International trade has existed for centuries. Over the years, international trade has grown steadily. The globalization of markets reflects the growth of a global business. Good international relations are one of the important factors that have facilitated globalization. Multinational corporations are the most important agencies of globalization. The terms multinational corporations refer to companies that have facilities in one or more countries other than their home country. Most of the time, the head office of these companies is located in the respective home country. They may also have other sub-headquarters in the countries where they operate. A company can only be considered a multinational company if it derives at least a quarter of its profits from abroad. There are approximately eighty-two thousand multinational corporations in the world. Many theories on the origin and development, background and classification of multinational corporations have developed. This article aims to analyze multinational companies. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay Multinational companies engage in the production of goods and services both in their home countries and in foreign countries. Businesses become multinational corporations when one parent company has an investment worth more than ten percent of that of another subsidiary company located in a different country from the parent company. This investment is called foreign direct investment (FDI). Multinational companies can produce similar products in all their branches or offer diversified products depending on the reasons and strategies used in their internationalization. Internationalization is the process by which companies increase their involvement in the transfer of products, services or resources outside their home country and their participation in transnational trade. Foreign direct investment is a crucial means of internationalization. It is one of the fastest growing economic activities in the world. The study of international trade is very complex. It is therefore crucial to classify multinational organizations into different types. There are two main reasons why classification is essential; Categorization reduces the complexity of multinational organizations into a distinctive and manageable number of characteristics. So it is easy to understand the formation and functioning of a multinational company. The second reason for classification is to find the best terms in the definition of multinational companies. Different statements are used to define multinationals. Although they are used synonymously, there are subtle and significant differences in their meanings. It is therefore necessary to distinguish between the different types of multinational organizations and to define specific terms that should be used to refer to the different types of multinational companies. The classification of multinationals is generally based on the management mindset, performance and structural formation of the organizations. On the basis of management mindset, multinational companies are classified into four typologies: ethnocentric, polycentric, regiocentric and geocentric multinationals. Ethnocentric multinationals are also known as home-country oriented multinationals. Multinational companies with a vocationnational have a form of centralized management. Head office makes all business decisions. The human resources of the parent company and subsidiaries are recruited in the company's country of origin. Ethnocentric multinationals have better coordination between parent and affiliate companies, thereby infusing the corporate culture and other practices of the host country. There is also effective communication and transfer of technical knowledge. Companies belonging to the typology of ethnocentric multinationals efficiently exploit their human resources. Conversely, ethnocentric multinationals may lack host government support, which can lead to poor performance. The other typology of managerial mentality is that of polycentric multinationals. They are also known as host country oriented multinationals. In polycentric organizations, subsidiaries are treated as an independent business. Management policies are adapted to the parameters of the parent company. Human resources are employed in the host country and are mandated to formulate strategies and guidelines in the interest of the affiliated company. Head offices must control the operations of their subsidiaries. Unlike ethnocentrics, polycentrics lack adequate coordination between the parent company and the subsidiary. However, polycentric multinationals have greater productivity power due to employees' understanding of the host country's market and culture. Businesses benefit from support from the host country's government, which increases the chances of success. The other typology of managerial mentality of multinational companies is that of regiocentric multinationals. Regiocentric multinationals have a form of decentralized management. The management of the subsidiaries is independent of the head office. Subsidiary management may demonstrate poor coordination with head office managers. Employees are recruited from different countries located in the geographical area of ​​the subsidiary. States where human resources are hired should closely resemble the culture of the host country. Unlike ethnocentric organizations, regiocentric multinationals use a relatively large pool of managers. Companies can therefore achieve higher profits than ethnocentric companies. On the other hand, subsidiary managers may neglect overall company goals, which can impact the entire company. The geocentric or globally oriented multinational is the final management-based typology. In this type of multinational company, management is centralized at headquarters. The subsidiaries are under the full control of the head office as is the case in ethnocentric multinational corporations. Conversely, human resources are recruited across borders, regardless of nationality. Multinationals in this category can maximize profits from affiliates and the parent company because they employ an international and experienced workforce with global business skills. However, companies incur high costs when recruiting and relocating staff. They also need to hire recruitment agencies to find and vet employees best suited for global operations, which incurs additional hiring costs. Based on their performance, multinational enterprises are classified into four groups: multinational, international, transnational and global