Multinational business is the one that has its operations in more than one country. These businesses mainly function in the entire major global. Examples of multinationals are Coca-Cola, IBM, McDonalds, Kellogg’s etc. Multinational businesses are well established corporate brands and are generally recognised across the globe. For example, Coca-Cola is a well established brand and is recognised in all parts of the world. Most of the multinational businesses are global by mature and implement similar marketing strategies across the globe. Multinational business is large and is highly influential in nature. MNC bring inward investment to countries other than their home base. Multinationals boost the national economy of the country in which they decide to set up operations and are therefore also supported by the national government while setting up their operations.
Reasons for expansion of business across boundaries are:
- Growth and expansion plans: Often when the company is saturated with its domestic operations, it wishes to grow its operations in new territories. Thus it looks for fresh markets across the boundaries and sets up its operations in a number of other countries.
- Size of market: Organisations want to expand their customer base and this could be achieved by going international.
- Cost reduction: Countries across the boundaries might be able to offer cheap labour and resources thereby helping the firm to achieve economies of scale.
- Increase in International competitors: Once the domestic market gets flooded with international competitors operating at much lesser costs, the domestic firms try to enter international markets to stay competitive by achieving economies of scale.
- Rise of global consumers: Today consumers across the globe have almost similar tastes and lifestyles whatever country they live in. This further supports the existence of multinational businesses.
- Reduction in transport and distribution costs
Joint venture
At times a multinational forms a joint venture with a local company of the target market. Joint venture refers to the establishment of a business entity by two or more companies by combining their skills and knowledge. Since the cost for setting up operations may be too high in a particular country, joint venture is a preferred mode as the costs are shared. Another advantage of a joint venture is that the partner in the joint venture has local knowledge and contacts which eases the process of establishment of operations. However, most business today do not prefer this mode as control is divided between the two partners.