Meaning and Definition of a Multi National Corporation

Most businesses studied so far in this unit — sole proprietorships, partnerships, cooperative societies, even a single joint stock company — operate and are owned within one country. A Multi National Corporation (MNC), sometimes called a Multi National Enterprise (MNE) or Transnational Corporation (TNC), is different: it is a giant company that owns, controls or manages production and/or service facilities in one or more countries other than the country in which it is incorporated and headquartered (its "home country"). It carries on business simultaneously in several "host countries" while a single head office in the home country continues to direct overall policy.

A widely used working definition: "A Multi National Corporation is a corporation that owns or controls production or service facilities in a country or countries other than the home country, through foreign direct investment." Two ideas sit inside this: (i) the corporation is legally registered and headquartered in one home country, and (ii) it actually owns or controls — not merely sells to or exports to — production/service units in other countries. A company that only exports its goods abroad through an agent is not an MNC by this test; it becomes one only when it sets up and controls its own factory, office, or subsidiary on foreign soil.

Well-known examples that a student will recognise from everyday life include large automobile, consumer-goods, technology and telecom companies that are headquartered in one country (say, the USA, Japan, South Korea or a European country) but manufacture, sell and employ people across dozens of countries including India — this chapter examines how such corporations are structured, why countries like India permit and even encourage them, and what benefits and concerns they bring.

Tamil Nadu's Commerce syllabus studies MNCs as one of several "Forms of Business Organisation" alongside sole proprietorship, partnership and the joint stock company — this is the same broad theme of globalisation and multinational enterprise that CBSE/NCERT Business Studies students also study under "Private, Public and Global Enterprises," even though the two boards organise and word their chapters differently.