UGF Lecture 1

Management > Global Firm > MNE

MNE

A Multinational Enterprise (MNE) is described as:

"a firm which owns or controls value-adding activities in two or more countries".

There are three aspects of this definition on which to elaborate:

1. "Value added activities" are things a company does which is of benefit to the firm and its customers, and for which its customers will pay more money. Activities can include Research and Development (R&D), day-to-day management and marketing. If the firm locates any one activity outside its home country it becomes an MNE.
2. The term "MNE" refers to the presence of a firm's business minimum of two countries, including the home country. This is the theoretical definition, as "real" MNEs are expected to operate in many countries.
3. MNE's "Own or control" activities overseas, with control being the most important aspect (ownership is the most powerful way of gaining control). An MNE needs to be able to control the way a subsidiary behaves in order to align it with the company global strategy.

Own and control