• Categorized under Business,Organizations | Difference Between Multinational and Transnational
Various factors such as modern, affordable and reliable communication technology have made it easy for companies to operate in other countries apart from the mother country. International corporations are classified based on business structure, products and services offered and also investment type. Examples of international corporations based on business structure include multinational and transnational corporations. These two form the base in international business operations. Because they operate under similar conditions, multinational and transnational corporations are sometimes labeled as one. This, however, should not be the case as they have various differences.
What is Multinational?
This is a corporation that has assets and facilities in one or more countries, other than the home country, and has a centralized office where global management is coordinated. Decision making hence affects all the subsidiaries globally.
What is Transnational?
These are corporations which operate in other countries, other than the home country, and do not have a centralized management system. Decisions are hence made to suit the operating zone. Similar firms operating in other countries cannot be referred to as subsidiaries, since the management system is not centralized. Transnational companies are also not loyal to the operating country’s value system, but are focused on business expansion.
Similarities between Multinational and Transnational
Both have foreign affiliates and operate globally
Both have local services as well as production hence affect employment, standards of living and household incomes
Differences between Multinational and Transnational
Multinational refers to a corporation that has assets and facilities in one or more countries, other than the home country, and has a centralized office where global management is coordinated. On the other hand, transnational refers to a corporation which operates in other countries, other than the home country, and do not have a centralized management system.
While multinationals have subsidiaries in other countries, a transnational does not have subsidiaries in other countries.
Decision making in a multinational is made in the mother country and should be effected in all the subsidiaries globally. On the other hand, decision making in a transnational is made by individual transnational corporations.
Multinationals face restrictions when it comes to local markets since they have centralized management systems. On the other hand, transnational companies are free to make decisions independently based on local markets.
Multinational vs. Transnational: Comparison Table
Summary of Multinational vs. Transnational
While both multinational and transnational corporations operate globally, multinational corporations have a centralized global management system while transnational corporations do not have a centralized management system. For this reason, business decisions occur at different levels. This limits decisions that can be made by individual multinational corporations. Both, however, are major contributors to economic development through the provision of goods and services as well as employment creation.