In a global economy, international competition, primarily through multinational and transnational organizations, plays a pivotal role. In developed countries like USA, 70 to 85 per cent of economy is influenced by multinational organizations.
Managing these types of organizations requires philosophies and systems, which are different from domestic organizations. International business operations can take several different forms. Four basic types of international organizations differ in the degree of international activities. A typical MNC has autonomous units that operate in several countries. Shell, Philips and ITT are three typical examples of MNCs.
They give autonomy to their subsidiaries in different countries to run their business independently. Subsidiaries are empowered to manage local issues like taste and preferences of customers and design of new products accordingly, adoption of strategies to tackle political pressures and economic trends.
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The degree of such independence even extends to non-integration with the MNCs’ headquarter. The global corporations, another form of MNC, maintain control of operations, as they treat the world market as unified whole.
Companies like Matsushita and NEC, considered world market as a unified whole and this way they tried to maximize their efficiency on a global scale. Typically, these companies function like a domestic company, except that they view the world as their market place.
A transnational corporation achieves both the local responsiveness of an MNC and at the same time the efficiencies of a global organization. They make use of networked structure to coordinate their specialized facilities located around the world. In this way, transnational organizations provide autonomy and independence to their units across the world, making all the units as integrated whole.
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The good examples of transnational companies are Ford, Unilever and British Petroleum. Micro-multinationals are small MNCs, who usually confine to single or specific products or services. BIC pen of USA could be a good example, as it only produces use-and-throw pen for almost half-a-century.
Primary features of these forms of organizations are that they are strong enough to influence the world economy in following ways:
i. Production and distribution extending beyond national boundaries.
ii. Systematic transfer of technology among the units located in different countries.
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iii. Direct investments in several countries.
iv. Capability to influence the balance of payment of countries of their operation.
v. Capability to exert political impact.
vi. Capability to overcome the barriers of nationalism.