Multi National Corporations Final

8/2/2019 Multi National Corporations Final

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Prepared by:Abhishek Kumar

Ajay KumarAkash Aggarwal

Amit KumarAnkesh ChoudharyKuljinder Singh

Prashant AwasthiRaghav Bhatia


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Any business corporation which hasholdings, management, production andmarketing extended over severalcountries, owns huge resources andextensive potentiality, and encourages acollective transfer of resources among

various countries, with a view to increasingprofitability under a centralized ownership,is called multinational corporation.


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Multinational business operation is not a new concept. It

emerged from mercantilist philosophy.

The British East India Company, Hudsons Bay Corporation,and Royal Africa Company are examples of multinational

companies (MNCs) of the mercantilist era.

The postWorld War II period has, however, witnessed a

changing hand in colonialism, and there emerged a new thrust

for industrial and technological development, as well as the

rise of the United States as the largest industrial power.


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It operates in many countries at differentlevels of economic development.

Its local subsidiaries are managed by thenationals.

It maintains complete industrial organizationincluding the R&D facilities in severalcountries.

It has a multinational central management

It has multinational stock ownershipBusiness enterprises with huge resources

and potentiality.


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To expand the business beyond the boundaries of the homecountry, where they were originally established .

Minimize the cost of production, especially the labor cost. Capture the lucrative foreign market against the international

competitors.

Avail the competitive advantage internationally. Achieve greater efficiency by producing in the local markets

and then exporting the products. Making the diversification intentionally effective so that a

steady growth of business could be achieved. To safeguard the companies interest in order to get behind the

tariff walls. Make the best use of technological advantages by setting up

production facilities abroad.. Establish an international corporate image. Counter the regulatory measures in the parent country.


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Expansion of the market territory beyond theboundaries of the country due to their internationalimage.

Marketing superiorities arising out of its up to date

market information systems , market reputation,effective advertisements and sales promotiontechniques and warehousing facilities.

Financial superiority over national firms. Technological superiorities over the national

companies of the underdeveloped countries. Effective product innovations due to its superior

R&D facilities.


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Help to increase the investment levels and thereby the incomeand employment in the host country.

Transfer technology especially to developing countries . Equalize the cost of factors of production around the world Integrate national economies.

Contribute towards R and D. Assist domestic suppliers. Improve standard of living in their host countries. Provide impetus in diversification. Help to improve balance of payments position in the host

county.

Contribute towards the national exchequer by way of dutiesand taxes. Motivate resource mobilization among the investors in the host

countries.


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The rapid rise of multinational corporations has been a topic ofconcern among intellectuals, activists and laymen who haveseen it as a threat of such basic civil rights as privacy. Theyhave pointed out that multinationals create false needs inconsumers and have had a long history of interference in the

policies of sovereign nation states. Evidence supporting thisbelief includes invasive advertising (such as billboards,television ads, adware, spam, telemarketing, child-targetedadvertising, guerrilla marketing), massive corporate campaigncontributions in democratic elections, and endless global newsstories about corporate corruption (Martha Stewart and Enron,

for example). Anti-corporate protesters suggest thatcorporations answer only to shareholders, giving human rightsand other issues almost no consideration


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Transfer pricing and sourcing.Foreign control over key sectors of

economy.Technological monopolyCompetition and market leadership.Repatriation of funds.


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Main objective is profit maximization. Suppression of domestic entrepreneurship, extension of oligopolistic

practices, passing of unsuitable technologies worsening incomedistribution.

Outflow of large sums of money in the from of dividends, profits,royalties, interest and technical fees can adversely affect balance of

payments. Cause distraction of competition and acquire monopoly power in

thee long run. Pose a threat to the sovereignty of nation. Interfere directly/indirectly in the internal political affairs of the host

country.

Cause harm by faulty technology transfer to capital-intensive nature,affecting the employment in a labor-supply economy. Cause fast depletion of non-renewable natural recourses in the host

country. Transfer pricing enables MNCs to avoid taxes by manipulating

prices on the intra-company transactions.


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Multinational companies are the organizations orenterprises that manage production or offerservices in more than one country. And India hasbeen the home to a number of multinationalcompanies. In fact, since the financialliberalization in the country in 1991, the numberof multinational companies in India has increasednoticeably. Though majority of the multinational

companies in India are from the U.S., howeverone can also find companies from other countriesas well.


