Multinationals and Transnationals

Multinational companies are not a recent phenomenon, but it is a fact that today because of modern and fast and efficient means of communications and transportation, companies and businesses find it easy to operate in many other countries apart from their parent country. It is customary to call such companies as multinational corporations. 

However, there is another word used for similar companies operating in more than a single country and that is transnational. This article tries to highlight the differences between multinational and transnational, in order to remove any doubt in the reader’s mind about these two concepts.

There is no doubt that when a company grows at a rate faster than its products or services can be utilized by people in the home country, it tries to internationalize its business in anticipation of greater profits. Thus, when a company invests in another country besides its own and does business with another country, it is termed as a multinational. A single company can have operations in any number of countries. Today we have multinationals referred to as MNC’s.

A different word has been coined to refer to corporations having a presence in more than a single country. Transnational is also a business entity having business operations in more than a single country, and many of the MNC’s classify to be called as transnational.

The basic difference between a multinational and a transnational lies in the fact that transnational company is borderless, as it does not consider any particular country as its base, home or headquarters. Multinational companies, though having a parent country and a centralized decision making process, adopts a selling strategy that is unique to every other country where it has investments. This strategy is made keeping in mind the requirements of the local markets and the rules and regulations of the government. Often MNC’s have to abide by sensitivities and culture of the local people.