What Is a Multinational Corporation?

Multinational corporations have branches in more than one country, receiving at least 25% of their profits outside their home base country. With increased globalization resulting from widespread internet access to fast travel, growing your business into a multinational corporation could give you an edge over your competitors by allowing you to reach more potential customers.

However, if you’re considering becoming a multinational corporation, consult with the experienced international law firm Rooney Nimmo, who can provide guidance on expanding into the US.

Advantages and Disadvantages of Multinational Corporations

When considering expanding your corporation into other countries, you must weigh the advantages and disadvantages. Whether to become multinational depends on each company’s business strategy and the competitive landscape.

Advantages

There are many advantages to operating as a multinational corporation.

Tax efficiency
A multinational company can filter profits through countries which have lower corporation tax rates. However, there can be a reputational downside to doing this. It is important to seek tax advice beforehand, and Rooney Nimmo can help.

Employment of skilled labor
A multinational has a bigger pool of labor to employ. The firm can employ specialists from across the globe. Having a bigger talent pool enables it to employ better managers or innovators, which can drive a company’s growth.

Wider customer base
Most firms reach product of market saturation—in a product life cycle, a large firm has very limited scope for growing sales in a single economy. Selling abroad enables a much greater consumer base and opens up new possibilities to increase sales.

Economies of Scale
Many industries have high fixed costs. This means firms who can grow in size will benefit from lower long-run average costs and greater efficiency.

Disadvantages

Although there are many advantages to expanding internationally, you could also encounter some issues during the process. Many countries with lower wages and fewer regulations are less stable than those with higher wages and extensive regulations. Political upheaval, for example, could force foreign companies out or spark violence that makes manufacturing difficult or impossible.

Additionally, less strict regulations could make your product cheaper and decrease the quality, resulting in fewer returning customers.

You could also become the target of local anger in your home country if you outsource jobs to a cheaper one since available jobs to locals will decrease.

Types of Multinational Corporations

There are four primary types of multinational corporations. Consult with the team at Rooney Nimmo to determine which suits your situation best.

Global Centralized Corporation

These corporations have a centralized organization head in one country and often outsource work to developing countries for cost reduction purposes. However, the offices usually remain based in a single country, with central offices controlling all aspects of the company.

Decentralized Corporation

These types of corporations usually have a strong base in their home country. However, unlike centralized corporations, each local office has its own command structure and the freedom to make decisions. This set-up encourages faster expansion since local offices can make more informed decisions about the local market.

International Company

These companies focus on furthering the Research and Development of the parent company through smaller offices based around the world.

Transnational Corporation

Transnational corporations use a combination of the other three types to create a decentralized, flexible structure.

Expand Your Business and Thrive with Rooney Nimmo

Turning your company into a multinational corporation requires extensive legal, financial, and business acumen. Before committing to a plan, consult with the team at Rooney Nimmo to determine the best route of action for your company.

We have lawyers located in the United Kingdom, the United States, China, and Hong Kong. Contact us today to discuss which countries are best for your expansion and create a short- and long-term plan to become a successful multinational corporation.

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