Mnc Nep Presentation

7/31/2019 Mnc Nep Presentation

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Lead to uneven growth and development

Multi-National Organizations


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DefinitionMultinational corporation (MNC) is a enterprise

that manages production or delivers services inmore than one country can also be referred to asan international corporation.
http://en.wikipedia.org/wiki/Productionhttp://en.wikipedia.org/wiki/Servicehttp://en.wikipedia.org/wiki/Servicehttp://en.wikipedia.org/wiki/Production


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Multinational corporate structure

Horizontally integrated multinationalcorporations manage production establishmentslocated in different countries to produce the sameor similar products. (example: McDonald's)

Vertically integrated multinationalcorporations manage production establishment

in certain country/countries to produce productsthat serve as input to its productionestablishments in other country/countries.(example:Adidas)
http://en.wikipedia.org/wiki/McDonald'shttp://en.wikipedia.org/wiki/Adidashttp://en.wikipedia.org/wiki/Adidashttp://en.wikipedia.org/wiki/McDonald's


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Multinational corporate structure (Contd..)

Diversified multinational corporationsmanage production establishments located indifferent countries that are neither horizontally

nor vertically nor straight, nor non-straightintegrated. (example: Hilton Hotels)
http://en.wikipedia.org/wiki/Hilton_Hotelshttp://en.wikipedia.org/wiki/Hilton_Hotels


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Micro-multinationals

A new breed enabled by Internet based communication tools.

Employees, clients and resources located in various countries.

Use of internet, cheaper telephony and lower travelling costs.

Internet tools like Google, Yahoo, MSN, EBay, Skype andAmazon make it easier for the micro-multinationals to reach

potential customers in other countries.


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SWOT Analysis of MNC

Strengths

Low Cost Well Developed Infrastructure

Weakness

Location is often very distant Lack of Transportation facilities Relative Inflexibility

Opportunities

Leverage Government Create the necessary infrastructure Attract new industries

Threats

Emergence of Private companies Establishment of monopoly


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Globalization in India Globalization has had a huge impact on the Indian economy. Globalization affected the

Indian economy both positively and negatively.

India's economy opened up during the early nineties. The policy measures on thedomestic front demanded that there was a requirement of multinational organizations toset up their offices here. The market became more open and the economy started

responding to the external (global) market. The directimpact of globalization was directlyseen on the GDP of the country which increased significantly.

The liberalization of the Indian economy along with globalization helped the country tostep up its GDP growth rate considerably. The GDP growth rate picked up instantly from5.6 percent in 1990-91 to 77.8 percent in 1996-97. Since then the growth rate did

manage to slump down due to drought and other factors but the country still managedto survive in the rat race and maintained a GDP growth of about 5 to 6 percent. TodayIndia is regarded as being the one of the fastest developing countries just after China.

Globalization has also played a major role in generating employment opportunities inIndia. After liberalization in the 1990s, the scenario of employment in India has

witnessed a phenomenal change. Cities like Bangalore, Delhi, Mumbai and Chennaiprovide employment to a chunk of the Indian population since it is in these cities only
http://business.mapsofindia.com/globalization/impact.htmlhttp://business.mapsofindia.com/india-gdp/http://business.mapsofindia.com/india-economy/http://business.mapsofindia.com/india-economy/http://business.mapsofindia.com/india-gdp/http://business.mapsofindia.com/globalization/impact.htmlhttp://business.mapsofindia.com/globalization/impact.htmlhttp://business.mapsofindia.com/globalization/impact.html


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Impact of globalization

It was in July 1991, when foreign currency reserves had tumbleddown to almost $1 billion; inflation was at a soaring high of 17%,highest level of fiscal deficit, and foreign investors loosingconfidence in Indian Economy.

With all these coupling factors, capital was on the verge of flyingout of the country and we were on the brink of become loandefaulters. It was at this time that with so many bottlenecks atbay, a complete overhauling of the economic system wasrequired. Policies and programs changed accordingly. This wasthe best time for us to realize the importance of globalization.

India welcomed globalization with open arms, the result of whichcan be seen clearly. India's Export and Imports have grownsignificantly over the last two decades. Quite a large numberofIndian companies have made a reputation for themselves onthe global scenario. India has become a one a stop destination

for many services specially related to IT and IT support.
http://business.mapsofindia.com/inflation/http://business.mapsofindia.com/india-company/http://business.mapsofindia.com/india-company/http://business.mapsofindia.com/inflation/


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Measures of globalization Devaluation: The first initiative towards globalization had been taken

the moment there was an announcement of devaluating the Indiancurrency by a hoping 18-19% against all the major global currencies.This was a major initiative in the international foreign exchange arena.The Balance of payment crisis could also be resolved by this measure.

