AN OVERVIEW OF MULTINATIONAL CORPORATION

I) INTRODUCTION

A multinational corporation/company is an organization doing business in more than

one country. Transnational company produces, markets, invests, and operates across
the world. It is integrated global enterprise which links global with global market at
profit. These companies have sales offices and/ or manufacturing facilities in many
countries. A corporation (MNC) engages in various activities like exporting,
importing, manufacturing in different countries. MNC's have worldwide involvement
and global perspective in its management and decision- making

1. MNCs consider opportunities throughout the globe through they do the business in
a few countries.

2. MNCs invest considerable portion of their assets internationally.

3. MNCs engage in international production and operate plants in the number of

countries.

4. MNCs take managerial decision based on a global perspective. The international

operations are integrated into the corporations overall business.

MNCs are huge industrial/ business organizations. They extend their industrial
marketing operations through a network of branches or their majority owned foreign
affiliates. MNCs produce the products in one few countries and sell them in most of
the countries. Transnational corporations produce the products in each country based
on the specific needs of the customers of that country and market these. A
transnational corporation mostly uses the inputs of the host country where it operates
unlike a multinational company. Large corporations having investment and business
in a number of countries, knows by various names such as multinational corporations,
international corporations and global corporations have become a very powerful
driving force at the world's economy

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II) MEANING AND DEFENATION, CHARACTERISTICS OF
MULTINATIONAL COMPANIES

2.1 MEANING

Multinational company is the company which is registered in one country but conduct
its business operations in multiple countries. It evolved during the 19th century.

First multinational company was formed in 1860 in U.S.A. At present these

companies are operating worldwide.

Multinational company are not only found in USA, but also in many other countries
like China, England, France, Germany, Japan, South Korea etc. These companies are
doing well in India also. Multinational companies are also known as Trans-National
Corporations or the International Corporations or the Global Giants.

Hindustan Lever Limited, Hero Honda, Reliance Infosys, etc. are some examples of
multinational companies operating in India.

Any corporation that is registered and operates in more than one country at the same
time is referred to as a multinational corporation (MNC). It is also termed as
transnational corporation. In most cases, the corporation's headquarters are in one
country, and it has totally or partially owned subsidiaries in other countries. Its
subsidiaries report to the corporation's main office.

OR

A multinational corporation (MNC) is a business that works in both its home country
and other countries across the world. It maintains a central office in one country that
manages all of its other offices, such as administrative branches or manufacturing.

OR

A business that owns and controls the production of goods or services in at least one
country other than its own.

According to Black's Law Dictionary, a firm or organization is regarded a

multinational corporation "if it derives 25% or more of its revenue from out-of-
country operations."

MNC is different from a global business, which has facilities in many countries and
regions worldwide. While every global business can be considered multinational, not
every multinational corporation is a global business.

2.2 Definitions of MNCs:

1) According to UNO, multinational companies means, "Those enterprises which own

or control production or service facilities outside the country in which they are based."

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2) According to International Labour Organisation "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 number of other countries".

3) According to N.H. Jacob, "A multinational corporation owns & manages its
business in two or more countries."

2.3 Characteristics of Multinational Companies (MNCs)1

Multinational corporations (MNCs) have characteristics that distinguish them from

domestic or single- country businesses. The following are the key characteristics of a
multinational corporation:

1. Large Size:

A multinational company is generally big in size. Some of the multinational

companies own and control assets worth billions of dollars. Their annual sales
turnover is more than the gross national product of many small countries.

2. Huge Capital:

These companies can easily raise huge capital by way of issuing shares to general
public, within & outside the country. They exercise great degree of economic
dominance. A large part of the capital assets of the parent country are owned by the
citizen’s of the home country.

3. Worldwide operations:

A multinational corporation carries on business in more than one country.

Multinational corporations such as Coco cola has branches in as many as seventy
countries around the world.

4. International management:

The management of multinational companies are international in character. It operates

on the basis of best possible alternative available anywhere in the world. Its local
subsidiaries are managed generally by the nationals of the host country. For example
the management of Hindustan Lever lies with Indians. The parent company Unilever
is in The United States of America.

5. Mobility of resources:

The operation of multinational company involves the mobility of capital, technology,

entrepreneurship and other factors of production across the territories.

