Multinational corporations are corporations that operate in two or more countries, as opposed to domestic corporations, which operate in their home country only. A multinational corporation may have different types of operations in foreign countries including offshored production and support processes as well as marketing and selling operations in foreign markets.
In the last several hundred years, multinational corporations have been key players in globalization. If companies like Walmart, Exxon Mobil, Chevron, ConocoPhillips, General Electric, General Motors, Ford, Bank of America and Proctor and Gamble were countries, they would be some of the biggest countries in the world. Even online giants like Amazon and E-Bay are larger than entire countries. In fact, these companies have operations in numerous different countries around the world. At the same time, our politicians are negotiating free trade agreements that will allow these companies, as well as start-ups, to compete better and more efficiently with domestic companies around the world.
Because multinational corporations operate in more than one country, they face additional international business risk, and use different strategies to mitigate these risks. For example, businesses choose between different modes of entry into international markets depending on the level of risk (and the expected returns) a new market offers.
International finance is also an important component of a multinational corporations' overall strategy. Multinational corporations use financial tools, such as hedging, to mitigate macroeconomic risks; for example, risks such as foreign exchange rate (currency exchange) risk.
As well, multinational corporations face challenges with international human resource management. These challenges involve bridging the gap between new international business cultures – especially when corporate managers are sent as expatriates to manage people from foreign cultures in new plants or offices.© BrainMass Inc. brainmass.com August 15, 2022, 3:43 pm ad1c9bdddf