Disinvestment: The core elements of globalization are privatization andliberalization. Under the privatization scheme, bulk of the public sectorundertakings have been/ and are still being sold to the private sector.Thus the concept of PPP (public private partnership) came up.

Allowing Foreign Direct Investment (FDI): Allowing FDI inflows is amajor step of globalization. The foreign investment regime has beenquite transparent and thus the economy is getting boosted up. Varioussectors were opened up for liberalizing the FDI regime.
http://business.mapsofindia.com/fdi-india/http://business.mapsofindia.com/fdi-india/


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Disadvantages of Globalization

Leads to unequal distribution of income within thecountry

Globalization hampers the domestic policies of the

country

Globalization also increases the risk of spreading ofcommunicable diseases

Monopoly can also set in with globalization

Outsourcing of jobs to the developing nations onlyresults in the loss of jobs for the developed nations.


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MNC in India


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MNC In India

MNC in India are attractedtowards:

Indias large market potential

India presents a remarkablebusiness opportunity by virtue ofits sheer size and growth

Labor competiveness

FDI attractiveness


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MNC In India(Contd)

Indias vast population isincreasing its purchasingpower

India is also emerging as themanufacturing and sourcing

location of choice for variousindustries


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Trends Of MNCs In INDIA

First MNC in INDIA is EAST INDIA Co. in 1600.

American companies accounts for around 37% of theturnover of the top 20 firms operating in India.

The scenario for 'MNC in India' has changed a lot inrecent years, since more and more firms from EuropeanUnion like Britain, Italy, France, Germany, Netherlands,

Finland, Belgium etc have outsourced their work to India.

Finnish mobile handset manufacturing giant Nokia is thelargest Multinational Corporation In India.


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A host of automobile companies like Fiat, FordMotors, Piaggio etc from Italy have opened shop inIndia with R&D wing attached.

Oil companies, Infrastructure builders from MiddleEast are also flocking in India to catch the boom.

South Korean electronics giants Samsung and LG

Electronics and small and mid-segment car majorHyundai Motors are doing excellent business andusing India as a hub for global delivery.

Trends Of MNCs In INDIA(Contd..)


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Trends Of MNCs In INDIA(Contd..)

Companies like SingTel of Singapore and Malaysiangiant Salem Group are showing huge interest forinvestment.

Also insurance companies like AIG and Max New YorkLife Insurance doing business in India.


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Success factors for MNCs operating in India

Commitment at global level

Raise the profile of India

Formulation of bold long term targets

Empowered local Management

More cost effective, enhances continuity, leveragesunderstanding of local environment

Localized product / market business models : createcustomized products and services in response tounique environment in India

Deliver the right product at the right price with rightpositioning for India


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MNC In India

MNC in India represent a diversified portfolio of companiesrepresenting different nations.


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The Indian MNCs

Paints Asian PaintsAuto & Components Tata Motors, Bharat

Forge

Chemicals Tata Chemicals, UnitedPhosphorus

Metals Sterlite Industries, TISCO

Packaging Essel

Pharmaceuticals Ranbaxy, Wockhardt, Sun,DRL

Oil & Gas ONGC


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Pros & Cons of MNC

Pros:

Increase investment level

Transferring the technology It increase host country exports & reduce its

imports

Integrating national economy Implement new innovations

Increase competition


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Pros & Cons of MNC (cont.)

Cons:

May acquire monopoly power

Underestimate local culture Think only about profit rather than host

country interest

Inflexibility in terms & conditions Heavy use of non-renewable natural

resources


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Indias Big Dream

Harnessing the global trends by encouraging the MNCsto engage in product innovation for local consumersrepresents a big challenge in India.

Policy-makers, industry leaders and academic institutesneed to work together to create and disseminate a list of"dream innovations" that will inspire people.

The development of Tata Motor's Rs 1 lakh car providesa powerful example


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IBM-Top MNC in India

IBM India Private Limited, a part of IBM has been operating fromthis country since the year 1992.

This global company is known for invention and integration ofsoftware, hardware as well as services, which assist forward

thinking institutions, enterprises and people, who build a smartplanet.

The net income of this company post completion of the financialyear end of 2010 was $14.8 billion with a net profit margin of14.9 %.

With innovative technology and solutions, this company ismaking a constant progress in India.

Present in more than 200 cities, this company is making constant

progress in global markets to maintain its leading position.


