Presentation on

Presented in class of : Ms.Pragati Bhandari

By Rishav Jain

Meaning Definition History of MNCs Objectives Reason for the growth of MNCs Favorable impact of MNCs Harmful effect of MNCs MNCs in India

Liberalization and MNCs

Future of MNCs A Critique of MNCs
3

An enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.

Mr. Jacques Maisonrouge, president , IBM

world trade corporation describe MNCs:

It operates in many countries at different levels of economic development. Its local subsidiaries are managed by nationals. It maintains complete industrial organisation including R&D facilities in several countries. It has a multinational central management. It has multinational stock ownership.
5

According to the ILO

The essential nature of the multinational enterprises lies in the fact that its managerial headquarters are located in one country, while the enterprise carries out operations in a number of other countries as well.

Multinational business operation is not a new concept. The British east India company, Hudsons bay corporation and Royal Africa companies are example of MNCs. The post second world war period has however, witnessed a changing hand in colonialism and there emerged a new thrusts for industrial and technological development as well as rise of the USA as the largest industrial power.
7

The Dutch East India Company was the first multinational

corporation in the world and the first company to issue stock It was 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 thought to be the East India Company. Many corporations have offices, branches or manufacturing plants in different countries from where their original and main headquarters is located.
8

1. Big size

2. Huge intellectual capital 3.Operates in many countries 4.Large number of customer 5.Large number of competitors 6.Structured way of decision making
9

To expand the business beyond the boundaries of the home country. Minimize cost of production, especially labour cost. Capture lucrative foreign market against international competitors. Avail of competitive advantage internationally.
10

Objectives

Achieve greater efficiency by producing in local market and then exporting the products. Make best use of technological advantages by setting up production facilities abroad.

Establish an international corporate image.

11

Factor mobility.

Development in communication technology.

Economic reforms.

Risk minimize.

Growth urge.

Market potential.

12

1.

MNCs create employment opportunities in the host countries. It helps to create a pool of managerial talent in the host country.

2. Helps removal of monopoly and improve the quality of domestic made products. 3. Promotes exports and reduce imports by raising domestic productions.

4. Goods are made available at cheaper price due to economies of scale.

13

5. Job and career opportunities at home and abroad in connection with overseas operations.

6. Encourages the world unity and all resulting in world harmony

14

1. The host county is likely to lose its economic sovereignty 2. The host nation may also experience some loss of control over its own economy 3. Feeling that labour is being exploited by the MNC/ Outsourcing 4. Lost of cultural moorings 5. The problem of Dumping Example Chinese products are priced low in Indian market.
15

India is the home of a number of multinational companies since the countrys market was liberalized in 1991. Initially The MNC from United States account 37% of turnover of first 20 firm operated in India

Now scenario has changed a lot more enterprises from European union like Britain, France, Netherlands, Italy, Germany, Belgium and Finland have come to India and outsourced their work to this country
Example Finnish mobile giant Nokia has their second largest base in India

Fastest Growing economy

Huge market potential

FDI attractiveness

Labor competitiveness

Macro economic stability

British Petroleum

Ford Motors

Reebok

Vodafone

LG
Sony and many more

Skoda motors

Many indian firms have slowly and surely embarked on global path and lead to the emergence of Indian multinational companies Some instances are:

Tata Motors sells its passenger car Indica in UK through a marketing alliance with Rover and has acquired a Daewoo Commercial vehicles unit giving it access to markets in korea and china

Ranbaxy is the ninth largest generics company in the world. An impressive 76% of its revenue come from overseas

Asian paints is among the 10 largest decorative paints maker in the world and has manufacturing facilities across 24 countries

Infosys has 25,634 employees including 600 from 33 nationalities other than Indian. It has 30 marketing offices across the world and 26 global development centers in US, Canada, Australia, UK and Japans

20

Pricewaterhousecoopers(PwC) gave a report on April 30 2010 on emerging MNCs They said India is expected to produce highest number of MNCs overtaking China as the emerging world largest source. Over 2200 Indian Companies are likely to open operations outside the country over next 15 years

In India ,Liberalization measures initiated in 1991 opened up the entry of MNCs. Measures to minimize bureaucratic control were also a part of 1991 policy. Which encouraged MNC operating in India.

Up to 51% of direct foreign equity was allowed in high priority areas requiring heavy investment.
100% foreign equity was permitted in high priority industry.

22

The amendment of Central Govt. ordinance of sept.27,1991, facilitated the entry of new MNCs on the one hand and expansion of the existing ones on the other. The provision restricting the acquisition of transfer of share of MRTP undertakings in both MRTP act and Companies act were deleted. New provisions as in section 108-A to 108-1 were included, facilitating the transfer of shares in MRTP companies and dominant undertakings. MNCs are now permitted to invest in Indias small scale sector.
23

 Increasing

international competition. Global consumer awareness. Technological advancement. Reduction in friction among nations. World Business Community coming together. Growing role of private sector inn developing countries.
24

 Regional

economic Integration. Increase in the number of bilateral treaties that promote FDI has increased considerably. Privatization programmes.

25

Transfer pricing and sourcing.

Foreign control over key sectors of the economy.

Technological monopoly.

Competition and market Leadership.

26

27