This is an organization that manages to establish operations, both production and commercial, beyond its borders. Read on to learn about its characteristics and structure, as well as some examples of this type of company.
According to the Organisation for Economic Co-operation and Development (OECD), multinational companies play an important role when it comes to investment. They also help in economic, environmental and social progress, minimising and solving the difficulties that may arise in their operations. Therefore, it is crucial to know what defines this type of organisation.
After the Second World War, large private organizations began to invest directly outside their borders, expanding significantly and creating subsidiaries in different countries. This has led to the emergence of multinational companies, taking advantage of accessible raw materials and cheap labor, being close to new markets and removing the physical risk of production, among others.
What is a multinational company?
It is a large organization that has facilities such as offices, sales outlets, production plants and other assets in more than one country, which allows it to market internationally . It has a central office located in its country of origin and from there it dictates the guidelines to control, manage and operate its other offices.
Multinational companies have many business opportunities. For example, they can buy raw materials in one country, process them in another, and then sell the final products in a third location. They can also operate from their place of origin, establishing commercial links with other countries, to whom they sell on a recurring basis. In this sense, this type of business offers the following advantages, both for them and for the nations where they are established:
They provide products and services at competitive prices.
They offer profitability to investors.
They contribute to the efficient use of capital, human resources and technology.
They facilitate the transfer of technology between countries, as well cpa b2b list as the development of technologies adapted to local conditions.
They promote the development of human capital through training and on-the-job education.
They offer employment opportunities in the countries where they settle.
Multinational companies: Characteristics
The main characteristic that determines what a multinational company means is that it allows the creation of different business units or subsidiaries in other countries, which depend economically and administratively on the main office. However, there are other aspects that serve to clearly identify these companies, such as those detailed below:
They have large capitals, which makes them very influential businesses.
They have an efficient business model, based on the use of advanced technology and the production of high-quality products.
They produce large volumes of goods.
They can change consumer habits in the markets they reach.
They locate their headquarters in industrialized countries, from where the entire company is controlled.
They have a global vision of their business in the market, which allows them to adapt their products or services to different countries.
They usually have a great impact on the development of the economies in which they are located.
They stand out in their sector for their leadership, their costs and their financial capacity.
They use various international marketing strategies in the countries where they have a presence and good brand positioning.
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Structure of a multinational company
The organizational structure of multinational companies seeks to define their qualifications and competitiveness in local markets, as well as to satisfy the need to integrate into these markets. The evolution of these businesses can be seen in the activities they carry out in developing countries, as part of their strategic investments.
Multinational companies are organizations with decentralized organizational structures. They also invest a lot of resources in research and development, and they also give a lot of weight to the number of workers who perform administrative tasks in order to export a larger percentage of their production.
There are three levels of work in this type of business. The third level manages the daily operations. The second level coordinates the managers who work at the third level. The first level is where top management sets goals and planning, thus establishing the guidelines for the other two levels to operate. The structure of multinational companies also differs between the following three types: