Escolar Documentos
Profissional Documentos
Cultura Documentos
Introduction
A multinational corporation/ company is an organization doing business
in more than one country. Transnational company produces, markets,
invests, and operates across the world. It is integrated global enterprise
which links global with global market at profit. These companies have
sales offices and/ or manufacturing facilities in many countries. A
corporation (MNC) engages in various activities like exporting,
importing, manufacturing in different countries. MNCs have worldwide
involvement and global perspective in its management and decisionmaking
1.MNCs consider opportunities throughout the globe through they do
the business in a few countries.
2.MNCs invest considerable portion of their assets internationally.
3.MNCs engage in international production and operate plants in the
number of countries.
4.MNCs take managerial decision based on a global perspective. The
international operations are integrated into the corporations overall
business.
MNCs are huge industrial/ business organizations. They extend their
industrial/ marketing operations through a network of branches or their
majority owned foreign affiliates. MNCs produce the products in one or
companies
are
also
known
as Trans-National
Definitions of MNCs:
1) According to UNO, multinational companies means, Those
enterprises which own or control production or service facilities
outside the country in which they are
based."
of
its
9. Employment:
It provides with employment opportunities to a large number of
unemployed individuals in
the
respective
countries
of
their
Classification of MNCs:
MNCs can be classified on the basis of several criteria, such as
function, control, investment, origin, turnover, products, etc.
On the basis of functional criterion, the MNCs are broadly grouped into:
1. Service MNCs:
A service MNCs is defined as a transnational company which derives
more than 50 per cent of its revenues from services. Service MNCs are
found in areas such as banking, insurance, finance, transport, tourism,
etc.
2. Manufacturing MNCs:
A Manufacturing MNCs is one which derives at least 50 per cent
of its revenue from manufacturing activity. A large number of
MNCs has entered into the manufacturing sector. Out of the top 200
MNCs, 118 firms are manufacturing MNCs. They produce a variety of
of
the
technical
and
other
resources
to needy countries in
4)
Marketing Opportunities:
professionalism and
fairness
in
deals. The
sole
objective
of
10
not contribute the tax revenue they could and even if they do it might
not find its way through to the government itself.
8) Improvements in Infrastructure: In addition to the investment
in a country in production or distribution facilities, a company
might also invest in additional infrastructure facilities like road,
rail, port and communications facilities. This can provide benefits
for the whole country.
9) Raising Standards: Multinational corporations bring about
competition in the foreign markets they venture in. Multinationals
produce goods and services that adhere to the best possible standards.
Since consumers are willing to spend their money on only the best
products, local businesses are forced to improve on the quality of
their products. This competition to produce good quality ends up
benefiting consumers who get good value for their money
10)
Job Creation:
11
12
13
14
of
profit through
exploitation
of
host
country's
15
of
16
and
17
contrary due to high prices prevailing in the host country its exports
curtail. Thus the B.O.P. problem gets aggravated.
11) Monopoly: The MNC's being the joint companies establish
their monopolies and iron out competition in the host country.
12) Evasion of taxes: The MNC's may evade the taxes by manipulating
their accounts.In the era of Liberalization we are not suppose to
look towards MNCs as a agents of exploitation but they also act as
agents of development by helping the host countries to increase
domestic investment and employment generation, boost exports, transfer
of technology and accelerate economic growth.
What is needed is to have a proper code of conduct for MNCs and an
effective competition policy and law in the host countries.
GROWTH OF MNC:
The MNCs share in global investment, production, employment and
trade has assumed considerable proportions.
According to the UN, there are 63,000 MNCs with 6,90,000 affiliates all
over the globe with 2,40,000 in China and only 1400 in India. The US
was the forerunner in giving births to MNCs. Today, biggest MNCs are
18
Japanese. THE global liberalization wave, paved the path for faster
expansion and growth of MNCs. The value added by the foreign
affiliates of MNCs, as a percentage of global GDP grew from 5% in the
1980s to about 7% by the end of 90s. The MNCs control about a third of
world output and the total sales of their foreign affiliates is almost equal
to the GNP of all developing countries. The value of the annual sales of
the largest manufacturing multinational General Motors, was about
$178bn in 1996. The total sales of the 3 largest automobile firms of the
world, namely, General Motors, Ford and Toyota is greater than the
value of Indias GDP.
