International and multinational companies: main differences

With business expanding to the far reaches of the globe, certain terms must be used when  defining how they function on an international level. That is why many refer to international and multinational companies. While it may seem self explanatory, there is a bit more to each of these terms, with each being designed to apply to the way that these companies run operations outside of their home countries. It really is very simple, but the terms can seem a bit confusing, and they overlap each other, so an explanation is certainly needed.

 

International companies

 

The first term being international companies, one would think that these are companies that have expanded all over the planet on an international level. While the name may imply this, it really means something a bit different. In fact, international companies are companies that are located within only one country, referred to as its “home” country. Where it gets the name of international company, is in its exports and imports, which must be on an international level. These kinds of companies have zero investment on the outside of their own home countries, they simply provide other countries with goods and are willing to trade with other international companies.

 

Examples of international companies

 

A perfect example of an international company has to be Apple. One of the biggest companies in the world, one would think that they have a base of operations within every country known to man, but this is simply not the case. With their headquarters and official decision making teams being in the United States, it is up to their sales and distribution in other countries in order to be considered an international company. Another good example has to be any small or local business that has grown to be able to export and import goods outside of their home country. Local businesses have no real choice but to stay within the confines of their country, but if they expand large enough, they could get to the point of a multinational company.

 

Multinational companies, how do they differ from the international ones?

 

Multinational companies, on the other hand, are a bit different to international companies. They do have bases and locations in multiple different countries, but each section in each country serves as almost its very own entity. What this essentially means is that multinational companies adapt to the way that other countries run and the types of products they consume in order to accommodate to the status quo of the country and maximize profit on a local level. They can have multiple branches in all kinds of places, but each branch will run individually and make up a greater part of a whole.

 

Examples of multinational companies

 

The best examples of multinational companies have to be most fast food chains. Mainly McDonald's and Starbucks. Both of these companies originated in the United States, but expanded to other countries. In doing so, they decided to adjust each menu item and respective product sold in order to accommodate regulations, ingredient availability, and general cultural customs. So consider the menu of a McDonald's in the United States, and then remember the fact that other places, like London, for example, have other items on their menu.

 

Differences between international and multinational companies

 

Overall, the two concepts are vaguely similar and can generally be used to complement the other. The main difference comes down to how they treat business on an international level. International companies are located in just one place with negotiations being done in other countries, whereas multinational companies can be located in multiple countries, but that also changes the leadership and direction of the company depending on respective countries. It is important to note that an international company is no less than a multinational company, however, an international company could choose to expand in a way that turns them into a multinational one.

 

We recommend that you continue updating yourself on the latest trends and acquire the right knowledge about the difference between international and multinational companies. We invite you to take a look at our International Master in Business Administration [IMBA].