multinationals. MNCs are multinational companies thatemploy a localized marketing strategy. They maximize local consumer responsiveness by customizing and adapting products and marketing strategies to meet different national conditions. Companies seek to understand the culture of the country concerned to exploit its domestic market. Companies of this typology have a form of decentralized management. They allow affiliated company managers to make independent decisions. Businesses may receive support from the host government and encounter minimal resistance from citizens during times of nationalism, because they identify them as their own business. The biggest challenge of this typology is the high cost that companies incur in researching the specific needs and interests of different markets. Additionally, the budget spent on formulating and designing marketing strategies for different markets is relatively high. International multinationals are the second typology by which multinational corporations are classified. International multinationals are companies that partner with other companies with similar goals in foreign countries to work together. Companies of this typology import raw materials and export finished products to their subsidiaries. They do not have production facilities in host countries. Management is decentralized, meaning that management and head office remain in their country of origin. Companies have therefore streamlined decision-making. International multinationals have a diverse market. They thus benefit from a constant flow of income. In addition, companies of this typology do not bear the additional costs of building offices and establishing production machinery and labor in foreign countries. However, they are easily affected by nationalism and misunderstanding of international marketing strategies. Transnational multinationals are another typology of multinational corporations based on business functionality. Transnational multinationals are companies that own production facilities in foreign countries. They require foreign direct investment. Their headquarters is in the parent company's state. The head office is the hub of a network of interdependent subsidiaries. Affiliated companies may produce brand variations in different countries. However, they must maintain the overall identity of the company and its overall objectives. Due to their decentralized organizational structure, companies of this typology benefit from reduced cost of manufacturing and other functions because they distribute production facilities in areas where labor, raw materials and Other assets are readily available. Transnational multinationals, however, display poor coordination between affiliates and the parent company. Furthermore, political situations, language barriers and cultural differences are also other challenges faced by multinational companies in this typology. Global multinationals are the last type of multinational companies classified based on their performance. They have a form of centralized management. They have corporate facilities in a dozen countries grouped under one headquarters, usually located in the parent country. Global multinationals view the world as one big market. They operate with absolute constancy; that is, they manufacture similar products in all their subsidiaries or they adopt a strategy ofrelative brand adapted to local tastes. They also use similar marketing strategies in all host countries. Companies benefit from economies of scale through high production volume, thereby reducing unit costs. Management communication and coordination costs are the main challenges facing global multinationals. It is necessary that human resources of different countries be consulted on all issues such as taxation and other legal matters, communication barriers and cultural activities among others that affect the global market. Based on the structural formation of the multinational enterprise, multinationals are classified into two categories. main typologies, horizontally and vertically integrated companies. Horizontally integrated companies are companies that operate production facilities located in different countries to produce at the same level of output. When an independent company manufacturing a particular product merges with companies providing a similar level of manufacturing but from different countries, the companies form a horizontally integrated multinational. The goal of horizontal integration is to minimize competition, increase productivity, access new markets, achieve economies of scale, or increase company size. Consolidation occurs in three main forms: acquisition, merger and hostile takeover. Acquisition occurs when a company buys another independent company. A merger is the consolidation of two separate companies. A hostile takeover is a forced acquisition of an independent company. Horizontal integration can lead to oligopoly or monopoly, which is allowed by the governments of different countries. Vertically integrated companies are organizations that merge to produce different varieties of products. Vertical integration occurs when a company manufacturing a specific product partners with another company from a different country, producing a different product to work together. A company, therefore, imports goods processed by a company from a foreign country and vice versa. For example, a company in country A imports products manufactured by a company in country B and markets both products, i.e. their original product and the imported products, in country A, and vice versa. Companies merge vertically for a variety of reasons. First, different companies merge to strengthen their supply chains and thus gain full control of the industries' value. Second, fusion helps reduce the cost of production. Since different companies belonging to the same multinational corporation produce various products, the cost of producing both products is minimized. Finally, companies merge vertically to access new markets. Therefore, vertically integrated multinational companies extract maximum profits from their products. Different internationalization factors influence the decision of business owners and shareholders to venture internationally. Drivers of internationalization are factors that trigger business expansion. They include market conditions, production costs and competitive business situations. There are two main types of these factors; Pull factors and push factors. Push factors are also called country of origin drivers. These are factors that encourage companies to invest