What is meant by multinational corporation? How are the cultures of these organizations different from local business firms?

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thetall | (Level 3) Educator

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A multinational corporation is a corporation that has its operations based in more than one country. These companies have branches or divisions in other countries apart from the ones in their country of origin. These entities also feature a centralized headquarters to facilitate coordination between the different bases of operations. Two examples of such corporations include Coca-Cola and Pepsi.co.

Multinational corporations provide an enhanced cultural experience for the different parties involved. This is because of the different nations and cultures that effective operations is required to factor in. This is different from local companies which are inclined to hire people within their geographical boundary and thus share similar cultures with less diversity compared to the multinationals. Thus in multinationals, the highly diverse people from distant regions come together and share their ideas within their working environments, which results in a hybrid corporate culture for the institution.

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sleeaustralind's profile pic

sleeaustralind | (Level 2) Adjunct Educator

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Multinational Corporations are businesses that operate in many nations but have their head offices located elsewhere. The best examples are firms such as Coca-Cola, Mc Donalds, and KFC.

Multinational corporations can simply operate in other nations or they can purchase local firms such as Walmart did in the United Kingdom and as Sony did in Australia buying Mushroom Records.

“Outsourcing” is another strategy of multinational corporations. This allows them to take advantage of low wage rates, the lack of unions, greater access to resources or any other factor that allows them to reduce the costs of manufacture, hence increasing profit margins.

The reason multinational companies operate in other nations is primarily an economic one. The cost of labour is a major factor. The hourly rate in many LEDC’s (Less Economically Developed Countries such as India and Vietnam) can be up to 10 times cheaper. The car manufacturing company Kia used this as a reason to relocate one of its factories from the USA to Mexico. Other economic factors may include reduced land prices, better access to infrastructure such as roads and ports as well as a lack of some laws (safety for example) that may exist in MEDC’s (More Economically Developed countries) such as the USA and UK.

The culture of Multinational corporations is one based on minimizing costs, maximizing production as well as profits. This usually involves high levels of technology. This may not be true of existing local companies who are simply too small to make large capital investments in technology. Similarly, the local firm may be largely influenced by customs and traditions. Relationships between people, ceremonial considerations and religious guidelines may be just as important, if not more important, than making a large profit.

In comparison, many multinational firms come to dominate the markets they enter. Companies such as McDonalds tend to push a Westernized view of food and culture (as their advertisements show). This becomes very destructive to local culture.

Multinational corporations become so large and important to the economies of developing countries that their leaving or closing down would adversely effect the country.

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