6. Integrated activities: A multinational company is usually a complete organization

comprising manufacturing, marketing, research and development and other facilities.

7. Several forms:
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Abhishek Agarwal, Impact Of Multinational Corporation In India

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A multinational company may operate in host countries in several ways i.c., branches,
subsidiaries, franchise, joint ventures. Turn key projects.
8. Centralized Control:

These multinational companies have their branches worldwide. They control all its
branches through head office which is situated in home country of those companies.

9. Employment:

It provides with employment opportunities to a large number of unemployed

individuals in the respective countries of their operation. In 2006, foreign affiliates of
MNCs employed over 73 million people, compared to 25 million in 1990.
Classification of MNCs:

SOME OTHER CLASSIFICATIONES

MNCs can be classified on the basis of several criteria, such as

function, control, investment, origin, turnover, products, etc.

On the basis of functional criterion, the MNCs are broadly grouped into:

10) A global corporate presence.

Jobs produced in other nations, maybe with greater earnings than those available
locally.

Direct investments in foreign countries, Seeks for increased efficiencies, lower

production costs, and a larger market share. Adopting a global perspective and
mission.

III) REASONS FOR BEING A MULTINATIONAL CORPORATION2

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Francis Cherunilam, International Marketing

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A company's principal purpose is to enhance earnings and expansion. If it can
enhance its worldwide customer base and market share abroad, it may consider that
opening offices in foreign nations is worthwhile. Companies may also profit from
particular tax structures or regulatory regimes prevalent in. other countries. There are
numerous more reasons why businesses seek to become multinational firms. Here are
a few of the most popular reasons:

1-Access to lower production costs

Establishing production in other nations, particularly in emerging economies,

frequently results in much lower production costs. However, outsourcing is one
method of reaching the goal and establishing manufacturing units in other nations
may be even more cost-effective.

MNCs can benefit from economies of scale and expand their worldwide brand
because of their size. The growth is done through strategic manufacturing/service
placement, which allows the corporation to take advantage of undervalued services
across the globe, more efficient and inexpensive supply chains, and advanced
technological/R&D capacity.

2-Proximity to target international markets

It is advantageous to establish a business in countries where a company's intended

consumer market is located. This helps to cut transportation expenses while also
providing global firms with better access to consumer comments and information, as
well as consumer intelligence. Because the same brand vision may be implemented
globally, international brand awareness facilitates the transition from different
countries and their specific marketplaces and reduces per capita marketing expenses.

3- Access to a larger talent pool

Multinational corporations are also known to hire only the best talent from around the
world, which allows management to provide the best technical knowledge and
innovative thinking to their product or service.

4- Different Taxes

Another common reason why a business will become multinational is to take

advantage of countries that offer lower corporate tax rates. Make sure that you work
with an experienced tax planning team to ensure that you understand how your tax
obligation will change and any potential ramifications as a result.

5. Avoidance of tariffs

When a company produces or manufactures its products in another country where

they also sell their products, they are exempt from import quotas and tariffs.

IV) RISKS THAT MNCS FACES3

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M.V.Kulkartni, International Marketing Managment

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When multinational firms operate in multiple countries and regions, they address a
variety of hazards. Changes in legislation or laws, political instability, crime and
violence, cultural differences, and currency exchange rate variations are examples of
such hazards. Furthermore, citizens in the home country may be resentful about
employment outsourcing to other countries..

The following is a detailed explanation of each risk:

1-Regulatory or legal risks

MNCs need to comply with the laws and regulations of the countries in which they
operate. If they fail to do so, they may face fines, penalties, or even imprisonment.

2-Political instability
MNCs may be at risk of losing assets or being forced to close down if there is political
instability in the country in which they operate. For example, if a country experiences
a civil war, MNCs may be forced to evacuate their employees and shut down their
operations. When Cuba fell under communist government, several corporations lost
their holdings. Kennecott Copper Company lost all of its assets in Chile when the
country briefly became communist. Many Indians lost their companies in Kuwait
when Iraq attacked the country during the Gulf War.

3-Currency exchange rates

MNCs with operations in numerous countries are vulnerable to currency exchange
rate swings. If the value of a country's currency falls, the MNC's operations in that
country may become more expensive.

