Difference Between TNC and MNC

Edited by Diffzy | Updated on: August 08, 2022

       

Difference Between TNC and MNC Difference Between TNC and MNC

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Introduction

Several businesses all around us continue to strive to be the best. Additionally, each organization has been categorized according to its regional makeup. Further, they are educated either globally or domestically. The world of today has been completed by companies like Apple, Microsoft, Google, McDonald's, Amazon, Facebook, and other fast-food franchises.

TNC vs MNC

The primary distinction between TNCs and MNCs is that the latter have parent firms and subsidiaries. TNCs, on the other hand, only have firms as subsidiaries. Additionally, although the latter lacks a centralized administration system, the former does. The Transnational Company is referred to as TNC. Because they trade with nations other than their own, they are frequently distinguished from MNCs. 

Difference Between TNC and MNC in Tabular Form

Table: TNC vs MNC
Parameters of Comparison
TNC
MNC
Meaning
A decentralized business known as a transnational corporation encompasses its production of products and services, foreign exchange, and any investments with other nations. TNC established its network in poorer nations to lower production costs.
Multinational Corporations are centralized businesses that control investment, management, and the production of goods and services both domestically and abroad.
History
TNC began to emerge in Western Europe in the 16th century. TNC evolved widespread in the sector of industrial capitalism later in the 19th century, with burgeoning engagement by numerous corporations, mostly in the US and Western European countries.
The East India Company started trading products and services internationally in 1601. The Dutch East India Company was the East India Company's twin MNC later in 1603.
Headquarters
TNC's headquarters are not in its country of origin but rather in a developing nation where manufacturing takes place.
The home nation of MNC, where the first product production started, is where the company's primary headquarters are situated.
Structure
A transnational firm works in several nations where products and services are produced and have a decentralized organizational structure.
Multinational corporations have centralized management, with the home nation serving as the main headquarters and other nations being used for manufacturing.
Examples
A well-known business Nestle is a multinational corporation with activities spread across several developing nations.
Microsoft. Among the most well-known multinational corporations in the world are Coca-Cola, IBM, and Apple.

What is TNC?

Transnational businesses, as was already said, are decentralized and can increase their earnings by interacting with local markets rather than having a set motherland. The word TNC was first used in the eighteenth century in and around the countries of Western Europe. The East India Enterprise was a dominant transnational company at the time.

Their business targets economically developed nations to attract inexpensive labor for greater manufacturing, and their strategic ideas are well praised. Additionally, because they may move their resources and activities to any region, they are always regarded favorably in terms of economics. Their main goal is to give their stockholders the biggest profit of their whole life.

TNC has been a multinational firm whose only success has come from the shifting tide of foreign investments around its headquarters. It is not a huge concern for them to make their judgments in conjunction with regional markets because they are allowed to run their own business. These businesses include Nestle, whose factory floors located abroad provide the majority of the company's income.

McDonald's, Apple, Starbucks, and any other company with a significant worldwide impact but no recognized homeland are instances of TNC.

The nature of transnational corporations is often oligopolistic (a limited number of companies operating in the same industry). They hold a dominant position in the market as a result of their enormous size. To gain enormous economic power, they also purchase other businesses. For instance, Hindustan Lever Ltd. has increased its market share in personal wash, washing powder, washing bars, shampoos, and skin care creams by purchasing Tata Oil Mills, Ponds India, etc.

TNCs are present in practically every nation, with the USA perhaps being the largest. Even emerging nations have their TNCs that conduct business in other developing nations. TNCs from emerging nations, however, is incomparable to those from industrialized nations. As a result, when considered as a whole, the TNCs phenomena is primarily one of the developed countries.

TNCs operate with flexibility and agility to integrate their global operations. TNCs must have the capability and flexibility to create and distribute goods through ongoing advancements and innovations to be able to fulfill the constantly shifting wants of customers who are extremely adaptable and dynamic. Managers must have the flexibility to adapt to the constantly shifting demands of the economic, political, and legal environments in the modern world, where change is the key to worldwide competitiveness.

The TNCs have engaged in a wide range of activities. TNCs provide services in several areas, including product promotion, providing finance, technology transfers, research, and knowledge creation. TNCs, on the other hand, are mostly restricted to industries that produce dynamic goods and services, such as heavy engineering, chemicals, pharmaceuticals, and the mining and petroleum industries.

Characteristics of Indian TNC

Smaller But with a Growth Attitude

Indian multinational corporations are more recent entrants into the worldwide commercial sphere, making them smaller in size than foreign multinational corporations. Indian TNCs, meanwhile, is expanding through acquisitions. As an illustration, Asian Paints purchased Delmege Forsyth and Co. from Sri Lanka together with four other companies from Australia, Egypt, Singapore, and Fiji.

Geographical Expansion

Indian multinational corporations are mostly found in emerging nations like Malaysia, Indonesia, Thailand, Singapore, Sri Lanka, Nigeria, Kenya, the United Arab Emirates, etc. The USA, UK, Germany, and other industrialized nations have seen some of their influence.

Low Cost/Product Differentiation Strategy

To combat fierce competition from international MNCs, Indian TNCs employ low-cost and/or product differentiation strategies.

Global Workforce

To get a more accurate understanding of local culture, customs, and values, Indian TNCs are increasingly hiring workers from the host nation. For instance, Infosys employs 600 people from 33 other countries outside India.

