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Difference between Multinational and Transnational
Thanks to modern, low-cost and reliable communication technology (and a bit of nudge from the pandemic) it is now considerably easier for enterprises to operate their businesses in places outside of their country of origin. In other words, many individuals today have the chance to showcase their own companies as one with a global presence.
Based on this very asset, companies can be sorted into distinct groups considering their corporate makeup, the products and services they offer, and the financial assets they invest in. Since their corporate forms are so different, multinational and transnational corporations are examples of international corporations. These two things are the bedrock of any worldwide commercial endeavor. Due to the similarities in their operating contexts, multinational and transnational enterprises are sometimes treated as if they were the same thing. There are too many differences between them for this to be acceptable, though.
What is a Multinational Corporation?
The term "multinational corporation" is used to describe a business whose assets and facilities are situated in more than just the country of its headquarters. This means that wherever the parent company's decisions are made, it will affect its global network of subsidiaries. Think of it like a server network mechanism where the central body decides operations of all connected units.
What is a Transnational Corporation?
In this context, "transnational" refers to a company that operates in more than one country but does not have a "central" headquarters in any of those locations. This means that choices are always made with the operating area in mind.
Companies that have branches in several different countries cannot be called subsidiaries of the main firm because of the lack of a unified management structure. Furthermore, because their major focus is on growing their operations, transnational organizations are not loyal to the country's value system.
Similarities − Multinational and Transnational
Both companies operate on a worldwide scale and have subsidiaries in other countries.
Both provide local services in addition to manufacturing, which results in an impact on employment, quality of life standards, and earnings for households.
Differences − Multinational and Transnational Corporations
The following table highlights how a Multinational Corporation is different from a Translational Corporation −
| Characteristics | Multinational | Transnational |
|---|---|---|
Definition |
The definition of a multinational corporation is one that has assets and facilities in more than one country, with worldwide management being coordinated from a single location. |
A company is considered transnational if it has operations in countries other than its home country and no central headquarters for its administration. |
Operations |
Branch offices of multi-multinational firms can be found in a wide variety of countries. |
No overseas branches or affiliates are part of a truly transnational corporation. |
Decision-making |
Decisions for a multinational corporation are made in the home country and then spread to the rest of the business's operations throughout the world. |
Every transnational enterprise is responsible for making its own decisions inside the organization. |
Local markets |
Multinational firms' capabilities in domestic markets are hampered by their reliance on top-down management. |
To best serve their local markets, transnational firms enjoy unfettered discretion in making business decisions. |
Conclusion
While both multinational and transnational businesses operate on a global scale, only the former maintains a centralized global management system. This means that decisions must be made at a variety of organizational levels. This limits the discretionary power of particular multinational corporations. Nonetheless, both of them make major contributions to economic growth through the provision of products and services and the creation of employment opportunities.
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