Quantitative and Qualitative Characteristics of Multinational Enterprise

Quantitative:

1. Size – Normally the MNCs are very large in size, i.e., operations. But not all MNCs are giants.

2. Geographic Diversity – MNCs get involved to take advantage of business opportunities in other geographic areas. This may be due to technology, lower cost, location or availability of natural resources. Companies get their functions done, where the cost is the lowest for the desired quality, not necessarily where the product is going to be sold. Normally an MNC must operate in two countries, but Harvard Multinational Enterprise project required subsidiaries in six or more nations. Coca Cola sells its products in 200 countries and “its destiny is to inherit the earth.”

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3. Networking – MNEs engage in inter-firm, intra-firm, or intra-group trade. Rugman in his study has confirmed that the top 500 companies of the world practice the same.

4. Revenue – MNEs don’t generate their entire revenue from just one country, rather their sales and revenues are geographically distributed. But there is no agreement over the exact percentage to qualify for being an MNE. However, 25 to 30% is the most often cited criteria.

5. Ownership – Ownership is related to control over decision-making. There are three components of this criterion: (i) who owns whom? (ii) Which countries own what percentage of World MNEs? And (iii) what is the ownership of intangible firm-specific assets, the main source of competitive advantage? One study proposed that several nations should be the owners of the corporation as is the case with Royal Dutch shell Group and Unilever.

6. Diversity in HR – In most of the MNEs foreign nationals in different capacities, including directors on the board, is a common sight.

Qualitative:

1. Management Philosophy – MNEs may be Ethnocentric (Head Quarters market oriented), Polycentric (Foreign market oriented), and Geocentric (Global perspective). All the subsidiaries possess a common strategic vision and draw upon a common pool of resources.

2. Operational Structure – MNEs have three kinds of operational structure:

i. Vertically integrated MNEs have successive stages of production in different locations to provide inputs to subsidiaries like a petroleum firm.

ii. Horizontally integrated MNCs produce the same product in its worldwide production units like Mark & Spencer.

iii. Diversified MNCs are the ones that are not horizontally or vertically linked to one another (subsidiaries).

Dlabay has mentioned some more characteristics as – worldwide market view, culturally sensitive hiring, standardised product (wherever possible), and international and local perspective (doing business with both an international outlook and local perspective).

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