Mncs and International Business

MNCs and International Business

1. Objectives: What is multinational corporationWhat is organizational transformationWhat is globalization of businessWhat is the role of MNCs in global economy
2. What are the merits, demerits andperspective of MNCsWhat is code of conductWhat is the role of multinationals in India
3. The total foreign affiliates of MNCs, only littlewere developed countriesForeign investment has been growing substantially faster than world output and export. Multinationals have been emerging from the developing countriesThe diversified corporations have many oddsagainst them and focus strategy is moresuccessful
4. Multinational corporation 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 International
5. Five Criteria of MNC1. It operates in many countries at different levels of economic development2. Its local subsidiaries are managed by nationals3. It maintains complete industrial organizations, including R and D and manufacturing facilities, in several countries
6. It has a multinational central management. It has multinational stock ownership
7. Organizational Transformation MNC is now increasingly assuming the role of an orchestrator of production and transactions within a cluster, or network, of cross border internal- external relationships, which may or may not involve equity investment, but which are intended to serve its global interests.
8. Globalization of business Globalization is a way of corporate life necessitated, facilitated and nourished by the transnationalisation of the world economy and developed by corporate strategies
9. Dimensions of Globalization1. Doing or planning of expand, business globally.2. Giving up the distinction between the domestic and foreign market and developing a global outlook of the business.3. Locating the production and other physical facilities on a consideration of the global business dynamics, irrespective of national considerations. 4. Basing product development and production planning on the global market consideration.5. Global sourcing of factors of production i.e., raw materials, components, machinery/technology, finance etc. are obtained from the best source anywhere in the world 6. Global orientation of organizational structure and management culture.
10. Reno vision on the Art of Global Dominance1. Source raw materials wherever they are cheapest.2. Manufacture wherever in the world is most cost effective.3. Sell in those global markets where prices are highest.4. Raise finances globally.5. Forge international strategic alliances.6. To manage all these, take on the best talent from all over the world.
11. Dominance of MNCs and global economy The global liberalization has paved the way for fast expansion and growth of the MNCs The economic clout of the MNCs is indicated by the GDP of most of the countries is smaller then the value of the annual sales turnover of the multinational giants
12. MNCs and international trade: The sale of foreign subsidiaries in the hostcountries are three to four times as large astotal world exportsSignificant increase in the export intensity ofthe foreign affiliates of MNCsThe abilities of multinationals to manipulatefinancial flows by the use of artificialtransfer prices is bound to be a matter ofconcern government
13. ‘Merits of MNCs1. MNCs help increase the investment level and thereby the income and employment in host country.2. The transnational corporations have become vehicles for the transfer of technology, especially to the developing countries.3. They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.4. The MNCs enable the host countries to increase their exports and decrease their import requirements.5. They work to equalize the cost of factors of production around the world.6. MNCs provide an efficient means of integrating national economics.7. The enormous resources of the multinational enterprises enable them to have very efficient research and development systems. Thus they make a commendable contribution to inventions and innovations. 8. MNCs also stimulate domestic enterprise because to support their own operations, the MNCs may encourage and assist domestic suppliers.9. MNCs help increase competition and break domestic monopolies.
14. Demerits of MNCs1. The MNCs technology is designed for world wide profit maximization, not the development needs of poor countries. The imported technologies are not adapted to a. consumption needs b. size of domestic markets c. resource availabilities d. stage of development of many of the LDCs.2. Through their power and flexibility, MNCs can evade or undermine national economic autonomy and control and their activities may be inimical to the national interests of particular countries.  MNCs may destroy competition and acquire monopoly powers.4. The tremendous power of the global corporations poses the risk that they may threaten the sovereignty of the nations in which they do business.5. MNCs retard growth of employment in the home country.6. The transnational corporations cause fast depletion of some of the non-renewable natural resources in the host country.7. The transfer pricing enables MNCs to avoid taxes by manipulating prices on intra-company transactions.
15. Growth Perspective of MNCs1. Increasing emphasis on market forces and a growing role for the private sector in nearly all developing countries.2. Rapidly changing technologies that are transforming the nature of organization and location of international production.3. The globalization of firms and industries4. The rise of services to constitute the largest single sector in the world economy5. Regional economic integration
16. Code of Conduct1. A framework to allow developing countries as well as transnational corporations to benefit from direct investments on terms contractually agreed upon2. Legislation3. Cooperation by governments4. Fiscal and other incentives and policies towards foreign investment5. An international procedure for discussions
17. Multinationals in India: In India the government policy confined the foreign investment to the priority areas like high technology and heavy investment sectors of national importance and export sectors. Firms which had been established in non-priority areas prior to the implementation of this policy have, however, been allowed to continue in those sectors.  Several Indian outfits of MNCs are in the low technology consumer goods sector. There are many MNCs which are in high technology area. Since the economic liberalization unshared in 1991, many multinationals in different lines of business have entered the Indian market.

Summary MNCs are corporations that control 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

23)Difference between a global, transnational, international and multinational company: We tend to read the following terms and think they refer to any company doing business in another country.

• Multinational
• International
• Transnational
• Global

Each term is distinct and has a specific meaning which define the scope and degree of interaction with their operations outside of their “home” country.