4-Possible backlash by host country citizens

Local residents may have the impression that they are being exploited for the
advantage of a foreign corporation. This resentment may be motivated by legitimate
national concerns. For example, during the Union Carbide plant disaster in Bhopal,
India, many people were heard saying, "This could never happen in America,
implying that safety and operating standards are not as high in the operations of plants
in developing countries due to the low premium placed on the lives of people in
developing countries.

5-Resentment Risk

MNCs that outsource jobs to other countries may face resentment from people in the
home country. This is because outsourcing can lead to job losses in the home country.
To protect their investments and operations, multinational firms must carefully
manage these risks. They can accomplish this by conducting extensive due diligence
prior to entering a new market, engaging local expertise, and preparing contingency
plans in the event of unforeseen circumstances

V) NATURE OF MNCS4
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Umesh Gaikwad, Multinational Corporation

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Multinational corporations can be viewed as four main organizational types,

1-Centralized Global Corporation

A centralized global corporation's organizational structure includes a chief

administrative and management office, sometimes known as the head office. For
example, the corporation may outsource production to developing nations in order to
reduce costs, these businesses may also establish production facilities in these
countries in order to maximize affordable resources and gain cost benefits. A
centralized multinational organization is more likely to be close to its international
target markets. The primary benefit of affiliates and subsidiaries in target areas is
lower distribution costs. It also increases the accessibility of potential customers and
their information...

2-Decentralized Corporation

A decentralized corporation maintains a presence in its home country and has

autonomous offices and other facilities in locations around the world. This type of
multinational company has the capability to achieve more, faster because it is
decentralized. Each office manages the local business itself, making its own decisions.

3-International Division within a Corporation

An international division is the component of a multinational corporation in charge of

all foreign operations. This framework improves corporate decisions and general
activity in domestic and international marketplaces. Operating independently, on the
other hand, can cause issues when general corporate consensus and action are
necessary. Maintaining and displaying the multinational's carefully cultivated,
enterprise-wide brand image may also be an issue..

4-Transnational Corporation

A transnational firm has a parent-subsidiary structure in which the parent company

manages the operations of subsidiaries in both foreign and home nations. Subsidiaries
can utilize assets belonging to the parent company, such as research and development
data. Subsidiaries may also be different brands. The parent company normally retains
a managerial role, guiding the operations of its domestic and overseas subsidiaries.

VI) OBJECTIVES OF MNCS5

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Yumna Syed, Multinational Corporation

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The objectives of multinational corporations (MNCs) typically encompass a range of
strategic goals that drive their global operations and expansion efforts. Here are some
key objectives of MNCs:

1- To expand the business beyond the boundaries of the home country, where they
were originally established.

2- Minimize the cost of production, especially the labor cost.

3- Avail the competitive advantage internationally..

4 Establish an international corporate image.

5 Make the best use of technological advantages by setting up production facilities

abroad.

6- Operating across multiple countries enables MNCs to take advantage of economies

of scale.

7- MNCs can offer employment opportunities, training, and skill development to the
local workforce in their host countries.

It is crucial to note that the specific aims of an MNC might change depending on
factors such as industry, size, market conditions, and the general strategy of the firm
Advantages of MNCs

MNCs have several advantages that are not only beneficial to the people but also
contribute to the development of the nation, some of the advantages are:

Developing an international presence can open up new markets and sales

opportunities unavailable or not feasible when operating just domestically.

Corporations can establish operations in markets where their capital can be used most
efficiently and wages have less impact on the bottom line than they did in the home
country.

MNCs provide an inflow of capital.

1. It allows countries to purchase imports.

2. It provides local employment.
3. It can diversify local economies.
4. It encourages more innovation.
5. It increases cultural awareness.

VII) CLASSIFICATION OF MNCS6

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Shashank Eashwar, Multinational Corporation

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1. Service MNCs:

A service MNCs is defined as a transnational company which derives more than 50

per cent of its revenues from services. Service MNCs are found in areas such as
banking, insurance, finance, transport, tourism, etc.

