A corporation that manages production or renders services in more than one country. Classification of Multinational Corporations Subsidiaries If you company is cash rich, then acquisitions may be a better strategy than establishing branches. Acquiring a local company for the purpose of vertical or horizontal Integration Is fast and comparatively easy, provided that you plan to leave the original business (branch management, Infrastructure) Intact.
By making the acquired company your subsidiary, you have the advantages of instant localization, name recognition and an experienced team at the helm. However, do your homework before acquiring a subsidiary; let your company experience acquisition indigestion. Franchises Franchises In foreign countries operate similarly to those in the United States. A foreign affiliate will purchase a license from your company to use your brand In a foreign country.
While the foreign affiliate retains ownership of your branded business, your company will receive royalties from each franchise. Franchising is the cheapest option, and the fastest way to build an established presence in a foreign entry with minimal risk. The higher risks (sales, profitability) are all absorbed by the foreign affiliate. However, foreign franchises have to be monitored closely, since the geographic and cultural divide can mask brewing problems.
Turn Key project Turn key projects are more common in businesses requiring precise technological expertise – such as power plants, factories or oil drilling platforms. In this setup, your business sells its technological know-how to a foreign firm, which pays your company to build a modified copy of your plant to their specifications, from scratch to the operational stage. This Includes all of your technologies and trade secrets.
Once the plant Is completed, you hand over the keys to the fully working plant to the foreign firm. All they have to do is “turn the kef’ to get started. While selling factories is extremely profitable, you also forfeit your own direct expansion plans in the country, due to another firm already holding the license to your technology. This is the trickiest of the five criteria and the one you’re least likely to encounter, unless your company specializes in mass production or resource exploration plants focused on
Organizational Structure Vertically Integrated Multinational Corporation Vertically integrated companies in a supply chain are united through a common owner. Each supply chain produces different products then the products are combined to produce the main product. Horizontally Integrated Multinational Corporation Horizontal integration is a business strategy where a company creates or acquires production units for outputs which are alike. Transnational Corporation Is a corporation that has a corporate facility but give decision making to each individual foreign market.
