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Characteristics of MNCs

The salient features of most of the multinational corporations are as under:

(i)    Giant Size. The assets and sales of MNCs run into billions of dollars and they make supernormal profits. For example, the physical assets of IBM are worth around 8 billion dollars. ITT has bout 800 subsidiaries in more than 70 countries and is the biggest multination corporation.

(ii)    International Operations. An MNC operates in many countries through a parent corporation in the home country. It runs its operations trough a network of branches and subsidiaries in host countries. Production, marketing and other operations are scattered in different countries to reap the economies of local operations.

(iii)    Centralized Control. An MNC has its headquarters in the home country through which control is exercised over the branches and subsidiaries. The local managements of branches and subsidiaries operate within the policy framework of the parent corporation. This is because of the fact the parent company holds 40% to 100% of the equity of the subsidiary company.

(iv)    Oligopolistic Power. Through the process of merger and takeover of other firms, in course of time, an MNC acquires a huge economic power. This coupled with its giant size makes it oligopolistic in character because of which it has a dominant position in the market.

(v)    Collective Transfer of Resources. A multinational corporation facilitates a multilateral transfer of resources. Usually this transfer takes place in the form of a “package” which includes technical know-how, machinery, and equipment, raw materials, management expertise, etc.

(vi)    International Market. MNCs have vast access to international markets as a result of vast resources and superior marketing skills. Because of this, MNCs are in a position to sell whatever product they choose manufacture in different courtiers.

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