In terms of direct employment, the MNCs accounted for 73mn people
worldwide and if indirect employment is considered, the figure
approximates 150mn people. Over 350m people were employed by the
foreign affiliates of MNCs in 1988.
A number of factors have contributed to the phenomenal growth of
MNCs. Some of the important factors are as follows: 1) Expansion of market territories: Rapid economic growth in a number of countries resulting in rising
GDPs and per capita incomes contributed to the growing standards of
living. This in turn contributed to the continuous expansion of market
territories. MNCs, both contributed to the expansion of market
19
20
4) Technological superiorities: MNCs are technologically prosperous on account of high and sustained
spend on R&D. developing countries on account of their technological
backwardness welcome MNCs to their countries because of the
attendant benefits of technology transfer.
CHALLENGES FACED BY MNC:
There is no company without problems it is facing. Whether an
organization is big or small, there will certainly be some sort of
problems or negative factor/influence militating against its survival or
continuity. Weihrich and Koontz (1994) states that the operation of
multinational companies needs to be weighed against the environmental
challenges and most of the challenges being faced by multinational
companies are:
1. There is usually acute shortage of manpower - people with lack of
managerial and technical skills
2. The challenge of unfriendly business environment
3. There is usually the problem of conflicting interest among the three
parties - the government, the MNC and the general public
21
4. There may be huge cost of labour in the host country, at least to get
the expatriate managers from home country or somewhere else
Conclusively, the above mentioned authors have given all round and
comprehensive note on the benefits of MNCs to the host country where
they operate and as well highlighted the derivable benefits to the MNCs
themselves from the host country. Likewise, in spite of the challenges
and the problems being faced by these MNCs, they still continue to
survival and waxing stronger.
22
23
machinery. They took two major decisions. Coco cola was asked to wind
up their operation . Asked IBM to reduce their foreign equity to 40%.
They did not agree, so asked to wind up MNC's operate in several
sectors like tobacco, toiletries beverages etc.
Industrial Policy of 1991 accepted foreign investment essential for
modernization
technology
up
gradation
and
industrial
development.
Several
For quite a long time, India had a restrictive policy in terms of foreign
direct investment. As a result, there was lesser number of companies that
showed interest in investing in Indian market. However, the scenario
changed during the financial liberalization of the country, especially
after 1991. Government, nowadays, makes continuous efforts to attract
24
25
Disadvantages of MNCs
Roses does not come without thrones. Disadvantages of having an
MNCs in a developing country like India are as under Competition to SMSI
26
27
Commercial Vehicles
Defence Security Vehicles
Homeland Security Vehicles
Passenger Vehicles
Post completion of the financial year 2010 to 2011, the global sales of
the company grew by 24.2 % with sales crossing INR. 1MILLION
Nokia Corporation:
29
Nokia Corporation was started in the year 1865. Being one of the
leading mobile companies in India, their stylish product range includes
the following:
Normal mobile handsets
Smartphones
Touch screen phones
Dual sim phones
Business phone
The net sales of the company increased by 4 % in the last financial year
with sales of EUR 42.4 billion as compared to 2009's EUR 41 billion.
Over the past few years, this company in India has been acquiring
companies, which have got new and interesting competencies and
technologies so as to enhance their ability of creating the mobile world.
Besides new developments to fight against mineral conflicts, they are
even to set up Bridge Centers in the country for supporting reemployment. Their first onsite for the installation of renewable power
generation are already in place.
PepsiCo:
PepsiCo. Inc. entered the Indian market with the name of PepsiCo India
from the year 1989. Within a short time span of 20 years, this company
has emerged as one of the fast growing as well as largest beverage and
food manufacturer. As per the annual report of the company in the last
30
31