2. Manufacturing MNCs:

A Manufacturing MNCs is one which derives at least 50 per cent of its revenue from
manufacturing activity. A large number of MNCs has entered into the manufacturing
sector. Out of the top 200 MNCs, 118 firms are manufacturing MNCs. They produce
a variety of goods. For example, Parry and Cadbury Fry produce Chocolates, Colgate
and Palmolive produce soaps and detergents, Ponds cosmetic goods, Olivetti
Teleprompting equipments, Dunlop, Good Year, Ceat-tyres and tubes.

3. Trading MNCS:

A trading MNCs is the one which derives at least 50 per cent of its revenue from
trading activity. These are the oldest form of multinationals. Trading MNCs control
about 60 per cent of the world's export trade. Tatas, Liptons, Brooke Bond, Hindujas
etc. are the trading Mncs. Importance of Mnc's And Their Benefits To Home/Host
Countries,

VIII) IMPORTANCE OF MNC'S7

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Divyanshi , Multinational Corporation

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1) Economic Development: The Developing countries need both foreign capital and
technology to make use of available resources for economic and industrial growth.
MNCs can provide the required financial, technical and other resources to needy
countries in exchange for economic gains.

2) Technology Gap: MNCs are the instruments of transfer of technology to the host
country. Technology is necessary to bring down cost of production and produce
quality goods on a large scale. The services of MNCs can be of great help to bridge
the technological gap between developed and developing countries.

3) Industrial Growth: MNCs are dynamic and offer growth opportunities for domestic
industries. MNCs assist local producers to enter the global markets through their well
established international network of production and marketing. And there by ensure
industrial growth.

4) Marketing Opportunities: MNCs have access to many markets in different

countries. They have the necessary skills and expertise to market products at
international level. For example, an Indian Company can enter into Joint Venture with
a foreign company to sell its product in the international market

5) Work Culture: MNCs introduces a work culture of excellence, professionalism and

fairness in deals. The sole objective of Multinational is profit maximisation. To
achieve this, they use various strategies like product innovation, technology up
gradation, professional management etc.

6) Export Promotion: MNCs assist developing countries in earnings foreign exchange.

This can be done by promoting and developing export oriented and import substitute
industries.

7) Tax Revenues: For the host country, there is a likelihood that the MNC will have to
be subject to the tax regime in that country. As a result, many MNCs pay large sums
in taxes to the host government. In less developed countries the problem might be that
there is a large amount of corruption and bad governance and as a result MNCs might
not contribute the tax revenue they could and even if they do it might not find its way
through to the government itself.

8) Improvements in Infrastructure: In addition to the investment in a country in

production or distribution facilities, a company might also invest in additional
infrastructure facilities like road, rail, port and communications facilities. This can
provide benefits for the whole country.

9) Raising Standards: Multinational corporations bring about competition in the

foreign markets they venture in. Multinationals produce goods and services that
adhere to the best possible standards. Since consumers are willing to spend their
money on only the best products, local businesses are forced to improve on the quality
of their products.

IX) BENEFITS OF MNC'S TO HOME COUNTRY8

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Balasingam Prahalathan, Multinational Corporation

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1) Facilitate inflow of foreign exchange: MNC's collect funds from the enterprises of
other countries in the form of fees, royalty, and service charges. This money is taken
to the country of their origin. MNC's make their home countries rich by facilitating
inflow of foreign exchange from other countries.

2) Promote global co-operations: MNC's provide co-operation to poor or developing

countries to develop their industries. The countries of their origin participate in such
international co-operation, which is beneficial to all countries- rich and poor.

3) Ensure optimum utilization of resources: -MNC's ensure optimum utilization of

natural and other resources available in their home countries. This is possible due to
their worldwide business contacts4) Promote bilateral trade relations: -MNC's
facilitate bilateral trade relations between their home countries and the other countries
with which they have business relations

10.1 Benefits of MNC's to host countries:

1) Raise the rate of investment: MNC's raise the rate of investment in the host
countries and thereby bring rapid industrial growth accompanied by massive
employment opportunities in different sectors of the economy.

2) Facilitate transfer of technology: -Multinationals act as agents for the transfer of

technology to developing countries and thereby help such countries to modernize
there industries. They remove technological gaps in developing countries by
providing techno-managerial skills.

3) Accelerate industrial growth: multinationals accelerate industrial growth in host

countries through collaborations, joint ventures and establishment of subsidiaries and
branches. They facilitate economic growth through financial, marketing and
technological services. MNC's are rightly called “messengers of progress".

