Saturday, 21 December 2019

Unit 9: Multinational Corporations

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Unit 9: Multinational Corporations


It has been said that the Multinational Corporation (MNC) is the most powerful institution in the world today.

MNCs are major players in international business.

They have expanded across national borders in two ways: trade and Foreign Direct Investment (FDI).

Each has contributed to stable, lasting benefits to the world economy.

In an era of WTO, regional groupings, liberalisation, and globalisation, the role of MNCs has increased tremendously.

MNCs are defined as an enterprise that is headquartered in one country but has operations in one or more countries.

There is a widespread impact of MNCs on both host and home countries.

MNCs influence trade balance of a country, promote small scale/ancillary industry as they use them as suppliers and MNCs transfer knowledge and improve the technology of local firms.

MNCs also help in economic development and development of infrastructure.


Besides all these advantages, MNCs are also considered responsible for putting profit Notes before people, for exploitation of workers, engaging in M&A activities instead of Greenfield projects.

Sometimes they become so big that they control the key sectors of the economy.

Organisation design, sometimes called organisation structure, is the overall pattern of structural components and configurations used to manage the total organisation.

Organizational structures generally establish internal authority relationships, responsibility for work performance, and paths of communication and control required for a company to achieve its objectives.

These structures are typically set up to blend the specialized expertise needed to facilitate decision making on a variety of short- and long-range problems.

The development of structures should generally be planned and managed.


Centralization: It concerns to the role of formal authority and hierarchical mechanism in the company’s decision making processes.

Diversification: To extend (business activities) into disparate fields.

Formalization: It represents decision making through bureaucratic mechanisms such as formal systems, established rules, and prescribed procedures.

Knowledge transfer: The process through which one unit (e.g., group, department, or division) is affected by the experience of another.

Matrix organization: An organizational structure that facilitates the horizontal flow of skills and information.

Multinational Corporation: A corporation that has its facilities and other assets in at least one country other than its home country.

Normative Integration: It relies neither on direct headquarters involvement nor on impersonal rules but on the socialization of managers into a set of shared goals, values, and beliefs that then shape their perspectives and behavior.

Production division structure: This type of structure is used by a company that sells a diversified selection of goods or services.

Transfer Pricing: A transfer price is price on good.

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