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Vodafone Vodafone Group Plc is an international telecommunication

company, which has got it's headquarter based in London in theUnited Kingdom (U. K.).

Earlier known as Vodafone Essar and Hutchison Essar, VodafoneIndia is among the largest operators of mobile networking in the

country.

The parent company Hutchison started its business in the year1992 along with the Max Group, which was its business partner inIndia.

Much later in 2011, Vodafone Group Plc decided to buy out mobileoperating business of Essar Group, its partner.

The turnover of the Vodafone Group Plc after the completion of thelast financial year grew to 44, 472 m from 41, 017 m that was

the turnover of the business year 2009.


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PepsiCo PepsiCo. Inc. entered the Indian market with the

name of PepsiCo India from the year 1989.

Within a short time span of 20 years, thiscompany has emerged as one of the fast growing

as well as largest beverage and foodmanufacturer.

As per the annual report of the company in thelast business year, the net revenue of PepsiCogrew by 33 %.

By the year 2020, this food manufacturingcompany intends to triple their portfolio of

enjoyable and wholesome offerings.


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Ranbaxy Laboratories Limited

Ranbaxy Laboratories Limited, one of the biggest pharmaceuticalcompanies in India, started their business in the country from theyear 1961.

The company made its public appearance in 1973 though.Headquartered in this nation, this international, research based,

integrated pharmaceutical company is the producer of a hugerange of affordable cum quality medicines that are trusted by bothpatients and healthcare professionals all over the world.

In the business year 2010, the registered global sales of thecompany was US $ 1, 868 Mn. Successful development of

business forms the key component of their trading strategy.

Apart from overseas acquisitions, this company is making acontinuous endeavor to enter the new global markets, which havegot high potential. For this, they are offering value addingproducts as well.


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Tata Consultancy Services

Commonly known as T. C. S., this multinational company is afamous name in the field of I. T. (Information Technology) services,Business Process Outsourcing (B. P. O.) as well as businesssolutions.

This company is a subsidiary of the Tata Group. The first center for

software researching was established in the country in 1981 in thecity of Pune.

Tata Consultancy earned a growth of 8.9 % during the latest quarterof this financial year, which ended on 30th September, 2011.

This renowned company is presently looking forward to the 10 bigdeals that they have received besides the Credit Union Australia'scontract as well as Government of Karnataka's INR. 94 crore dealfor a total period of 6 years.

In this current business year, they are about to employ 60, 000people to meet their business requirement.


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Key Advantages of existence of MNCs in India .i.e what has Indiareally gained?

Work culture for employees

Systems

Training and Learning

Technology especially concept of working with better technologies

Safety Health and Environmental Learning's

Culture and Ethos

Excellent training grounds for many entrepreneurs


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Bottlenecks Of MNC in India

Socio-economic challenges Language

Culture

Autonomy to local managers how comfortable are

we?

Handling of potential liabilities related to Labour, IPRetc

Difficult operating environment

Weak infrastructure

Patience


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Key gains NOW


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Key gains NOW

Outsourcing Centres for key processes setup by various MNCs

R&D Outsourcing Pharmaceuticals, Engineering, IT, Telecom

Product development centres (Telecom, IT)


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MNC in Rural India -HUL

Hindustan Unilever Ltd. (HUL), the country'slargest consumer-products company owned byAnglo-Dutch Unilever.

It made waves in the hinterland in 2001 when itsShakti Project enlisted self-help groups todevelop a network of women -- largely from verylow-income households -- into entrepreneurs,

selling baskets of HUL products door to door.

Today, 42,000 women earn a living by selling HULproducts in more than 100,000 villages in 15

states.


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Nokia

Taking a lead in that growth has been Nokia, theUS$55 billion Finnish mobile handset maker, which isone of the companies profiled in this special report.

As part of a global emerging market focus since2006, rural India now accounts for 40% of NokiaIndia's US$5 billion annual revenue.

Along with Samsung, LG, Sony Ericsson and

Motorola, there are a number of handset makers notonly from China selling cut-price handsets, but alsofrom India's home-grown companies that are chippingaway at Nokia's market share lead with hand sets thatare cheaper, more practical or both.


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Role of Multinational Corporations

1. Filling Savings Gap: The first important contribution of MNCs is itsrole in filling the resource gap between targeted or desired investmentand domestically mobilized savings. For example, to achieve a 7%growth rate of national output if the required rate of saving is 21% but ifthe savings that can be domestically mobilised is only 16% then there

is a saving gap of 5%. If the country can fill this gap with foreign directinvestments from the MNCs, it will be in a better position to achieve itstarget rate of economic growth.

