A company often becomes involved in iritemaslonal trade by exchanging goods or services with another country—importing raw materials it may need for production or exporting finished products to a foreign market. Establishing these trade relationships is the first step in the deveLopment of a multinational business. At this stage, however, the corporation’s emphasis is still on the domestic market. As trade expands, the corporation’s dealings with companies or people outside the “home country” of that corporation increase.
The corporation then begins to view the whole world as a base for production and marketing operations. The next step In the development of a multinational business is focusing on the world market. The company may establish a foreign assembly plant, engage in contract manufacturing, or build a foreign manufacturing company or subsidiary. Therefore, a multinational corporation is a company that is primarily based in one country and has production and marketing activities in foreign countries.
Since World War II, multinational corporations have grown rapidly. The names and products of many of the multinationals have become well-known in the world marketplace: International Business Machines (IBM), Royal Dutch Shell, Panasonic, Coca-Cola, and Volkswagen. Coca-Cola, for example, now has operations in more than 180 countries.
A multinational corporation operates In a complex business environment. Cultural, social, economic, political, and technological systems vary from country to country. In order to operate successfully, a multinational company needs a basic understanding and appreciation of the foreign business environment.
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