We tend to read the following terms and think they refer to any company doing business

in another country.

• Multinational
• International
• Transnational
• Global

Andrew Hines over at BNET has brief and clear definitions of each of these terms, Get
your international business terms right.

Each term is distinct and has a specific meaning which define the scope and degree of
interaction with their operations outside of their “home” country.

• International companies are importers and exporters, they have no investment

outside of their home country.
• Multinational companies have investment in other countries, but do not have
coordinated product offerings in each country. More focused on adapting their
products and service to each individual local market.
• Global companies have invested and are present in many countries. They market
their products through the use of the same coordinated image/brand in all markets.
Generally one corporate office that is responsible for global strategy. Emphasis on
volume, cost management and efficiency.
• Transnational companies are much more complex organizations. They have
invested in foreign operations, have a central corporate facility but give decision-
making, R&D and marketing powers to each individual foreign market

Don’t make the mistake of calling a company global when it’s really just international –
or even worse, saying a company is multinational when it’s really transnational! For
convenience, it’s common to use the umbrella term international business to describe
business activities that extend past the borders of a company’s home country. But
international business analysts (like superstar Michael Porter) have a more precise
vocabulary to describe varying foreign activities. Here’s a summary list of the important
categories:

• International companies have no foreign direct investments (FDI) and make their
product or service only in their home country. In other words, they’re exporters
and importers. They have no staff, warehouses, or sales offices in foreign
countries. The best examples of international companies, in the strict sense, are
exotic retail shops that sell imported products, or small local manufacturers that
export to neighboring countries.

• Multinational companies cross the FDI threshold. They invest directly in foreign
assets, whether it’s a lease contract on a building to house service operations, a
 plant on foreign soil, or a foreign marketing campaign. Generally, though.
Multinational companies, however, have FDI only in a limited number of
countries, and they do not attempt to homogenize their product offering
throughout the countries they operate in — they focus much more on being
responsive to local preferences than a global company would.

• Global companies have investments in dozens of countries but maintain a strong

headquarters in one, usually their home country. Their mantra is economies of
scale, and they’ll homogenize products as much as the market will allow in order
to keep costs low. Their marketing campaigns often span the globe with one
message (albeit in different languages) in an attempt to smooth out differences in
local tastes and preferences.

• Transnational companies are often very complex and extremely difficult to

manage. They invest directly in dozens of countries and experience strong
pressures both for cost reduction and local responsiveness. These companies may
have a global headquarters, but they also distribute decision-making power to
various national headquarters, and they have dedicated R&D activities for
different national markets.

In the world of eCommerce and virtual business, it becomes more difficult to stick any
particular company squarely into a category. At that point, it’s more helpful to categorize
a company by its intention or strategic focus, rather than its actual operations.

International business is a term used to collectively describe all commercial

transactions (private and governmental, sales, investments, logistics, and transportation)
that take place between two or more nations. Usually, private companies undertake such
transactions for profit; governments undertake them for profit and for political reasons. It
refers to all those business activities which involves cross border transactions of goods,
services, resources between two or more nations. Transaction of economic resources
include capital, skills, people etc. for international production of physical goods and
services such as finance, banking, insurance, construction etc.

A multinational enterprise (MNE) is a company that has a worldwide approach to

markets and production or one with operations in more than a country. An MNE is often
called multinational corporation (MNC) or transnational company (TNC). Well known
MNCs include fast food companies such as McDonald’s and Yum Brands, vehicle
manufacturers such as General Motors, Ford Motor Company and Toyota, consumer
electronics companies like Samsung, LG and Sony, and energy companies such as
ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national
markets.
Areas of study within this topic include differences in legal systems, political systems,
economic policy, language, accounting standards, labor standards, living standards,
environmental standards, local culture, corporate culture, foreign exchange market,
tariffs, import and export regulations, trade agreements, climate, education and many
more topics. Each of these factors requires significant changes in how individual business
units operate from one country to the next.

The conduct of international operations depends on companies’ objectives and the means
with which they carry them out. The operations affect and are affected by the physical
and societal factors and the competitive environment.

There has been growth in globalization in recent decades due to the following eight
factors:

• Technology is expanding, especially in transportation and communications.

