WHAT IS THE DIFFERENCE OF MULTINATIONAL, GLOBAL AND TRANSNATIONAL COMPANY? | NATURE OF INTL BUSINESS

Dorothy Angeles - Pelayo

25 Oct 202015:24

Summary

TLDRThe script discusses the distinctions between multinational, global, and transnational companies in the context of international business. Multinational companies adapt their products to local markets, global companies maintain consistent offerings worldwide, while transnational firms delegate decision-making to local markets. It also touches on international business challenges like restrictions, inflation, and benefits such as economic growth and job creation. Furthermore, it highlights the integration of economies, dominance of developed countries, market segmentation, and sensitivity to political and economic changes.

Takeaways

🌐 Multinational companies adapt their products and services to local markets, like McDonald's offering a salad or KFC serving rice in some regions.
🌏 Global companies maintain consistent offerings and processes across all countries, such as Adobe, Hilton, and Hyatt.
🌍 Transnational companies have a central corporate facility but delegate decision-making, R&D, and marketing to local markets, exemplified by Nestlé.
📉 International restrictions like foreign exchange, trade blocs, and barriers can significantly impact international business operations.
💹 International businesses can lead to economic growth and development for participating countries, providing jobs and technology transfer.
🔝 International businesses often start at a domestic level before expanding globally, reaching larger markets.
🤝 The integration of economies allows companies to utilize resources from different countries, creating a win-win situation.
💼 Developed countries, with their financial capacity and advanced technology, tend to dominate international business.
📊 Market segmentation is crucial in international business, as consumer demands vary greatly across different countries.
🔍 International businesses are highly sensitive to political, economic, and technological changes, which can affect them positively or negatively.

Q & A

What is the primary focus of multinational companies?
-Multinational companies primarily focus on adapting their products and services to each individual local market.
How does McDonald's illustrate the concept of multinational companies?
-McDonald's illustrates the concept by offering slightly different menu items like a name salad in some regions, adapting to local tastes and preferences.
What is the main difference between multinational and global companies?
-The main difference is that multinational companies adapt their products and services to local markets, while global companies offer consistent products and processes across all countries.
Can you provide an example of a global company mentioned in the script?
-Adobe is given as an example of a global company with consistent offerings and processes in each country.
What is the defining characteristic of a transnational company?
-Transnational companies have a central corporate facility but delegate decision-making, R&D, and marketing to local markets, aiming for a global perspective.
How does the script describe the impact of international restrictions on business?
-International restrictions such as foreign exchange, trade blocs, and trade barriers can greatly affect international businesses by imposing limitations on operations across different countries.
What benefits do countries gain from participating in international business?
-Countries that participate in international business tend to become richer and more developed, gaining access to foreign capital, latest technology, rapid industrial development, and employment opportunities.
How does international business affect the scale of operations?
-International businesses often operate on a larger scale compared to domestic businesses, serving a broader market which can lead to greater earnings and economic growth.
What is meant by the integration of economies in the context of international business?
-Integration of economies refers to companies utilizing labor, resources, finance, and establishments from different countries, creating a win-win situation and fostering mutual economic benefits.
Which countries tend to dominate international business according to the script?
-Developed countries like the USA, Japan, and Europe tend to dominate international business due to their large financial capacity, advanced technologies, and significant investment in R&D.
How does market segmentation play a role in international business?
-Market segmentation is a nature of international business where companies produce goods according to the demand of consumers in different countries, tailoring their offerings to meet varying consumer demands.
Why is international business considered sensitive?
-International business is sensitive due to its susceptibility to changes in the political environment, economic policies, and technological advancements, which can positively or negatively impact operations.

Outlines

00:00

🌍 Multinational vs. Global vs. Transnational Companies

The paragraph discusses the differences between multinational, global, and transnational companies. Multinational companies focus on adapting their products and services to local markets, exemplified by McDonald's offering region-specific menu items. Global companies maintain consistent offerings and processes across all countries, such as Adobe, Hilton, and Hyatt. Transnational companies have a central corporate facility but delegate decision-making, R&D, and marketing to local markets, as seen in Nestlé's diverse executive hiring and global decision-making approach.

05:01

📈 Impact of International Business on Countries

This section highlights how international business can benefit countries by fostering economic growth and development. It mentions that countries with international businesses tend to become richer and more developed. Developing countries can gain from foreign capital, advanced technology, rapid industrial development, and increased employment opportunities. The paragraph also touches on international restrictions such as foreign exchange, trade blocs, and barriers that can affect international business operations.

