The Example of Multinational Corporation Operation in a Foreign Market

Multinational Corporation (MNC) is a business organization whose activities are located in more than two countries and is the organizational form that defines foreign direct investment, which the form consist of country location where the form is incorporated and of the establishment of branches or subsidiaries in foreign countries (Kogut, 2001; Shah, F. A., Yusaf, D. M., Hussain, A., & Hussain, J., 2012); or it can simplify to say if there have cheap production cost are located in other countries, MNC will place their business in there to enjoy material resources (Bennett, 2002). There are few alternative entry strategies that MNC enter into foreign market which can divide into two categories, domestic production and foreign production. For domestic production, the company production process operation conduct in home country then export either direct or indirect way to the foreign country. In the meanwhile, foreign production strategy include assembly, contact manufacturing, licensing and franchising, joint ventures, and 100 per cent ownership. MNC can perform their business activities and operation in terms of the number of countries in which they operate. They can operate in 100 countries, with hundreds of thousands of employees located outside its home country (Kogut, 2001). The main concern is whether capital can flow from one country to another in expectation of higher rates of return and which entry strategy is more suitable and optimal with company policy, foreign culture and regulation.
Licensing is a common entry strategy to enter into foreign market with a limited degree of risk. It is usually for a longer term and involves greater responsibilities for the local producer (Lambin, 2007). Licensing is similar like franc...

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...uction, and increased market power. Nonetheless, the big problem is power of control had been divided due to joint venture mean two companies join together to develop new business idea and environment. In order to solve this problem, the joint venture agreement is the optimal solution which it permits the avoidance of control problems. In addition, the presence of local firm facilitates the integration of the international firm in a foreign environment. (Lambin, 2007)
In the nutshell, MNC can earn global profit maximization in foreign market through either licensing or joint venture. It need to depend on how MNC policy work, if the management of MNC wish not engage in huge capital investment, they may heading to licensing. Yet, host country policy and regulation and inflation issue need to be concern too where it will change organization structure in foreign market.