The subject of assignment at the assignment criteria box Essay

The subject of assignment at the assignment criteria box - Essay Example Multinational companies are those companies with branches in several countries. A multinational company is a main company that produces in foreign countries through its branches or partners situated in several countries. The policies of the branches and partners are directly controlled by the parent company which sets strategies for all the activities of the company that go beyond the boundaries of the host countries. These include; product marketing, personnel, financial matters as well as production strategies. The policies may have host country orientation or parent country orientation (Feldman, 2008, pp.22-27). A multinational company may be owned by citizens of one, two countries or more. In another situation, a company may establish branches in different countries in order to reduce the cost of transporting raw materials in order to reduce the final cost of the products that is added to the consumer price. A company may also establish branches in countries that import its products in order to escape import tax that may be enforced by the importing country against foreign companies. An example of this is when external levy was enforced against outsiders by the European Community, companies from the United States engaged in Foreign Direct Investment in order to evade these tariffs (Howard Perlmutter, 1969). Fluctuating exchange rates are also a factor that leads to the establishment of multinational companies in order to avoid losses that are associated with these rates. This phenomenon arises when companies produce at a high value of the local currency and then the value falls during exportation. They opt to establish a subsidiary industry in the importing country. Competition is also a factor that gives rise to multinational companies. A company X in one country may be producing the same products as another company Y in a different country, both competing for a