The Multinational Corporations..

During its early stages, international business was conducted in the form of enterprises that were owned singly or in partnerships. As the size of organizations grew with industrialization and companies’ needs for capital increased, corporations began to displace privately held firms. These corporations had the distinct advantage of being entities with a separate legal identity, consequently limiting the liabilities of the principals or owners. At the same time, by issuing shares of stock, the corporation could tap an enormous pool of excess funds held by potential individual investors.

A multinational corporation is a firm that conducts international business from a multitude of locations in different countries. For example, Nestle, Sony Citygroup etc are some of leading MNCs in the current business world.

Advantages and Disadvantages of MNC aka Multinational Corporations
MNCs have certain unique advantages and disadvantages in their operations that make them quite different from purely domestically oriented companies.


ADVANTAGES

**Superior Technical Know-how
The most important advantage that MNCs enjoy is patented technical know-how, which enables them to compete internationally.

**Large Size and Economies of Scale
Most MNCs tend to be large. Some of them have sales that are larger than gross national products of many countries. The large size confers the advantage of significant economies of scale to MNCs.

**Lower Input Costs Due to Large Size
The large production levels of multinational necessitate the purchase of inputs in commensurately large volumes. Bulk purchase of inputs enable MNCs to bargain for lower input costs, and they are enable to obtain substantial volume discounts. The lowered input costs imply less expensive and therefore, more competitive finished products.

**Ability to Access Raw Materials Overseas
Many MNCs lower inputs and production costs by accessing raw materials in foreign countries. In many of these cases, MNCs supply the technology to extract or refine the raw materials, or both.

**Ability to Shift Production Overseas
The ability ot shift production overseas is another advantage enjoyed by MNCs. To increase their international competitiveness, MNCs relocate their production facilities overseas, thereby taking advantage of lower costs of labor, raw materials and other inputs and utilizing incentives offered by host country.

**Scale Economies in Shipment, Distribution and Promotion

**Brand Image and Goodwill Advantages

**Access to Low-Cost Financing

**Financial Flexibility

**Information Advantages

**Managerial Experience and Expertise

**Diversification of Risks


DISADVANTAGES

**Business Risks
Since MNCs conduct business outside the borders of their own countries, they deal with the currencies of other countries, which render them vulnerable to fluctuations in exchange rates.

**Political Risks

**Different Legal Systems

**Host-Country regulations

**Cultural Differences

**Operational Difficulties

What is International Business..?

In it’s purest definition, international business is described as any business activity that crosses national boundaries. The entities involved in business can be private, governmental or the mixture of the two. International business can be broken down into four types.

Foreign Trade

Trade in Services

Portfolio Investments

Direct Investments

In foreign trade, visible physical goods or commodities move between countries as exports or imports. Exports consist of merchandise that leaves a country. Imports are those items brought across national boards into a country.

In addition to tangible goods, countries also trade in services, such as insurance, banking, travel, consulting and hotels. The international firm is paid for services it renders in another country. The earnings can be in forms of fees or royalties.

Portfolio investments are financial investments made in foreign countries. The investor purchases debt or equity in expectation of nothing more than a financial return on the investment.

Direct Investments are differentiate by much greater levels of control over the project or enterprise by the investor

By the 1880s the Industrial Revolution was in full swing in Europe and the US, and the production grew to unprecedented levels,abetted by scientific invention, the development of new sources of energy, efficiencies achieved in production and improvements in transportation such as domestic and international railroad systems. Growth continued in upward spiral mass production met and surpassed domestic demands, pushing manufacturers to seek enlarged, foreign markets for their products. It led ultimately to the emergence of the multinational corporation (MNC) as a new organizational entity in the international business world.