A multinational corporation owns or controls business operations in more than one country. Expanding these operations creates cross-border networks.
Business operations are the activities and facilities a company runs. It may design equipment in one country, make it in a factory it owns in another and run a service centre in a third. Its operations connect investment, knowledge, production and customers across borders.
A multinational corporation, or MNC, owns or controls business operations in more than one country. These may include factories, offices, research facilities or services. Selling to an overseas customer or buying from an independent overseas supplier does not, on its own, make a business an MNC.
MNCs may locate activities abroad to reach customers, use particular skills or resources, manage costs or work near other businesses. As they expand, money is invested across borders, staff share knowledge and goods or services move between locations. A supply chain connects those who produce and deliver a product. It can include independent firms as well as the MNC's own facilities; not every supplier is owned by the MNC.
Worked example: A company adds an overseas service centre
A laboratory-equipment company has a factory and design team in Singapore. It opens and runs its own service centre in Germany, employs technicians there and trains them to maintain its machines. It also buys packaging from an independent Malaysian supplier.
- Its Singapore activities and company-run German service centre establish operations in more than one country. This is evidence that it is an MNC.
- Investment sets up the German operation, and training shares technical knowledge across borders. Spare parts and maintenance information also connect the two locations.
- The Malaysian supplier adds a supply-chain link. Buying its packaging does not establish that the equipment company owns or controls that supplier.
Watch out for this
Any business with overseas customers or suppliers is a multinational corporation.
Look for ownership or control of business operations in more than one country. Cross-border sales and purchases establish trade, but they do not by themselves establish overseas operations.
Check your understanding
Which evidence most clearly establishes that a company is an MNC?
- It owns and runs a research centre in Singapore and a factory in Poland.
- Its only workshop is in Singapore and it posts products to customers in many countries.
- Its local shop buys goods from several independent foreign manufacturers.