Multinational Enterprises Conflicts with Host Nations

A multi national enterprise (MNE’s) is defined as a business, which owns or controls foreign subsidiaries in more than one country (Host nation). These are also called transnational corporations (TC’s). Multi national enterprises cover the entire spectrum of businesses, including manufacturing, agriculture, service provision and finance. These can be vast, well known companies or smaller specialist firms.

There are three different types of MNE’s which all have different primary motives. Horizontally integrated multinationals produce the same product in each country of operation. The only differentiation is the marketing and promotion of the product to suit the consumers of that particular area. The prime reason for this approach is expansion of the business into new areas. Vertically integrated multinationals operates by having different stages of operations in numerous geographic areas. Primarily the reason for this is control over variable costs, and to reduce the risks of the business environment. This type of company includes oil companies such as shell and car manufacturing plants such as Vauxhall. Other types of MNE’s are categorised as conglomerate. These are diverse businesses that produce a wide range of different products in numerous countries. The reason for such practise is to utilise different sources of production in different areas. Companies who adopt this approach include Heinz, Organics, Calvin Klein and Birds Eye. As this type of MNE often uses the same product in different countries, research and marketing has to be particularly extensive because what entices some cultures may offend others.

MNE’s adopt different forms of operation, but the reason for them becoming multinational is primarily profit maximisation. The utilisation of resources in different geographic locations it enables them to provide better products and services with lower costs and ultimately greater profit margin. Different countries have different advantages for multinational enterprises.