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Multi National Companies

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Published in: Business Studies
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Introduction, history, features, example of MNCs

Rohit G / Indore

5 years of teaching experience

Qualification: MBA/PGDM (WBUT - 2015)

Teaches: Accountancy, Commerce Subjects, Economics, Mathematics, Bank Clerical, IBPS, SBI Exam, SSC Exams, BBA Entrance, BBA Subjects, Management Subjects

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  1. Business Environment Presentation On- MNCs
  2. MNCs Introduction A MNC is a business which owns or controls productio n or service facilities outside the country in which it is based. This means that they do not just export their products, but make them abroad. Usually have interests in at least 4 countries, but most operate in more than this
  3. Definition "Mr. Jacques Maisonrouge, president , IBM world trade corporation describe MNCs": It operates in many countries at different levels of e conomic development. Its local subsidiaries are managed by nationals. It maintains complete industrial organization includ ing R&D facilities in several countries. It has a multinational central management. It has multinational stock ownership.
  4. History Multinational business operation is not a new concept . The British east India company, Hudson's bay corpo ration and Royal Africa companies are example of M NCs. The post second world war period has however, witne ssed a changing hand in colonialism and there emerge d a new thrusts for industrial and technological devel opment as well as rise of the USA as the largest indus trial power.
  5. History contd. The Dutch East India Company was the first multinational cor poration in the world and the first company to issue stock It w as also arguably the world's first mega corporation possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. The first modern multinational corporation is generally though t to be the East India Company. Many corporations have office s, branches or manufacturing plants in different countries from where their original and main headquarters is located.
  6. MNCs in India have a long history and tradition NöStlö Good Food, Good Life cltlbank nMStJN 0RAcce• HSBC The world's local bank ici The Vital Ingredient imagination at work sk GlaxoSmithKline OLG ood Ciba
  7. Some MNCs Examples Ford British American Tobacco Volkswagen Matsui Unilever The biggest: Exxon (Esso) General Motors Royal Dutch Shell These companies have a turnov er in excess of the GNPs of mos countries.
  8. Some facts about MNCs Multinational companies have branches called su bsidiaries' in more than one country; Many have sales 'outlets' in various countries; A MNC must have production facilities in more tha n one country.
  9. Reasons for Establishing MNCs To increase market share To secure cheaper premises and labour Employment and Health & Safety Legislation in othe r countries may be more relaxed To avoid or minimise the amount of tax to be paid To take advantage of government grants available To save on costs of transporting goods to the market place To avoid trade barriers like the EU Common External Tariff To develop an international brand
  10. Features of MNCs l. Big size and Huge intellectual capital 2.0perates in many countries 3.Large number of customer 4.Large number of competitors 5.Structured way of decision making
  11. Reasons For Being An MNC To avoid protectionist policie S By producing within a coun try, a company can avoid tari ffs and import controls. u Japanese car companies wh o produce in the UK can exp ort to other EU countries wit hout having additional charg es or limits placed upon the The Globalisation of markets 'Many people believe that natio nal boundaries are no longer im portant for firms 'Communication and travel are increasingly faster and make th e world seem smaller. vMNCs who are global in outlo ok can take advantage of this s o-called 'global village'
  12. Performance of MNCs — An Analysis Over the last few decades, most MNCs have shown typical characteristics in their growth plans in India Prefers operations to be less assets intensive Lean operations as far as employees are concern ed Preference of profitability over growth Most businesses generate high ROCEs Extremely cagey to enter "non-Parent" growth ar
  13. Various studies have shown that there are 3 key success factors for MNCs operating in India... Commitment at global level Raise the profile of India Formulation of bold long term targets Empowered local Management More cost effective, enhances continuity, leverages unde rstanding of local environment Localized product / market business models ; creat e customized products and services in response to unique environment in India Deliver the right product at the right price with right pos •tioningfor India
  14. What are the key issues in the Indian context which have hindered MNCs growth? Rigidity and insistence on evaluating India like any other market Not being able to recognize early enough that In dia is a price and quality conscious market Many MNCs have got consistently caught in rou nds of "parent consolidation" 100% subsidiary conundrum
  15. Advantages of MNCs to the Host Country They bring new jobs to an area; Often at the forefront of new technology and can brin g this to another country; Often more efficient than local companies; They can lead to the introduction of new management techniques; Often export their output therefore help the Balance o f Payments ; They can lead to new businesses being set up locally once people have learned new skills.
  16. Disadvantages of MNCs They are very powerful and can influence the gover nment of a country; Local employment can be dependent on one large e mployer; They may use up natural resources which may not b e renewable; They can force local firms out of business; The profit they make goes back to the 'home' count ry; They can be 'footloose' and may move to another c ountry if better incentives offered.
  17. MNCs and Social responsibility Often criticised for their marketing techniques, e.g. Ne stle and baby milk; Marlboro targeting children Safety issues, e.g. factories in a host country have lowe r standards than allowed in base country e.g. India Impact on the environment, e.g. rainforests being destr oyed However they may offer higher wages than local organ isations and they have the power, money and knowledg e to help preserve the environment if they choose.
  18. Government control Some people feel that MNCs have too much influenc e over governments. In some countries MNCs avoid paying tax. Some MNCs exert power on politicians and decisions and policies may be shaped to suit them.
  19. Future of MNCs Increasing international competition. Global consumer awareness. Technological advancement. Reduction in friction among nations. World Business Community coming together. Growing role of private sector in developing countrie S. Regional economic Integration. Increase in the number of bilateral treaties that promo te FDI has increased considerably.
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