10:02

🌐 Nature of International Business

The nature of international business is explored, emphasizing its sensitivity to political, economic, and technological changes. It operates on a large scale, often starting from domestic markets and expanding globally. International businesses integrate economies by utilizing resources from different countries, leading to mutual benefits. However, they are often dominated by developed countries with significant financial and technological advantages. Market segmentation is also a key characteristic, as international businesses cater to the varying demands of consumers in different countries.

15:04

🔍 Sensitivity of International Business

The final paragraph underscores the sensitivity of international business to external events and changes. It is highly affected by political and economic policy shifts, technological advancements, and other global events. These factors can significantly influence business operations, either positively or negatively. The example of President Duterte's policies affecting businesses in the Philippines is given to illustrate how government actions can have a direct impact on international business operations.

Mindmap

Keywords

💡Multinational Company

A multinational company is a corporation that manages businesses in multiple countries. These companies often adapt their products and services to suit the local markets where they operate. In the script, McDonald's is used as an example, where they offer a 'name salad' in some locations and KFC offers rice, indicating how they cater to local tastes.

💡National Company

A national company typically operates within a single country and may not have international operations. The script does not provide a direct example, but the term is used in contrast to multinational and global companies to highlight the scope of business operations.

💡Global Company

A global company has a presence in multiple countries but maintains consistent offerings and processes across all locations. Unlike multinational companies, which adapt to local markets, global companies offer the same products and services everywhere. Adobe is mentioned as an example, suggesting that its software offerings are the same worldwide.

💡Transnational Company

A transnational company operates across borders with a decentralized approach, often giving decision-making power to local markets. They may have a central corporate facility but aim to make decisions from a global perspective. The script uses Nestlé as an example, indicating their senior executives are from various countries, reflecting a diverse and global decision-making process.

💡Market Adaptation

Market adaptation refers to the process by which companies modify their products or services to meet the preferences and demands of consumers in different markets. The script explains that multinational companies focus on this to lower costs and better serve local customers, as seen with McDonald's and KFC adjusting their menus.

💡International Restrictions

International restrictions encompass laws, regulations, and policies that affect how businesses operate across different countries. These can include foreign exchange controls, trade blocs, and trade barriers. The script mentions these restrictions as significant factors that can greatly affect international business operations.

💡Economic Development

Economic development refers to the process by which a country improves its economic well-being and quality of life for its citizens. The script suggests that countries that participate in international business tend to become richer and more developed, benefiting from foreign capital and technology.

💡Market Segmentation

Market segmentation is the strategy of dividing a broad market into distinct groups of consumers with similar needs and characteristics. International businesses often produce goods according to the demands of consumers in different market segments. The script points out that the demand of consumers varies greatly in different countries, necessitating this approach.

💡Integration of Economies

Integration of economies refers to the interdependence and interconnectedness of different national economies. The script mentions that international businesses often utilize labor, resources, finance, and establishments from other countries, creating a win-win situation and fostering economic integration.

💡Sensitivity to External Factors

International businesses are highly sensitive to changes in the political environment, economic policies, and technological advancements. The script highlights that these factors can significantly affect international business operations, either positively or negatively.

💡Domestic Business

Domestic business refers to commercial activities that occur within a single country. The script contrasts domestic businesses with international ones, noting that international businesses often start at a domestic level before expanding globally.

Highlights

Multinational companies adapt their products and services to each individual local market.

McDonald's and KFC offer different menu items in different countries to cater to local tastes.

Multinational companies aim to lower costs by using local materials and resources.

Global companies have a consistent offering and process across all countries.

Adobe is an example of a global company with consistent offerings worldwide.

Google's operations in China had to adapt to local regulations, illustrating the challenges of global consistency.

Transnational companies give decision-making power to local markets while maintaining a central corporate facility.

Nestlé is an example of a transnational company with a global perspective and local decision-making.

International restrictions such as foreign exchange, trade blocs, and trade barriers affect international business.

Inflation can impact the cost of products and services in international business.

International business can lead to economic development and job creation in participating countries.

International businesses often start at a domestic level and then expand to a global scale.

Economies are integrated as companies utilize resources from different countries.

Developed countries often dominate international business due to financial capacity and technological advancement.

International businesses produce goods according to the demand of consumers in different market segments.

International business is sensitive to political, economic, and technological changes.

Government policies can significantly affect the expansion and profitability of international businesses.