How to Describe the Four Basic Levels of International Business Activities
Once limited to mainly domestic companies engaging in transnational trade, international business has grown rapidly in the late 20th and early 21st centuries. Multinational corporations whose operations sometimes span dozens of countries now play a key role in world economic affairs. In fact, some multinational companies are wealthier than entire countries. As international commerce has grown more complicated, economists have devised classifications to describe corporations' differing levels of international business activity.
International companies operate primarily in a single country but have some exposure to foreign markets. The most common type of American international business is one that purchases products or raw materials from international markets. Best Buy is an example of this type of business. The company operates in the United States and employs mostly American citizens, but it sells a large amount of imported goods. International companies also include businesses that outsource a substantial amount of work and ones that maintain minor operations in foreign countries.
Companies that operate in more than one country and receive substantial income from these foreign operations qualify as multinational in nature. Multinational companies, while usually controlled by management based in a single country, cater to markets in individual countries. Apple Computer is an example of a multinational corporation. While Apple maintains a strong American management team, the company directly targets markets in a wide variety of countries.
Economists often debate the exact characteristics that distinguish a multinational company from a transnational one. In general, transnational companies are the very largest multinational businesses with separate divisions that operate with significant independence in their assigned markets. BP Amoco is an example of a transnational business. BP Amoco maintains largely independent continental divisions, employs senior executives from a variety of countries and often makes decisions from a global perspective that is not restrained by its national headquarters.
No known global companies exist, but economists have established criteria for evaluating what a global company would be. Such a business would operate on a worldwide scale, but it would not be tied legally to any one nation. It would not have a native country of incorporation, and its management would operate outside of any single country's jurisdiction. An example of a global company would be a space exploration corporation chartered by the United Nations.