abroad. Pull factors are elements that encouragecompanies to invest in a specific country. They are also called host country drivers. Push factors reveal the disadvantages a company experiences by operating only in its home country, while pull factors reveal the advantages of venturing abroad. Internationalization factors mainly suggest the location or direction of expansion. Locality is also determined by the motivations behind internationalization. There are four main categories of motivations; market research, resource research, efficiency research and strategic asset research. Market research focuses on the demand aspect. Businesses invest remotely with the intention of providing goods and services to take advantage of foreign markets. The markets of different countries motivate business owners and shareholders of specific companies to decide to expand their operations abroad. They therefore recognize the importance of venturing into these countries. Market researchers believe that a direct presence in countries where their products are marketable is essential for the company. They believe that foreign investment allows them to promote and exploit new markets, thereby generating more revenue. Furthermore, establishing production facilities in foreign countries leads to effective competition between host country firms and the multinational corporation. A saturated market and high competition in the home country are some of the main reasons for market research. The next motivation that leads to foreign direct investment is the search for resources. Resources are essential to the survival of businesses that provide goods. Labor is also a resource in the production industry. Companies tend to seek cheap raw materials and unskilled labor to minimize production costs and maximize profits. However, the workforce must be numerous and motivated. Resource seekers seeking labor as a resource are often manufacturing firms with high real labor costs. The main reasons why companies invest in foreign countries due to resources are that the desired quantity can be acquired at a lower comparative cost or the supply does not exist at all in the home country. The availability of raw materials in the potential host country reduces the cost of these materials. Companies therefore invest in these countries to reduce transport costs. The search for efficiency is the other motivation for foreign direct investment. The main objectives of firms seeking efficiency in foreign countries are: to exploit the advantages of economies of scale and scope and to take advantage of differences in factor availability, culture, institutional arrangements and economic systems in the different countries.Through foreign investment and expansion, businesses have access to cheap labor and inputs; hence, increased efficiency in their performance. Efficiency researchers often use factor endowments in developing countries. These factors enable these companies to compete effectively in the international market. Efficiency seekers seek to reduce the costs of producing and delivering their products to their customers by establishing a physical presence in foreign countries. They also benefit from government incentives and avoid trade barriers as local businesses. The search for strategic assets isthe last motive which leads to the internationalization of multinationals. Strategic assets are non-tradable assets, that is, assets that are not exchangeable through market operations. Employee skills, knowledge, and vital supplies, among others, are examples of assets that strategic asset seekers track to foreign countries to use for their benefit. Technology is also a strategic asset sought by asset seekers in target countries. Companies obtain a motive to search for strategic assets through the acquisition of foreign companies. Asset seekers may also attempt to form alliances with other firms to exploit other firms' knowledge. Strong market competition in the company's home country triggers this motive. Resources are therefore essential to strengthen the company to maintain its competitive position. Strategic asset seekers often come from less developed countries and target companies from developed countries with high technological levels. In conclusion, the underlying reasons for the internationalization of companies are to strengthen and maintain the competitive environment, protect their value and increase their profits. The firm's internationalization motivations and strategies depend on the unique advantages and resources of the potential host country that provide competitive advantages and increased revenue. Different internationalization factors, push and pull factors, as well as reasons for expansion determine the specific benefits targeted by the company. Push and pull factors determine firms' motivations to internationalize. Business development is not limited to internationalization factors and incentives alone. There are other factors such as government policies and political factors that affect the mode of integration. Some MNEs, particularly MNCs from developing countries, view government regulations and host country government incentives as critical determinants of MNE internationalization. The firm-specific advantages that different types of multinational corporations possess are similar but differ in terms of proportionality in terms of operations. and generating profits. For example, multinational companies that produce different varieties of products can generate higher profits than those that produce similar products across all their industries. In addition, companies of the multi-national typology of multinational companies, which have a decentralized form of management, are considered local companies. They therefore enjoy the privilege of operating freely in host countries without barriers or restrictions from the respective governments and citizens. , these companies can generate more revenue than companies belonging to ethnocentric multinational companies, with a form of centralized management. However, management does not have a significant impact on the performance of multinational companies. Because the primary missions of managers are to ensure good coordination between the parent company and affiliated companies. Keep in mind: This is just a sample.Get a custom paper from our expert writers now.Get a Custom EssayIn conclusion, the evolution of international trade and the rise of multinational corporations have significantly shaped the landscape global trade. The complex nature of international trade and the complexity of,.