Why Invest in a Multinational Corporation?

A multinational corporation is a company that has business in several different countries at the same time. These companies employ various business strategies that are unique to the regions in which they are located. Multinational corporations can often gain a competitive advantage by having operations in various countries. There are many companies that have expanded into other countries and many of these companies made a good investment. Here are a few reasons that you might want to consider investing in a multinational corporation.

Large Companies

In order to expand your business into multiple countries, you generally have to have a very large company to do this. Many of these bigger companies are financially sound and have a good chance of being in business for an extended period of time. Logically, a company would not try to pursue expanding into other markets until it has done well in its own. This means that you can feel relatively confident when investing in a multinational corporation. While it may not always be smooth sailing, you can be somewhat sure that they will be a safe investment.

Exposure to Foreign Markets

Another advantage of investing in a multinational corporation is that you can gain exposure to foreign markets. This type of exposure is considered indirect exposure because you are essentially investing in a company that does business in many countries. You can gain this indirect exposure without taking on all of the risks that come with investing in foreign investments. For example, if you wanted to invest in a foreign company directly, you would have to open a new brokerage account that deals in that country. You have to convert your currency over to a foreign currency. This can mean that you can lose something on the exchange rate.

You also have to worry about political and economic factors within the foreign country. When you invest in a multinational company, you can keep your same brokerage account and you will not have to convert your money. The company that is expanding into a region can mean that you can feel confident about investing in that region.

Lowering Costs

Another advantage that you need to consider is the company's ability to lower costs. Many large businesses venture into other countries because it allows them to cut down on their overhead. For example, manufacturing companies know that they can set up plants in smaller countries and find workers that will work for cheaper prices. This allows them to save significant amounts of money on production and manufacture the same product.

In some cases, multinational companies will also be able to take advantage of favorable tax situations. They could set up their headquarters in a country that is considered to be a tax haven. When this happens, they can lower their overall taxes and improve profitability for investors.

Some companies also set up near an area in which the resources for their products come from. In this way, they cut down on transportation costs and shipping.

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