What Makes a Company a Multinational Corporation?

[Md. Anikuzzaman]

Multinational corporations are typically large companies headquartered in one country but with operations in several countries. The defining trait of a multinational corporation is being incorporated -- usually in its home country -- and doing business in several countries. While these are the only criteria a company must meet to properly be considered a multinational corporation, there are other characteristics that these corporations tend to share in common. Small businesses hoping to become multinational corporations generally need clear business plans as well as the capacity to expand operations, staff and business reach.

Size
While a business can technically be considered a multinational corporation if it has offices in two countries, most multinational corporations have relatively large operations. They might, for example, have business headquarters in each country or operate large warehouses, factories or offices in several countries. These operations typically require a large staff of workers and managers, as well as contracts with service providers such as attorneys and accountants.

The Internet has opened the world of multinational operations to all businesses. Some small businesses can compete in a global marketplace by selling on websites or connecting remotely to foreign locations. Internet businesses often have lower overhead, particularly if they don't have brick-and-mortar stores.

Imports and Exports
Because multinational corporations typically run large operations, they may need lots of supplies, products and materials. Consequently, these businesses tend to import products to serve their businesses as well as export products to other businesses. Multinational corporations also may import products from their own factories stationed in other countries or export products from a factory to a retailer in another country. While even an individual can import or export a product or two, a common characteristic of multinational corporations is the large volume of importing or exporting done by the company. Some small businesses become multinational corporations by expanding their businesses to include imports and exports.

Public Corporations
Companies don't have to be traded publicly to become multinational corporations, but many of these corporations do go public. Publicly traded corporations make shares in their businesses available to investors. The investment money helps fund the company, and if the value of shares goes up, investors can share in the profits. This role in the stock exchange gives multinational corporations the ability to affect the economy of an entire nation. Some multinational corporations are traded in several nation's stock markets. Small businesses interested in becoming public corporations don't necessarily need to become huge. Public trading only requires that the company open its shares to a public audience, and many startups greatly expand when they choose to go public.

Partnerships and Affiliates
The textbook "Managerial Economics" points out that many multinational corporations develop partnerships and affiliations with other businesses, non-governmental organizations and governments. Such affiliations might include the licensing of products or chains to individuals or businesses, partnerships with governments to fulfill local initiatives and affiliations with non-governmental organizations to help raise money for charitable causes.

Source: http://smallbusiness.chron.com/company-multinational-corporation-60186.html