Multinational Corporations

MNCs; Advantages; Disadvantages; Structure, Systems & Operations; Current opportunities for Indian MNCs

MNCs

An MNC is an organization doing business in more than one country MNCs have been growing & spreading their operations due to market, financial & other superiorities & the expansion of international markets The EU had 163 out of 500 top MNCs in the world in 2007 followed by US with 162 & Japan with 67. Developing countries had around 53 MNCs & this no. has been increasing. India had 6 MNCs.

Advantages

Promote capital formation on a worldwide basis They have advantages in information, decision making, adaptation & risk reduction, thus increasing gains from trade They may strengthen competition & reduce monopolistic influences Economies of scale & efficiency Contribute to output, employment & govt. revenue They promote technology & reduce prices Enhance exports & also diversify export basket

Disadvantages

Could also reduce competition & lead to monopoly Sometimes wield substantial influence on policy making of countries Sometimes exploit resources, avoid taxes & repatriate profits Have to be regulated MNCs coming into India have taken advantage of our vast market but have not contributed much to exports from India except software exports (changed after 1991)

Organizational Structure

It concerns the shape adopted by the business in the pursuit of its strategic objectives Height & width of structures Hierarchical configuration Mintzbergs Determinants contingency & configuration approach Contingency approach structure depends on nature of business, environment, strategy, age & history, size , level of technology, geographical span, culture, leadership Configuration approach structure should take into account job specialization, formalization, unit size & grouping, planning & control systems, centralization & decentralization, etc.

International Organizational Structures

Export department Mother-daughter structure International divisional structure

Global structures

Functionally based structure Product based structure Geographic/Regionally based structure Matrix structure

Transnational structure

Multidimensional perspectives Distributed, interdependent capabilities Flexible integrative processes

Decision making & control

Decision making is related to structure Combination of centralization & decentralization to achieve global coordination & local responsiveness Strategy decides structure & control Evaluation of performance in order to ensure profitability, identify potential problems & facilitate resource allocation

Indian MNCs

Policy regime since 1991 has allowed capital outflow & the enterprises have responded Both inward & outward foreign investment policies have been liberalized India has entered into Bilateral Investment Promotion & Protection Agreements (BIPAs) with a no. of countries To be an MNC a firm requires Global ambition, Sustainable competitive advantage, Global leadership and Global acquisitions & integration