Formation of Global Companies Short Answer Type Questions

Question 1.
What are the stages of development of company at global level?

  • Domestic company
  • International company
  • Multinational company
  • Global company
  • Trans national company.

(a) Domestic company: This company carries its business at national level under domestic rules.

(b) International company: These companies carries in business in two or more countries by opening its branches. Places and polices of business are framed by Head Office of home country itself.

(c) Multinational company: These companies will have domestic orientation with decentralized management and work in many countries as local companies. .

(d) Global compaies: Global companies have centralized hub level. It has global market and uses resources globally. It will have mixed orientation. These companies are strking the right balance between global and cocal factors.

(e) Transnational companies: This companies have a global strategies. It will have integrated network and use global resources.

Question 2.
What is global company? What are its features?
Global company means a company which carries its business around the world and has the ability to compete in domestic markets with foreign competitions.
Features of global company:

  • Its business operations are in multiple units located in different parts of the globe but all – linked by common ownership.
  • All the units draw on a common pool of resources such as money, credit, information, patents, trade mark, trade names and control systems.
  • All the units respond to some common strategy.
  • Personal resounes contains high diversity.
  • This company transactions includes intellectual properties and technology process accross the globe.

Question 3.
State the features of multinational company.

  • It is a large scale business company have its operations in a certain minimum number of countries (i.e. at least in six countries).
  • It operates through branches, subsidies, joint ventures, etc in host countries.
  • It possesses management team which companies personal drawn from different countries.
  • It is managed controlled by professionally trained personnel of several countries therefore. It is has professional management.
  • It has centralized control with the head office and it has, its head office in the home country.

Question 4.
Write a note on management style of MNCs.
Efficient operation of multinational companies requires an effective organizational structure. A successful system is required to operate internally and to control the business smoothly. Several factors affect the organizational structure of MNC they are:

  • Company object
  • Management style
  • External constraints
  • Internal constraints etc

Management style of a company can effect the organizational design profoundly. There are three management style in MNCs. They are –
(a) Ethnocentric management style: It is characterized by strong control by the parent company strong centralization in decision making and most of its managerial personnel are home country nationals.

(b) Poly centric management style: This management style allows decentralization of authority and decision, making. Management personnel in foreign subsidiaries are largely of host countries.

(c) Geo centric management: It is the combinations of poly centric and ethnocentric management style major decision making powers are centralized and management personnel in any particular nationality. The characteritics of these management styles are essential for organizational designs and to control the business strategy.

Question 4.
Explain the various types of MNC.
(a) Transnational Corp: Incorporated or Unincorporated enterprises comprising parent enterprises and their foreign affiliates.

(b) Parent enterprise: controls assets of other entities in countries other than its home country, usually by owning a certain equity capital state (usually 10% or more)

(c) Foreign Affiliate: is an incorporated or unincorporated enterprise in which an investor, who is resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise, A subsidiary, associate, and branches are all referred to as foreign affiliates.
→ Subsidiary: is an incorporated enterprise in the host country in which another entity directly owns more than half of the shareholding voting power and has the right to appoint or remove a majority of the members of the administrative, management, or supervisory body.

→ Associate: is enterprise in the host country in which an investor owns at least 10% but not more than half of the shareholders voting power.

→ Branch: is a wholly or jointly owned unincorporated enterprise in the host country.