4) Promote export and reduce imports: MNC's help the host countries to reduce the
imports and promote the exports by raising domestic production. Marketing facilities
at global level are provided by MNC's due to their global business contacts.

5) Provide services to professionals: - MNC's provide the services of the skilled

professional managers for managing the activities of the enterprises in which they are
involved/interested. This raises overall managerial efficiency or enterprises connected
with multinationals. MNC's bring managerial revolution in host countries.

6) Facilitate efficient utilization of resources: Multinationals facilitate efficient

utilization of resources available in host countries. This leads to economic
development.

7) Provide benefits of R and D activities: Multinationals has enormous resources at

their disposal. Some are utilized for R and D activities. The benefits of R and D
activities are passed on to the enterprises operating in the host countries.
X) DEMERITS OF MULTINATIONAL COMPANIES (MNC'S)9
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Digvijay Chauhan, Multinational Corporation In India

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1) Profit maximization: The basic purpose of MNCs in the maximization of profit
through exploitation of host country's resources. MNCs hardly bother about the
economic development of the host country.

2) Plunder of wealth: MNCs plunder wealth to their home countries in the form of
transferring the huge amount of foreign exchange gamed through royalties, fees,
dividends etc. to their home countries.

3) Useless transfer of technology: The technology transfer which takes place is of the
nature of capital intensive and import oriented which doesn't suit to the
underdeveloped countries. Generally it is observed that the MNCs do not transfer their
advanced technology to the underdeveloped countries.
4) Effect on Employment: Employment might not be as extensive as hoped, many
jobs might go to skilled workers from other countries rather than to domestic workers.

Moreover, the amount of new jobs are created depends on the type of investment.
Investment into capital intensive production facilities might not bring as many jobs to
an area as hoped.

5) Misuse of weak Government: The size and power of multinationals can be used to
exploit weak or corrupt governments to get better deals for the MNC. The MNCs may
use their economic power to turn the political table in their own favour. They may
even see to it that the choicest party Govt. should get elected by hook or crook.

6) Undermining Local Cultures and Traditions: The MNCs have been criticized for
their business strategies and practices in the ho st countries. They may undermine
local cultures and traditions, change the consumption habits of the people for their
benefit against the long term interest of the local community, promote conspicuous
consumption, and dump harmful products in the developing countries.

7) High tempo of show and advertisement: The MNCs may take undue advantage of
their financial strength in terms of lavishlyspreading the huge amount in unnecessary
showrooms and advertisement as a result of which the prices of goods zoom like
anything in the host country.

8) Repatriation of profits: Profits might go back to the headquarters of the MNC

rather than staying in the host country. Hence, the benefits might not be as great.
These funds will not be beneficial for the domestic country which is allowing MNCs
to establish their base in the home country.

9) Destruction of Local Industries: Multinationals usually have more money in terms

of capitalization than local businesses. This means that they are able to finance
operations for a long time even without making a profit in the knowledge that, once
they have developed brand loyalty, they will start making sustainable profits
thereafter. This means that they can deliberately set very low prices so as to take the
market share of the companies they have found in that market. This may therefore
lead to the local companies to close down as they cannot afford to charge these low
prices.

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10) BOP Problem: The MNCs transfer the technology which is import oriented due to
which the host countries imports increase. On the contrary due to high prices
prevailing in the host country its exports curtail. Thus the B.O.P. problem gets
aggravated.

11) Monopoly: The MNC's being the joint companies establish their monopolies and
iron out competition in the host country.

12) Evasion of taxes: The MNC's may evade the taxes by manipulating their accounts.
In the era of Liberalization we are not suppose to look towards MNCs as a agents of
exploitation but they also act as agents of development by helping the host countries
to increase domestic investment and employment generation, boost exports, transfer
of technology and accelerate economic growth.

What is needed is to have a proper code of conduct for MNCs and an effective
competition policy and law in the host countries.

XI) GROWTH OF MNC

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The MNCs share in global investment, production, employment and trade has
assumed considerable proportions.

