Task Psychology

Multinational Corporation

A multinational corporation (MNC) or enterprise (MNE), is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries.
The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock. It was also arguably the world's first megacorporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies.
Some multinational corporations are very big, with budgets that exceed some nations' GDPs. Multinational corporations can have a powerful influence in local economies, and even the world economy, and play an important role in international relations and globalization.
Multinational corporations because of their enormous size, enjoy massive economic and political power which enables them to dictate terms to the under-developed countries. They are able to manipulate prices and profits and restrict the entry of potential competitors through their dominant influences over new technology, special skills, ability to spend enormous fund on advertising etc.
MNCs organize this operation in different countries through any of the following five alternatives:

1) Branches: The simplest form of extending business operations is to set up branches in the developing countries. Such branches bring with them the technology of the parent company and are linked up with it.
2) Subsidiaries: Multination also operates by setting up national affiliates as subsidiary companies. A subsidiary in a particular country is established under the laws of the country. Such subsidiary companies take advantage of the financial, managerial and technical skills of the holding company and also benefit by the international reputation that latter enjoys.
3) Joint Venture Company: a joint venture is the establishment of a firm that is jointly owned by two or more otherwise independent firms. Most joint ventures are 50:50 partnerships. At times, multinationals enter into a joint venture with an indigenous firm or agency. Under this arrangement of MNC makes available machinery, capital goods and technological expertise to the indigenous firm. This form of organization is adopted in those countries where the law requires control by nationals.
Joint ventures are attractive because: They allow the firm to benefit from a local partner’s knowledge of the host country’s competitive conditions, culture, language, political systems, and business systems. The costs and risks of opening a foreign market are shared with the partner. When political considerations make joint ventures the only feasible entry mode.
 The firm risks givingvJoint ventures are unattractive because:   The firm may not have thevcontrol of its technology to its partner.  tight control over subsidiaries need to realize experience curve or  Shared ownership can lead to conflicts and battlesvlocation economies.  for control if goals and objectives differ or change over time.
4) Franchise Holders: This is a special kind of arrangement by which an affiliate firm produces or markets the product of a multinational firm after obtaining a license from that firm. A formal contract is entered into between the affiliate firm and the multinational firm which specifically mentions the rights that are transferred to the affiliate firm and lays down the compensation (usually in the form of royalties) that it has to pay to the parent firm.
Culture is the set of values and beliefs shared by a group. This includes groups as small as social groups, and as large as a whole country. Since multinational companies operate in more than one country, they are exposed to many different cultures. Each culture has its own beliefs and values. To be successful in these foreign countries, multinational companies must have a global mindset, and be able to recognize and adapt to the differences.

Communication is the process of conveying messages. ‘’Successful communication in the international business environment requires not only an understanding of language, but also the nonverbal aspects of communication that are part of any community’’ (Ferraro, pg 73). Different countries are going to have different ways of communicating. If certain executives of a company want to do business with people from different countries, they need to understand how to communicate clearly with them, without mistakenly doing something wrong. The most obvious way of communicating with different people is with words, and therefore, some executives learn how to speak the language spoken in the foreign country. This act can show that the executive is truly dedicated to the work, and that he is willing to do anything to complete the deal. Greeting rituals are sometimes overlooked, but they shouldn’t be because they are more important in some parts of the world than others. ‘’In Japan, failure to show respect by exchanging business cards can get negotiations off to a very bad start’’(Schneider and Barsoux, pg 26) . ‘’While in France, greetings are highly personal and individual…as workers expect to be greeted individually’’(Schneider and Barsoux, pg 26) Another form of communicating is through hand gestures. Often goes unnoticed, hand gestures are as important as words themselves because they too have meaning behind them. ‘’ Cultures located in southern Europe and the Middle East employ a wide variety of gestures frequently with purposefulness’’(Ferraro, pg 79). Some hand gestures have different meanings in different countries. ‘’For example, the hand gesture where the index finger and thumb touch and create a ‘zero’ can mean different things in different places. In the US and UK, it means ok. In Russia it means zero. In Japan it refers to money. While in Brazil, it is viewed as an insult.Time is another communication system.In western cultures, people like to get to the point of the matter in business meetings and conversations. However, in other countries like Saudi Arabia and Russia, it is customary to converse first about unrelated matters before starting the business discussions for which the meeting was arranged. Barging straight into the business issue, without informal small talk at the beginning, may make them very uncomfortable and may ruin the negotiations.