Text 4. Multinational corporations

Read the text and practice exercises

It is important to distinguish between an international firm and a multinational corporation. An international firm is one that sells in international markets, either through exporting or overseas sales outlets. By contrast, a multinational corporation operates production and marketing facilities on an international level. The multinational corporation considers the world its market.

A multinational corporation (MNC) is one that has its headquarters in one country but whose operations are worldwide.

An MNC seeks international markets when it finds limitations in the home market. It tries to approach a foreign market in the effective way — either on a local or national level. Decisions made in an MNC are locally inspired. But major decisions are made by a central management, located in the country of origin of the MNC.

Multinational corporations can use either a global or multinational strategy. A global strategy uses a standardized product and marketing strategy worldwide. The same product is sold in essentially the same manner throughout the world. One example is Coca-Cola. Its four key brands now control 44 percent of the world's soft-drink sales. Its TV ads are adapted only slightly to local languages and cultures in each national market.

Under a multinational strategy, each national market is treated differently. Firms develop products and marketing strategies that appeal to the customs, tastes and buying habits of particular national markets. Many restaurant chains like Mc'Donalds, Pizza Hut, employ a multinational strategy when tailor their menus to local tastes.

Multinational corporations offer benefits of free trade to the home and host countries alike.

The home country may derive the following important advantages:

1. Exploitation of existing technology;

2. Improvement in the standard of living;

3. Increased profitability for local manufacturers;

4. Cheaper products imported into the home country.

There are also a few important advantages to the host country:

1. Transfer of proven technology;

2. Creation of employment;

3. Increase in national wealth;

4. Provision of good but inexpensive products to consumers.

Multinational corporations have become so dominant in some foreign markets that they are now the object of close political and economic scrutiny. These firms have been criticized for their profit margins; investment policies; employment practices; and dominance of local markets.

Companies operating abroad must be sure that they behave as fairly and responsibly overseas as they do at home.

Notes:

... is treated differently ... -... розглядаеться по різному ...scrutiny - тут, увага, уважне вивчення

Exercises

Exercises 1. Study the following definitions. Make sure you understand them and can reproduce them from memory:

multinational corporation - a corporation which has a home country for its main base and has a network of auxilliary operations in other countries; a corporation controlling production and marketing systems in several countries besides its own;

a global strategy - worldwide use of a standardized product and marketing strategy;

a multinational strategy strategy whereby each national market is treated differently;

brand a name - often protected by a trademark, used by a firm for its products; 102

profit margin - percentage difference between sales income and the cost of sales;

head quarters main office, where the board of directors meets and works

Exercise 2. Find the following words and phrases in the text and translate the sentences containing them:

To distinguish between; overseas sales outlets; on an international level; headquarters; limitations; to approach a foreign market; a standardized product; national market; appeal to the customs; employ и multinational strategy; benefits of free trade; to derive; proven technology; provision; dominant; profit margins, to behave.

Exercise 3. Find words in the text opposite in meaning to the following:

to confuse, expensive, disadvantage, unemployment, decline, ineffective

Exercise 4. Match the words in column A with their synonyms in column B:

A B

to distinguish to handle

habit benefit

trade name scrutiny

examination brand

universal global

custom profit

to treat to differentiate

Exercise 5. Explain the meaning of the following phrases:

A multinational corporation, a global strategy, a multinational strategy

Text 5.