19 Advantages and Disadvantages of Multinational Corporations

A multinational corporation is an agency which owns assets in at least one country

other than its domestic market. Anything of value qualifies for this label, ranging
from a partnership, office space, or retail product. The only stipulation is that
there must be something owned (not leased) in 2+ countries to qualify. A joint
partnership could also transform a company into a multinational corporation under
certain circumstances.

The nature of the multinational corporation is that it runs through a centralized

hierarchy that focuses on the primary office in its home nation. Each office,
product, or contract receives direct, local support from the organization to create
revenues, but those who manage the foreign markets must still report to the C-Suite
of the firm � which could be half of a world away.

This structure is what makes a multinational corporation different, by definition,

from a transnational organization. The latter allows each market to operate
independently from every other one � making it more like a DBA rather than a true
satellite from the central office.

There are three regions of the world where most multinational corporations have
their headquarters: Japan, the United States, and Europe. The advantages and
disadvantages of operating under this structure involve the money and power that
these organizations control. The top 5 largest companies in the world manage more
than $1.5 trillion in revenues every year.
List of the Advantages of Multinational Corporations

1. Multinational corporations are often responsible for today�s best practices.

Most multinational corporates rely on merchants and distributors for their goods
and services. Some even use these third-party entities to create additional sales
opportunities. Because of their global presence and overall sizes, these
organizations use leverage with their associates to produce a required action for
each customer.

If the vendor fails to do so, then the multinational corporation can move to a
different supplier immediately. This practice directly eliminates some distribution
businesses overseas with a single decision, which is why this structure creates
competences of scale that keep prices down while still ensuring reasonably
excellent product quality.

2. Innovation happens because of the investments made by multinational

corporations.
Most multinational corporations spend about 5%-10% of their yearly budget on
innovative research and development projects. Most of the firms that invest richly
into R&D are the organizations who are on the Fortune Global 500 list consistently.