Question

Four senior executives of the world’s largest firms with extensive holdings outside the home country speak. Company A: “We are a multinational firm. We distribute our products in about 100 countries. We manufacture in over 17 countries and do research and development in three countries. We look at all new investment projects both domestic and overseas- using exactly the same criteria”. The execution from Company A continuous, “of course most of the key posts in our subsidiaries are held by home-country nationals. Whenever replacements for these men are sought, it is the practise, if not the policy, to look next to you at the head office and pick someone (Usually a home country national) you know and trust”. Company B : “ We are a multinational Firm- only 1 percent of the personnel in our affiliate companies are non-national. Most of these are us executives in temporary assignments. In all major markets, the affiliates managing director is of the local nationality”. He continuous, “of course there are very few non-Americans in the key posts at headquarters. The few we have are so Americanized that we usually do not notice their nationality. Unfortunately, you cannot find good foreigners who are willing to live in the United states, were out headquarters is located –American executives are more mobile. In addition, American have the drive and initiative we like. In fact, the European nationals would prefer to report to an American rather than to some other European”. Company C: “We are a multinational Firm- Our product division executives have world wide profit responsibility. As our organizational chart shows, the United States is just one region on a par with Europe, LatinAmerica, Africa, etc., in each division”. The executives from Company C go on to explain “the World Wide product division concept is rather difficult to implement. The senior executives in charge of these divisions have little overseas experience. They have been promoted from domestic posts and tend to view foreign consumer needs as really basically the same as ours. Also, product division executives tend to focus on the domestic market because the domestic market is larger and generates more revenue than the fragmented foreign markets. The rewards are for global performance, but strategy is to focus on domestic. Most of our senior executives simply do not understand what happens overseas and really do not trust foreign executives, even those in key positions”. Company D (non-American): “We are a multinational Firm. We have at least 18 nationalities represented at our headquarters. Most senior executives speak at least two languages. About 30 percent of our staff at headquarters is foreigners. 15 He continuous by explaining that “Since the voting shareholders must by low come from the home country, the home country’s interest must be given careful consideration. But we are proud of our nationality; we should not be ashamed of it. Infact, many times we have been reluctant to use home-country ideas overseas, to our detriment, specially in air U.S. subsidiary-our country produces good executives, who tend to stay with us a long time. It is harder to keep executives from the United States. Questions: (a) Discuss which company is truly multinational? (b) Outline all the attributes of a truly multinational company?

Answer 1

(a) Company is truly a multinational company. This is because company A operate in a very large scale. It distributes its products in about 100 countries. It manufactures its products in 17 countries and the company is engaged in research and development in 3 countries. This meets the crieteria of a multinational company of working and producing in a large base with several manufacting huns and branches in many countries all over the world. Moreover the country places its nationals in most of the key positions. This is also a charecteristic of centralised multinational companies. Multinational companies may have different branches all over the world, but they are mostly centralised from headquarter.

(b) Attributes of a truly multinational company:

i. Huge amount of turnover:

Multinational companies are charecterized with a huge turnover. The mamount of physical and financial asset of a multinational company must be high. The company's target must be very high and they should be able to earn a good amount profit.

ii. Well spreaded branches:

The network of branches of a multinational company must be spreaded in many countries. In each country the company must have more than one office that should function through mseveral branches and other subsidiaries.

iii. Control over the branches:

The headquarter which is situated in the home country must have a good control on the branches and other offices situated in home country and other contries. In other words the source of command to run the company must be originated from the home country.

iv. Experiencing a continued growth:

Multinational companies must keep growing in both home and foreign branches. Experiencing a continuous growth is a charecteristic of multinational companies. They strive to grow in economic size even by doing mergers and aquisitions.

v. Usage of advanced technology:

In order to maintain a substantial growth multinational companies use capital intensive advanced technologies in both production and marketing.

vi. Skilled employees:

Multinational companies take a good care in selecting their employees. Employees are the base of the company and the architect of a company's future. Hence they select well trained and well educated people who are able to handle huge funds, accustomed with advanced technologies, run huge business.

vii. Forceful marketing and advertising:

Multinational companies spend a huge amount of money on marketing and advertising. This is how they reach out their product to a larger population and sell those products among them.

viii. Maintain good quality:

Multinational companies not only spend a huge amount of money in advertising and marketin to sell their products. They also take a good care to ensure the quality of their product is perfect. Multinational companies use capital intensive technology which makes them able to produce good quality products.