According to the UN, there are 63,000 MNCs with 6,90,000 affiliates all over the
globe with 2,40,000 in China and only 1400 in India. The US was the forerunner in
giving births to MNCs. Today, biggest MNC's are Japanese. THE global liberalization
wave, paved the path for faster expansion and growth of MNCs. The value added by
the foreign affiliates of MNCs, as a percentage of global GDP grew from 5% in the
1980s to about 7% by the end of 90s. The MNCs control about a third of world output
and the total sales of their foreign affiliates is almost equal to the GNP of all
developing countries. The value of the annual sales of the largest manufacturing
multinational General Motors was about $178bn in 1996. The total sales of the 3
largest automobile firms of the world, namely, General Motors, Ford and Toyota is
greater than the value of India's GDP.

In terms of direct employment, the MNCs accounted for 73mn people worldwide and
if indirect employment is considered, the figure approximates 150mn people. Over
350m people were employed by the foreign affiliates of MNCs in 1988.

A number of factors have contributed to the phenomenal growth of MNCs. Some of

the important factors are as follows: -

1) Expansion of market territories: -

Rapid economic growth in a number of countries resulting in rising GDPs and per
capita incomes contributed to the growing standards of living. This in turn contributed
to the continuous expansion of market territories. MNCs, both contributed to the
expansion of market territories and also grew in size and spread as a result of
expansion of market territories.

2) Market superiorities: -

In many ways, MNCs have an edge over domestic firms, such as: -

a) Availability of reliable and current data,

b) MNCs enjoy market reputation,

c) MNCs encounter relatively less problems and difficulties in marketing the

products,

d) MNCs adopt more effective advertising and sales promotion techniques, and

c) MNCs enjoy faster transportation and adequate warehousing facilities

3) Financial superiorities: -

MNCs also enjoy a number of financial advantages over domestic firms.

These are: -

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a) Availability of huge financial resources with the MNCs helps them to transform
business environment and circumstances in their favor.

b) MNCs can use the funds more effectively and economically on account of their
activities in numerous countries.

c) MNCs have easy access to international capital markets, and

d) MNCs have easy assessed to international banks and financial institutions.

4) Technological superiorities: -

MNCs are technologically prosperous on account of high and sustained spend on

R&D. developing countries on account of their technological backwardness welcome
MNCs to their countries because of the attendant benefits of technology transfer.

XII) CHALLENGES FACED BY MNC

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There is no company without problems it is facing. Whether an organization is big or
small, there will certainly be some sort of problems or negative factor/influence
militating against its survival or continuity. Weihrich and Koontz (1994) states that
the operation of multinational companies needs to be weighed against the
environmental challenges and most of the challenges being faced by multinational
companies are:

1. There is usually acute shortage of manpower people with lack of managerial and
technical skills

2. The challenge of unfriendly business environment

3. There is usually the problem of conflicting interest among the three parties the
government, the MNC and the general public4. There may be huge cost of labour in
the host country, at least to get the expatriate managers from home country or
somewhere else comprehensive note on the benefits of MNCs to the host country
where they operate and as well highlighted the derivable benefits to the MNCS
themselves from the host country. Likewise, in spite of the challenges and the
problems being faced by these MNCs, they still continue to survival and waxing
stronger.

XII) MULTINATIONAL COMPANIES (MNC'S) IMPACT ON INDIAN

ECONOMY

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MNC may be defined as a company, which operates in number of countries and has
production and service facilities outside the country of its origin. They are also called
Trans

National Company (TNC) their activities have both good and bad impacts on the
economy. They take decisions on a global context or basis. Their maximum profit
objectives take no account of the reactions produced in the countries felling in their
orbit. They operate in different institutional forms some are: Subsidiaries companies
wholly owned by MNC in other countries Subsidiary company enter into joint venture
with a company another company Agreement among companies of different countries
regarding production and discussion of market. Development and Activities: Soon
after independence foreign capital entered India in the form of direct investments
through MNC's Companies had been formed in advanced countries with the specific
purpose of operating in India. Such companies started their subsidiaries, branches and
affiliates in India. At times government gave some tax concession to them with in the
FERA (Foreign Exchange Regulation Act) and streamlined the licensing procedures.
The purpose was to secure advanced, technical and industrial know how. During the
janata rule the policy was outright purchase of technical knowhow skills and
machinery. They took two major decisions. Coco cola was asked to wind up their
operation. Asked IBM to reduce their foreign equity to 40%. They did not agree, so
asked to wind up MNC's operate in several sectors like tobacco, toiletries beverages
etc. Industrial Policy of 1991 accepted foreign investment essential for modernization
technology up gradation and industrial development. Several concessions were given
FERA regulations were liberalized and permitted to use their trademarks in the
domestic market. Now has become a wide spread phenomena with USA the biggest
among them. Recently a large number of Indian brands were taken over by them some
important takeovers are Asian Paints ICI (UK) Premier Automobiles transferred two
plants to Peugeot (France) Lakeme brand by Lever. Hero Honda by TVS Suzuki etc.

