Chapter 20.3, Problem 4R

To determine

To evaluate: The difference between a multinational and an affiliate.

Explanation of Solution

A multinational corporation (MNC) has infrastructure and other resources in one other nation than its place of origin. Usually, a multinational company has offices or warehouses in various countries, and a centralized corporate headquarters where global management is coordinated. These firms are also called to as international or multinational corporate organizations tend to have expenditures which surpass those of many small nations.

Affiliate is generally used to define a corporate partnership in which one firm holds less than one majority stake in the other corporation 's shares. Affiliations may also define a form of partnership in which the larger parent company is subsidiary of at least two separate firms. In the retail sector even the term affiliate is used. In this scenario, one corporation becomes partnered with another to market their goods or services and to receive a profit to do so.

Economics Concept Introduction

Introduction: In many cases of foreign direct investment, firms start creating host country subsidiaries and affiliates to avoid negative prejudice linked with foreign ownership or bad impression associated with buying with owning a controversial parent company.