More Products

Indian TNCs are expanding their product offerings. Mr. Kumara Mangalam, for instance, has expanded the Birla companies' businesses into the areas of fashion, software, cellular communications, financial services, and insurance.

Adoption of Modern Management Strategies with a Focus on Research and Development

To attain desired objectives, Indian TNCs are continually utilizing the most contemporary management techniques. To develop the expertise and abilities necessary to be competitive in marketplaces throughout the world that are characterized by fierce rivalry, they are investing enormous quantities of money in research and development.

High Mortality Rate

Due to imprecise goals and a lack of knowledge of foreign cultures and markets, many Indian TNCs have failed.

What is MNC?

A Multinational Company is referred to as MNC in shorthand. In contrast to TNC, which only owns a large number of businesses globally, it owns both its main firm and its subsidiaries. They are regarded as the finest option among young job searchers since they foster an environment where top firms may do a lot of business. In general, the MNC's jobs involve importing and exporting products and services, making investments in businesses with foreign headquarters, running manufacturing activities, and so on.

They were frequently condemned for inequality, unemployment, tax evasion, and salary stagnation among non-natives due to the emergence of globalization. Nevertheless, they had imported the best raw resources home from overseas. Microsoft is a fantastic illustration of an MNC because it lends its commerce to other countries like India while maintaining its American headquarters. Coca-Cola, Sony, IBM, and other companies serve as more examples.

Features of MNC

High Turnover and Many Assets

MNCs conduct business internationally. This implies they have substantial holdings in practically every country where they do business. Their turnovers might likewise be astronomically high. Apple, for instance, has a $1 trillion market capitalization. This is larger than Saudi Arabia's whole economy!

Control

MNCs exercise unified control. Even if they have several branches spread throughout numerous nations, their central office in the country of origin will continue to exercise primary authority. Although the host country's corporate activities have their management and offices, the head office nevertheless retains ultimate authority.

Technological Advantages

An MNC has access to enormous resources and investments, as we already witnessed. This enables them to enhance their goods and business using the greatest technology available. The majority of businesses also make significant financial investments in their R&D division to create and unearth new technical wonders.

Management by Professionals

An MNC is managed by extremely talented and professional people. They have qualified managers to handle their business operations, technology, financing, expansion, etc. Additionally, because of their reputations and resources, they can draw top personnel to their businesses.

Aggressive Marketing

MNCs have a lot of resources available for marketing, advertising, and promotional efforts. Since they aim to reach a global audience, good marketing is required. They can take the market and sell their items all over the world thanks to aggressive marketing.

Merits of MNC

  • MNCs help the host nation's economy thrive, which is one of the key benefits. They bring a lot of cash and significant investments. Then they encourage quick industrial expansion through subsidiaries, joint ventures, branches, and factories. MNCs are regarded as the carriers of progress.
  • A global firm contributes to the nation's technical advancement. They provide the host nation with fresh inventions and cutting-edge technology. They aid in the modernization of the sector in underdeveloped nations.
  • MNCs lessen the host nation's reliance on imports. Exports from the nation increase while imports decline.
  • Large amounts of finance and resources are available to MNCs in general. In R&D, a sizable amount of these resources are used. The host nations where they put up their R&D facilities may benefit greatly from this.
  • Additionally, multinational firms encourage the best possible use of the nation's resources. The development of the economy follows from this.
  • MNCs generate enormous wealth for their native nations through their profits. The business will gather fees, royalties, earnings, and charges from its host nations and send them home. The home nation benefits greatly from this enormous input of foreign currency.
  • MNCs offer a way for industrialized and developing or undeveloped nations to collaborate. This enables both parties to gain from the collaboration.
  • Additionally, these multinational firms support the development of bilateral commerce between nations. Both the national economies and the global market and economy profit from this.

Demerits of a Multinational Corporation

  • A global firm simply has financial interests in mind. Their objectives might not coincide with those of the host nation, which would be detrimental to its economic growth.
  • The presence of MNCs in some host nations may limit competition and potentially result in a monopoly or monopolistic competition.
  • In their host nations, they too impose steep taxes and levies. then transfer all the proceeds to their native nation. This currency outflow might be harmful to the host nation.
  • To reduce their significant tax bills, they also employ strategies like transfer pricing.

Main Differences Between TNC and MNC in Points

  • In addition to its primary or home country, TNC also runs its manufacturing in other nations. Unlike MNC, which conducts business both in its nation and in several others.
  • While MNCs run with a centralized management structure, TNCs operate with a decentralized management structure.
  • TNC was established in the 16th century, the same era as MNC first appeared. But after the 19th and 20th centuries, TNC prospered. MNC, on the other hand, started as the East India Company in 1601.
  • TNC doesn't have a single headquarters but instead has offices in several developing nations. Even so, MNC oversees activities in other nations from its headquarters on its own.
  • Marketing claims that MNC places at least one of its auxiliary firms in a country with a high consumer price index whereas TNC places its subsidiary companies in developing nations because of the lower cost of manufacturing.

Conclusion

TNCs are decentralized organizations that produce products and services outside of their home nation by operating or facilitating production in many nations. A multinational corporation (MNC) is a centralized management organization that operates its investment, service, or management production in at least one country in addition to its home country. TNC and MNC have similar definitions but differ in relatively minor ways in terms of how commodities and services are produced.

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"Difference Between TNC and MNC." Diffzy.com, 2022. Sun. 25 Sep. 2022. <https://www.diffzy.com/article/difference-between-tnc-and-mnc-830>.



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