Multinational companies have been around for some time, and as a result of modern, efficient communication and transportation methods, they can operate in various countries in addition to their home country. These corporations are often referred to as multinational corporations or MNCs. However, there is another term used for similar companies operating in multiple countries: transnational. This article aims to highlight the differences between multinational and transnational companies, clarifying these two concepts for readers.
Key Takeaways
- Transnational corporations are a type of multinational corporation.
- Multinational corporations have an international identity tied to their home country where they are headquartered, while transnational corporations do not consider a particular country as their base.
- Multinationals have branches in other countries, while transnationals have subsidiaries.
When a company’s growth rate surpasses the rate at which its products or services can be used by people in its home country, it tries to internationalize its business in anticipation of greater profits. Thus, when a company invests in another country and conducts business with that country, it is considered a multinational. A single company can have operations in any number of countries.
A different term has been created to describe corporations with a presence in more than one country: transnational. Transnational companies are business entities with operations in multiple countries, and many MNCs can also be classified as transnational companies.
The primary difference between a multinational and a transnational company lies in the fact that a transnational company does not consider any specific country as its base, home, or headquarters. Although multinational companies have a parent country and centralized decision-making process, they adopt a unique selling strategy for each country where they have investments. This strategy is designed with the local market requirements and government regulations in mind. Often, MNCs must adhere to the sensitivities and culture of the local people.