• Governments are removing international business restrictions.
• Institutions provide services to ease the conduct of international business.
• Consumers know about and want foreign goods and services.
• Competition has become more global.
• Political relationships have improved among some major economic powers.
• Countries cooperate more on transnational issues.
• Cross-national cooperation and agreements.

What are transnational corporations?

Transnational corporations (TNCs), also known as multinational corporations, are businesses that
operate in more than one country. This means they usually have headquarters in one country and
other facilities, such as a factory or an office, in one or more other countries. Many TNCs earn
more revenue than the government budgets of some developing countries, which make them
powerful entities in the world economy.

See image 1

Commercial issues
Supply and demand is the staple principle on which business is built, so when a TNC operates in
a different country to its source (country of headquarters), it needs to take into account the
commercial environment of the host (country in which the operation is located). This may be as
simple as a shift in values, for example an advertisement in one country may be considered
offensive in another. Sometimes the issues are more complex, such as adjusting to different
business cultures.

Global brands have little or no variation in their products, ensuring that consumers worldwide can
access the same standard of goods and services wherever the brand exists. An Apple iPod has
no local variation apart from the language on screen, for example, which means that an approved
repairer should be able to fix it if it breaks, wherever you are in the world.

See image 2
Social commentators note, however, that global brands homogenise the marketplace, which
means to decrease variety and make everything the same. Although some TNCs make local
concessions, for example, McDonald's burgers in India do not contain beef because cows are
sacred there; many TNCs do little to celebrate cultural differences that make the countries of the
world unique.

See image 3

Economic issues
Because TNCs transcend the physical boundaries of countries, many of them remain stable when
the market shifts to different parts of the world. If, for example, a TNC had operations in Latin
America and Asia and Asia became a profitable market while Latin America waned, then the TNC
would still benefit from the shift in focus over the local companies in Latin America.

TNCs also have the freedom to move operations to where the market suits them, sometimes
through tax incentives offered by a country's government to set up operations there or because a
market has emerged in a place that was previously restricted or closed.

Existing in different countries means that TNCs are susceptible to fluctuations (variations) in
currency and need to monitor the currency to adjust their prices accordingly. If the US dollar
decreased in value, but the TNC continued to charge the same amount for its goods and
services, then the TNC would actually lose money from all transactions completed in US dollars.

See image 4

Legal issues
Different countries have different laws, including those for setting up operational structures like
offices and factories, registering the business, employing people and doing business. TNCs need
to negotiate the laws of each host country while maintaining a consistent company policy
worldwide.

Employment laws usually include employee conditions that relate to the safety of the working
environment, minimum wage standards and quality standards with regard to the products and
services the company provides. They may also include laws that cover employee behaviour, such
as discrimination and harassment laws.

There may be some legal issues related to the environment where TNCs operate. Commercial
logging companies, for example, may have limits imposed on how many trees they can cut down
in a set period. Other companies may be liable to pay damages if they pollute the environment,
for example, an oil spill from a tanker is likely to attract a large fine. Some countries have
introduced financial disincentives to offset damage to the environment, such as carbon taxes for
industries that emit carbon into the atmosphere.

See image 5

Ethical issues
Ethical issues involve aspects of a company's operation that are not covered by the law. If the
international market perceives a TNC's operation as unethical, there could be repercussions
against the company, which may affect global trade.

Issues include employment issues, such as 'sweatshop' work, where the law does not specify
minimum working conditions (or existing laws are not policed) leading to exploitation of workers.
It could also relate to operational issues such as closing or reducing operations in one country
and moving to another because the labour costs are cheaper. Although a company is within its
rights to pursue its best interests, there are economic consequences when a TNC closes
because of the local impact of large-scale unemployment.

Most ethical concerns related to ecological issues involve unsustainable practices, such as land
clearing for unsuitable crops. Ecological issues often tie in with social issues. This is often the
case with the timber and mining industries where the products are economically practical, but the
operations decrease the efficiency of other industries or leave communities with damaged
ecosystems in the aftermath.

Some issues are indirect, like market competition. One unethical practice is when the TNC
reduces its prices in the short term to attract the local market and push local competition out of
business and then, when there is no competition, raise the prices. TNCs can afford to trade with
reduced prices initially because of their income from other established sources.