Professional Documents
Culture Documents
There are many reason of companies to become MNCs Following: 1. One of the greatest organizational advantages is brand recognition, which at international levels of business is highly valued. 2. The company can spread risks. If the economy is slow or demand is dropping in one country, chances are it will be thriving in another! 3. One reason may be to compete with larger companies and maybe to receive economies of scale. 4. The market for many products if becoming more and more global-especially with the internet- and so it is another reason to multinational company to survive'. 5. The size of the market. There may be 1 million out of 60 million in the UK who want your product, where as there are billions in the world and so your market size would increase and so would sale. 6. A firm becomes multinational only when the head quarter or parent company is effectively owned by nationals of two or more countries. For example: Shell and Unilever, controlled by British and Dutch interests, are good examples. However, by ownership test, very few multinationals are multinational. The ownership of most MNCs is antinational. (e.g. The Smith-Corona versus Brothers case) 7. To have Technology Advantage expertise by manufacturing Goods direct rather than allowing other to take advantage of license. 8. To Reduce Cost by setting up units near Customer and avoid transportation cost & take advantage of local low cost & avoid middle man.
9. Firms also become MNC in response to increased competition and to protect world Market share Follow the Competitor strategy.