Presentation By:

Deepika Luthra Diwakar SainiSagar Batra

“A corporation that controls production facilities in more than one country, such facilities having been acquired through the process of foreign direct investment. Firms that participate in international business, however large they may be solely by

exporting or by licensing technology are not multinational enterprises.”

DEFINITION:

SOME MULTINATIONAL COMAPANIES

DEFINITIONAL DIMENSIONS

By Size: The term MNC implies bigness. Bigness also has

number of factors like market value, sales, profits, return on

equity

By Structure: Structural requirement include the

number of countries in which the firm does business and the citizenship of corporate owners and top managers.

By Behaviour: This is an abstract as a measure of

multinationalisation and it refers mostly to the behavioural

characteristics of top management.

By Performance: Performance depends on

such characteristics as earnings, sales and assets.

FACTS AND FIGUERSpublished by the UNCTAD (United Nations Conference on Trade and Development)

There is a total of 889,416 MNCs around the world.

The 100 largest MNCs sales combined amounted to nearly $8.5

trillion.

There is a total of 3,057 multinational companies (MNCs) in India:

815 based in the country and 2,242 foreign affiliates.

From 2004 to 2009, the number of Indian-based MNCs decreased

nearly 50%, while the number of foreign affiliates increased 90%.

SOME IMPORTANT TERMS

Parent enterprises

Subsidiary

Associate Foreign affiliates

Transnational corporations

CHARACTERISTICS OF DIFFERENT

ORGANISATIONAL MODELSORGANISATIONAL

CHARACTERISTIC

S

MULTINATIONAL GLOBAL INTERNATIONAL TRANSACTIONAL

Configuration of

assets and

capabilities

Decentralised and

nationally self -

sufficient

Centralised and

globally scaled

Sources of core

competencies

centralised, other

decentralised

Dispersed

,independent and

specialised.

roles of overseas

operation

Sensing and

exploiting local

opportunities

Implementing parent

company strategies.

Adapting and

leveraging parent

company strategies

differentiate

contributions by

national units to

integrated world

wide operation

Development and

diffusion of

knowledge

Knowledge

developed and

retained within each

unit

Knowledge

developed and

retained at the

centre

Knowledge

developed at the

centre and

transferred to

overseas units

Knowledge

developed jointly

and shared

worldwide

BENEFITS TO THE HOST COUNTRY

Increase the investment level and thereby income and

employment

Transfer technology mainly in developing countries

Also kindle a managerial revolution through professional and

highly sophisticated management techniques

MNCs enable to increase their export and decrease the import

Equalise the cost of factors of production around the world

Provide an efficient means of integrating national economies

MNCs make a contribution to inventions and innovations

through research and development systems

MNCs may encourage and assist domestic supplier

MNCs help increase competition and break domestic

MNCs AND INTERNATIONAL TRADE

According to peter drucker MNCs and international trade are the two

side of the same coin

The period of fifties and sixties was the most rapid growth of

multinational trade

Foreign affiliates of MNCs account for about one-third of the world

exports

More than 40% of total exports of China is done by MNCs

Apart from trade in commodities other transaction also take place

extensively:

The granting of loans

Licensing of technologies

Provision of services

MNCs technology is designed for world wide profit maximisation, not the development needs of poor countries

Through there power and flexibility, MNCs can evade or undermine national economic autonomy and control

MNCs may destroy competition and acquire monopoly powers

On political involvement, MNCs have been accused on occasion of:

Supporting repressive regimes

Paying protection money to terrorist groups

Paying bribes to secure political influence

Not respecting human rights

Destabilizing national government of which they do not approve

PROBLEMS FACED BY HOST COUNTRY

MNCs retard growth of employment in the home country

Transfer pricing enables MNCs to avoid taxes by manipulating

prices on intra-company transactions

MNCs have been accused of the following environmental

problems:

Polluting the environment

Not paying compensation for the environmental damages

Causing harmful changes in the local living conditions

Paying little regard to the risks of accidents causing major

environmental catastrophes

Cont.

Cont.

The MNCs criticized for their business strategies and

practices in the host countries for:

Undermine local cultures and traditions

Change the consumption habits for their benefits

Promote conspicuous consumption

Dump harmful products in developing countries etc.

PERSPECTIVES

Increasing emphasis on market forces

Growing role for the private sector in nearly all developing countries

Rapidly changing technologies that are transforming the nature of

organisation

The rise of services to constitute the largest single sector in the

world economy

The globalisation of firms and industries

Regional economic integration

CODE OF CONDUCT

MNCs must respect the national sovereignty of host countries

and observe their domestic laws, regulations and

administrative practices

Adhere to host nations economic goals, development

objections and sociocultural values

Respect human rights

Not interfere in internal political affairs or in intergovernmental

relations

Not engage in corrupt practices

MULTINATIONALS IN INDIA

There was very little foreign investment has taken place in

INDIA. Due to Government conditions which were

unacceptable to them. For Ex. Coca Cola and IBM, even left

India in late 1970’s.

The Foreign Exchange Regulation Act (FERA), 1973 was not

in the favour of Multinational's.

An often heard criticism is that MNC’s drain the foreign

exchange of the developing countries

Cont.

India followed policies that discriminate against export

production and in favour of production for the local market

since 1980s

Due to economic liberalisation in 1991, many multinationals in

different line of business have entered in Indian market and

multinational prior in India have expanded their business.

TOP 10 MNCs IN INDIA Microsoft

IBM

PepsiCo

Ranbaxy Laboratories Ltd.

Nestle

CocaCola

Procter & Gamble

Nokia

Sony Corporation

Citigroup Inc

Round:- 1

A corporation that controls ________ facilities in more than

one country

a) Trade

b) farming

c) developing

d) Production

QUESTIONS: 1

QUESTION: 2

Different dimensions used to define the MNCs are size, structure,

behaviour and __________.

a) Emotions

b) Investment

c) Performance

d) employment

QUESTION: 3

MNCs must respect ______ rights

a) Animals

b) politician

c) Human

d) Bribers

QUESTION: 4

There is a total of MNCs _______ around the world.

a) 889,416

b) 889,616

c) 666,666

d) 989,516

Round:- 2

QUESTION: 5

According to ________ ________ MNCs and international

trade are the two side of the same coin

a) Peter parker

b) Peter subhramanyam swami

c) Peter dranken

d) Peter drucker

QUESTION: 6

Due to economic _____________ in 1991, many

multinationals in different line of business have entered in

Indian market

a) Demonization

b) Development

c) Liability

d) Liberalisation

QUESTION: 7

The Foreign ________ Regulation Act, 1973 was not in the

favour of Multinational's.

a) Investment

b) Exchange

c) Import Export

d) Policies

Final Round

QUESTION: 8

Transnational corporation are enterprises comprising

________ _________ and there _________ affiliates.

a) Foreign enterprises and their parent

b) Native enterprises and their host

c) Associate enterprises and their subsidiary

d) Parent enterprises and their foreign

THANK YOU HAI JI …..