What is the difference between a corporation and multinational corporation?

multinational corporation (MNC), also called transnational corporation, any corporation that is registered and operates in more than one country at a time. Generally the corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in other countries. Its subsidiaries report to the corporation’s central headquarters.

In economic terms, a firm’s advantages in establishing a multinational corporation include both vertical and horizontal economies of scale (i.e., reductions in cost that result from an expanded level of output and a consolidation of management) and an increased market share. Although cultural barriers can create unpredictable obstacles as companies establish offices and production plants around the world, a firm’s technical expertise, experienced personnel, and proven strategies usually can be transferred from country to country. Critics of the multinational corporation usually view it as an economic and, often, political means of foreign domination. Developing countries, with a narrow range of exports (often of primary goods) as their economic base, are particularly vulnerable to economic exploitation. Monopolistic practices, human-rights abuses, and disruption of more-traditional means of economic growth are among the risks that face host countries.

Global and multinational companies are distinctly different on the management and operational levels. The business models do overlap, however, in their marketing efforts. Both global and multinational companies have a presence in multiple countries. The primary differences lie in how it operates within the bounds of each individual country.

Global Company Distinctions

A global company has a foothold in multiple countries but the offerings and processes are consistent in each country. For example, a major soda brand can set up shop in different countries, but the recipe does not change in the global model. The company uses the same ingredients and manufacturing processes, regardless of local culture. In a global model, the business does not adapt to local norms, but rather, it imposes its existing business model on the country.

The only exception within the global model is the marketing approach to drive sales in individual countries. The product is consistent but messaging must adapt to work within the cultural norms. Marketing is where the two models are difficult to distinguish.

Multinational Company Distinctions

Like the global company, a multinational company operates in multiple countries, and the company adapts marketing messaging to fit each culture group. Driving sales is always top of mind. The major difference in a multinational business model is the adaptation of product offerings and manufacturing processes. A multinational has more autonomy in each individual country, whereas a global model is still beholden to its central operating model.

Multinationals adapt operations and products to fit within individual markets. Global executive search firm Kincannon and Reid says a multinational is different, because it uses a decentralized approach to business. Each arm acts independently, while still serving the larger brand model.

Global and Multinational Examples

Consider the same global soda company example from the section Global Company Distinctions in the first section. The company is global, because the soda does not change. The recipe, product and process for delivering the product to market is the same in each country. If that same company allowed each country arm to alter the recipe and production process to be adaptive within the specific market and culture, they would transform to a multinational model, (which is common in the beverage industry).

Reducing controls from the central location and distributing the power of the product and process to each arm of the business, makes it a multinational. A global company is capable of altering the business model to transform into a multinational. The models are not entirely static, and both are influenced by their parent company and top-level leadership.

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