For quite a long time, India had a restrictive policy in terms of foreign direct
investment. As a result, there was lesser number of companies that showed interest in
investing in Indian market. However, the scenario changed during the financial
liberalization of the country, especially after 1991. Government, nowadays, makes
continuous efforts to attract foreign investments by relaxing many of its policies. As a
result, a number of multinational companies have shown interest in Indian market.

XIV) PROFIT OF MNCS IN INDIA

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It is too specify that the companies come and settle in India to earn profit. A company
enlarges its jurisdiction of work beyond its native place when they get a wide scope to
earn a profit and such is the case of the MNCs that have flourished here. More over
India has wide market for different and new goods and services due to the ever
increasing population and the varying consumer taste. The government FDI policies
have somehow benefited them and drawn their attention too. The restrictive policies
that stopped the company's inflow are however withdrawn and the country has shown
much interest to bring in foreign investment here.

Besides the foreign directive policies the labour competitive market, market
competition and the macro-economic stability are some of the key factors that
magnetize the foreign MNCs here. Following are the reasons why multinational
companies consider India as a preferred destination for business:

➤ Huge market potential of the country

➤ FDI attractiveness

➤ Labor competitiveness

➤ Macro-economic stability

XV) ADVANTAGES OF THE GROWING MNCS TO INDIA

There are certain advantages that the underdeveloped countries like and the
developing countries like India derive from the foreign MNCs that establishes. They
are as under:

➤ Initiating a higher level of investment.

➤ Reducing the technological gap

➤ The natural resources are utilized in true sense.

➤ The foreign exchange gap is reduced

➤ Boosts up the basic economic structure.

XVI) DISADVANTAGES OF MNCS

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As there are various benefits of an MNC, also there are some drawbacks. Here are a
few disadvantages Of MNCS.

Those opposed to multinational corporations point to the potential they may have to
develop a monopoly (for certain products). This can drive up prices for consumers,
stifle competition, and inhibit innovation.

Multinational companies may also cause the downfall of small, local businesses.
Activists have also claimed that multinational companies breach ethical standards.
They accuse them of evading laws to advance their business agendas.

1. Import skilled laborers, which is not good for local laborers.

2. It encourages political corruption.
3. It removes jobs from their home country.
4. It creates one-way raw material resource consumption.

Matrix organizational structure

A matrix organization is a work structure where team members report to multiple

leaders. In a matrix organization, team members (whether remote or in-house) report
to a project manager as well as their department head. This management structure can
help your company create new products and services without realigning teams.

OR

A matrix organizational structure doesn't follow the traditional, hierarchical model. In

the matrix structure, you share resources and staff across teams and projects, as well
as within departments or functions.

Roses do not come without thrones. Disadvantages of having MNCs in a developing

country like India are as under-

➤ Competition to SMSI

➤ Pollution and Environmental hazards

➤ Some MNCs come only for tax benefits only

➤ Exploitation of natural resources

➤ Lack of employment opportunities

➤ Diffusion of profits and Forex Imbalance

➤ Working environment and conditions

XVII) TOP MNCS IN INDIA

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The country has got many M. N. C.s operating here. Following are names of some of
the most famous multinational companies, who have their headquarters of operational
branches based in the nation: renowned company is presently looking forward to the
10 big deals that they have received besides the Credit Union Australia's contract as
well as Government of Karnataka's INR. 94 crore deal for a total period of 6 years. In
this current business year, they are about to employ 60,000 people to meet their
business requirement.

