Competitive Advantages of Multinational Corporations

Competitive Advantages of Multinational Corporations

Multinational corporations are seeking an array of competitive advantages allowing them to expand on international markets:

  • Lower production costs. A standard approach where going on international markets can reduce input costs such as labor, or grant access to a broader pool of resources. Multinational corporations are often better placed to take advantage of input costs differences than a domestic corporation bound to the conditions of a national market.
  • Price stability. Input costs can vary for reasons such as variations in exchange rates, resource scarcity, and changes in labor costs. The goal is not necessarily to find the lowest input costs but to find a location where the price of relatively low input costs has the potential to remain stable for a period of time. Therefore, it is considered risky to invest in locations that may have low input costs, but could be subject to some form of instability (e.g. political) where market conditions could change.
  • Product quality. Offering consistency in product quality allows a multinational corporation to remain competitive. Quality can be measured in terms of the performance of the product (consistency and endurance), the quality of customer service, and how easy it is to maintain or upgrade a product.
  • Logistics flexibility. Market demands are regularly subject to changes, such as demand seasonality and demand surges. Being able to respond rapidly to such an event allows a corporation to remain able to offer goods on markets. At the same time, competitors may be unable to, thus being a temporary situation of monopoly. Further, the capability to withstand disruptions such as natural disasters allow multinational corporations the ability to supply markets.