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There are a number of reasons why the multinationalcompanies are coming down to India. India has got a hugemarket. It has also got one of the fastest growing economiesin the world. Besides, the policy of the government towardsFDI has also played a major role in attracting the multinational

companies in India.For quite a long time, India had a restrictive policy in terms offoreign direct investment. As a result, there was lesser numberof companies that showed interest in investing in Indianmarket. However, the scenario changed during the financial

liberalization of the country, especially after 1991.Government, nowadays, makes continuous efforts to attractforeign investments by relaxing many of its policies. As aresult, a number of multinational companies have showninterest in Indian market.


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Tata Motors sells its passenger-car Indica in the UK through amarketingalliance with Rover and has acquired a DaewooCommercial Vehicles unit giving it access to markets in Korea andChina.

Ranbaxy is the 9th largest generics company in the World. Animpressive 76percent of its revenues come from overseas.

Dr Reddys Laboratories became the first Asia-Pacificpharmaceuticalcompany outside Japan to list on the New YorkStock Exchange in 2001.

Asian Paints is among the 10 largest decorative paints makersin the Worldand has manufacturing facilities across 24 countries.

Small auto components companyBharat Forge hasbecame the

Worlds second largest forgings manufacturer after acquiring CarlDan Peddinghaus a German forgings company last year. Itsworkforce includes Japanese, German, American and Chinesepeople. It has 31 customers across the World and only 31 percent ofits turnover comes from India.


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Essel Propackis the Worlds largest manufacturers oflamitubes; tubesusedto package toothpaste. It has 17 plants spread across 11 countriesand a turnover of Rs. 609.2 Crore for the year ended December 2003. Thecompany commands a staggering 30 percent of the 12.8 billion-units globaltubes market.

About 80 percent of revenues forTata Consultancy Services comes from

outsideIndia. lnfosys has 49,422 employees including employees from over 33

nationalities other than Indian. It has (approximately) 30 marketingoffices across the World and 26 global software development centersin the US, Canada, Australia, the UK and Japan.

Sundram Fasteners is not merely a nuts and bolts company. It believesinthinking out of the box. Probably that is why it decided to acquire a plantin China. The plant in Jiaxin city in the Haiyan economic zone has ensuredone fact: that its customers who were earlier buying Sundram products inEurope and the US, did not have to go far from home to access the product.


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1) MNCs make substantial contribution in capital formation andtechnology development, which are scarce factors in theunderdeveloped countries.

2) The host governments policies and approaches to foreign

investment, monetary and fiscal policies, manpower availability,industrial climate, etc., are vital issues for MNCs to take aninvestment decision.

3) RBI provides a single-window clearance, to give liberty to Indiancompanies, to make investment in other countries.

4) There were 37,000 multinationals is with over 1.7 lakh foreignaffiliates functioning in the world in 1992.


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The gifted liberalization has supported the Indian economy andenabled it with wheels of development and progress. Of the threeIndian sectors i.e. Agriculture, Industry and Services, though thedependency on Agriculture is most, Services contribute largely tothe Indian GDP. The Indian Service sector which now speaks of

ITES and BPO has leveraged upon the skilled, educated andyouthful population within India thereby providing requiredemployment and forex inflow. The advent of multinationals in Indiahas evolved through various stages but even as of now thesecompanies have not come of age. Globalisation has, of course,

provided wings to the activities of investment, financing andoperations of Indian companies. Whether multinational,transnational, international, foreign or non-Indian, these companieshave been accepted by the Indian businesses some as allies andsome as adversaries. Whichever may be the case, Indian economyhas ensured its development.


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It now becomes confusing to numerically differentiate a corporateand a country by its size of revenue or GDP respectively. However,huge or small, multinationals have their pros and cons. Indianmarkets are now been viewed as growing and creation of newmarkets through exploration and experiment with the needs of thepresent cash rich Indian customer is underway. Maturity of industry

and segments has urged leading Indian companies to now acquiremarkets and companies abroad. Though there can be basicdistinctions between multinationals in terms of their organizationaldesign, each multinational has customized its structure as per itsobjectives. Indian multinationals have just begun to mark their globalpresence. The coming of age of these multinationals would mean

revenues, profits and assets at par with those leading in the World.Indian multinationals are performance-wise improving every year.But what still matters is global presence and reach to a much largerextent.

Documents

Multi National Corporations Final