1. Tata Motors Limited:

The biggest automobile company in India, Tata Motors Limited, is among the leading
commercial vehicles manufacturer in the country. They are one of the top 3 passenger
vehicle manufacturers. Established in the year 1945, this company, a part of the
famous Tata Group, has got its manufacturing units located in different parts of the
nation.

Some of their well known products of the company are categorized in the following
heads:

➤ Commercial Vehicles

➤ Defense Security Vehicles

➤ Homeland Security Vehicles

➤ Passenger Vehicles

Post completion of the financial year 2010 to 2011, the global sales of the company
grew by 24.2% with sales crossing INR. IMILLION

2. Nokia Corporation: Nokia Corporation was started in the year 1865. Being one
of the leading mobile companies in India, their stylish product range includes
the following:

Normal mobile handsets

➤ Smartphone’s

➤ Touch screen phones

➤ Dual sim phones

➤ Business phone

The net sales of the company increased by 4% in the last financial year with sales of
EUR 42.4 billion as compared to 2009's EUR 41 billion. Over the past few years, this
company in India has been acquiring companies, which have got new and interesting
competencies and technologies so as to enhance their ability of creating the mobile
world. Besides new developments to fight against mineral conflicts, they are even to

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set up Bridge Centers in the country for supporting re- employment. Their first onsite
for the installation of renewable power generation are already in place.

3. Pepsi Co:

Pepsi Co. Inc. entered the Indian market with the name of PepsiCo India from the year
1989. Within a short time span of 20 years, this company has emerged as one of the
fast growing as well as largest beverage and food manufacturer. As per the annual
report of the company in the last business year, the net revenue of PepsiCo grew by
33%. By the year 2020, this food manufacturing company intends to triple their
portfolio of enjoyable and wholesome offerings. The expansion of their Good- For-
You portfolio is believed to be assisting the company in attaining the competitive
advantage of the growing packaged nutrition market in the world, which is presently
valued at $ 500 billion

XVIII) CONCLUSION

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Multinational companies need to evaluate social responsibility, employee devilment,
competitors, and customers in accordance with business ethics. The companies can
operate well if they follow cultural practices in countries where they operate.

From the discussion, it appears that combining business and ethics is somewhat
difficult. While international businesses have to respond to social issues, their aim is
to make profits. Often, the public good is not considered or given less priority. As
such, multinational consider profitability before evaluating the governing ethics. For
multinational companies to grow in terms of sales and profits, it is vital for them to
consider business ethics. The companies should develop ethics initiatives build on
cultural, regulatory, and ethical frameworks of the countries where they operate in. As
such, the companies can establish business ethics that are acceptable and contribute to
their growth.

XIX ) BIBLOGRAPHY

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A) ARTICLES

1. Abhishek Agarwal, Impact Of Multinational Corporation In India

2. Divyanshi , Multinational Corporation

3. Balasingam Prahalathan, Multinational Corporation

4. Digvijay Chauhan, Multinational Corporation In India

5. Francis Cherunilam, International Marketing

6. Yumna Syed, Multinational Corporation

7. M.V.Kulkartni, International Marketing Managment

8. Umesh Gaikwad, Multinational Corporation

9. Shashank Eashwar, Multinational Corporation

B) JOURNAL

1. https://en.wikipedia.org/wiki/Multinational corporation

2. https://www.investopedia.com/terms/m/multinationalcorporation.asp

3. https://www.britannica.com/money/topic/multinational-corporation

4.https://corporatefinanceinstitute.com/resources/management/multinational-
corporation/

5. https://mksh.com/the-four-types-of-multinational-business/

6. https://www.toppers4u.com/2021/02/multinational-corporation-objectives.html

7.https://limbd.org/multinational-corporation-company-classified-as-an-mnc-
objectives-advantages-

8. disadvantages-of-mnc-how-to-firms-engage-in-international-business/

9. https://www.nibusinessinfo.co.uk/content/matrix-organisational-structure

10. https://asana.com/resources/matrix-organization

11. https://taxfoundation.org/taxedu/glossary/foreign-direct-investment-fdi/

12. https://www.investopedia.com/terms/f/fdi.asp

13.https://www.wallstreetmoio.com/greenfield-investment/#text=Greenfield
%20investments%20are %20a%20type,of%20the%20controls%20over%20its

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14. https://trade.ec.europa.eu/access-to-markets/en/content/types-investment

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