country – the home country – and which has operations, subsidiaries or investments in two or more additional host countries.

Benefits of Operating Multinationally

Businesses invest internationally to increase revenue growth. Basing a business in a market that's experiencing revenue growth at very fast rates across most or all of a company's product lines seems to be a sure-fire way to counter declining markets in the home country. The added bonus is that lower labor costs, local access to needed resources and production capabilities of suppliers, and distribution within local markets can keep operating costs low. In addition, operating internationally decreases a company's reliance on a single market economy and provides access to consumer markets with growing-purchasing power.

Risks of Multinational Operations

When a company buys revenue growth by investing internationally, it also buys the risks that accompany the possible return on their money. For example, companies become vulnerable to currency rate fluctuations, which can negate profits earned. In addition, companies may have a difficult time revising their operations to accommodate host-country regulations. In addition, changes in regulations, such as import restrictions related to critical supplies, can affect the financial and operational feasibility of a company's continued production in a country. Also, competition for local markets is increasing in the form of both multinational and local companies.

Multinational Opportunities

Ernst and Young predicts that domestic demand will continue to increase in some rapid-growth markets due to a doubling of the number of middle-class households in emerging countries, such as those in Asia and Latin America. The company suggests that by 2020, the rapid-growth economies will include 270 million new households, which will make investment in these countries even more attractive. According to Ernst and Young, emerging markets in Asia will account for 40-percent of global consumer spending by 2030.





