What is a multinational corporation? Why do firms expand into other countries?.
Multi National Corporation (MNC) is business firm incorporated in one country that has production and sales operation in several other countries. The firm has its facilities and other assets and operating in at least one country other than its home. Such companies have offices and/or factories in different countries and usually have a centralized head office at the home country where they coordinate global management. Very large multinationals have budgets that exceed those of many small countries. The objective for a multinational corporation is a specific goal that the corporation wants to attain, and it must be something that managers can measure. Some common business objectives include maximizing profits, having high-quality customer service, growing at a specified rate, reaching a specific sales level, coming up with new products and acting socially responsible.
Companies choose to invest in foreign markets for a number of reasons, often the same reasons for expanding their operations within their home country. The economist John Dunning has identified four primary reasons for corporate foreign investments (Global Capitalism, FDI and Competitiveness, 2002): .
Resource Seeking: the main goal in this category for MNC is acquiring particular types of resources that might not be available in the home country like natural resources or raw materials or it may be available at lower cost like the labor and workers who don't need to have skills and work hard working might be available also at lower price. .
Market seeking: in this case MNEs invest in a foreign country to exploit the possibilities granted by markets of greater dimensions. Various reasons (besides that of searching and exploiting new markets) lead to this choice by the MNEs: to follow suppliers or customers that have built foreign production facilities, to adapt goods to local needs or tastes and to save the cost of serving a market from distance.