2. Filling Trade Gap: The second contribution relates to filling the

foreign exchange or trade gap. An inflow of foreign capital can reduceor even remove the deficit in the balance of payments if the MNCs cangenerate a net positive flow of export earnings.

3. Filling Revenue Gap: The third important role of MNCs is filling the

gap between targeted governmental tax revenues and locally raised


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4. Filling Management/Technological Gap:Fourthly, Multinationals not only provide financial resources but they also supply a

package of needed resources including management experience,entrepreneurial abilities, and technological skills. These can be transferred totheir local counterparts by means of training programs and the process oflearning by doing.Moreover,

MNCs bring with them the most sophisticated technological knowledge aboutproduction processes while transferring modern machinery and equipment tocapital poor LDCs. Such transfers of knowledge, skills, and technology areassumed to be both desirable and productive for the recipient country.

5.Other Beneficial Roles: The MNCs also bring several other benefits to thehost country.

(a) The domestic labour may benefit in the form of higher real wages.(b) The consumers benefits by way of lower prices and better quality products.

(c) Investments by MNCs will also induce more domestic investment. Forexample, ancillary units can be set up to feed the main industries of theMNCs

(d) MNCs expenditures on research and development(R&D), although limited isbound to benefit the host country.

Apart from these there are indirect gains through the realization of externaleconomies.


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Criticism of MNC

1.Although MNCs provide capital, they may lower domestic savings andinvestment rates by stifling competition through exclusive productionagreements with the host governments. MNCs often fail to reinvestmuch of their profits and also they may inhibit the expansion ofindigenous firms.

2. Although the initial impact of MNC investment is to improve theforeign exchange position of the recipient nation, its long-run impactmay reduce foreign exchange earnings on both current and capitalaccounts. The current account may deteriorate as a result of substantialimportation of intermediate and capital goods while the capital accountmay worsen because of the overseas repatriation of profits, interest,royalties, etc.

3. While MNCs do contribute to public revenue in the form of corporatetaxes, their contribution is considerably less than it should be as a resultof liberal tax concessions, excessive investment allowances, subsidiesand tariff protection provided by the host government.


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4. The management, entrepreneurial skills, technology, andoverseas contacts provided by the MNCs may have little impacton developing local skills and resources. In fact, thedevelopment of these local skills may be inhibited by the MNCsby stifling the growth of indigenous entrepreneurship as a resultof the MNCs dominance of local markets.

5. MNCs impact on development is very uneven. In manysituations MNC activities reinforce dualistic economic structuresand widens income inequalities. They tend to promote theinterests of some few modern-sector workers only. They alsodivert resources away from the production of consumer goods by

producing luxurious goods demanded by the local elites.

6. MNCs typically produce inappropriate products and stimulateinappropriate consumption patterns through advertising and theirmonopolistic market power. Production is done with capital-intensive technique which is not useful for labour surplus

economies. This would aggravate the unemployment problem inthe host country.


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7. The behaviour pattern of MNCs reveals that they do notengage in R & D activities in underdeveloped countries.However, these LDCs have to bear the bulk of their costs.

8. MNCs often use their economic power to influencegovernment policies in directions unfavorable todevelopment. The host government has to provide themspecial economic and political concessions in the form ofexcessive protection, lower tax, subsidized inputs, cheapprovision of factory sites. As a result, the private profits ofMNCs may exceed social benefits.

9. Multinationals may damage the host countries bysuppressing domestic entrepreneurship through theirsuperior knowledge, worldwide contacts, and advertisingskills. They drive out local competitors and inhibit theemergence of small-scale enterprises.

MNC f i l d l i


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MNC from a social and moral viewpoint

Many MNCs are not paying their tax liability, they prefer to establish in thatcountry where tax laws are not strict similarly they prefer to establish in thatcountry where environmental laws are also not much strict and these aremainly developing countries.

They even send their toxic waste in these countries by taking advantage of

loose environmental laws even the quality of their products vary with countryto country we can take the example of coca cola which is of superior qualityin USA and is of inferior in India.

MNCs also responsible for misallocation of resources in the developingcountries. They provide mainly luxurious products because there is moreprofit in it. Thus demand for these products increase due to demonstrationeffect and this leads to misallocation of resources towards luxurious goods

but the need of developing countries is to produce more and more necessarygoods because most of the people belong to poor or middle class.

Another aspect, which judges MNCs morally, is political interference.Generally it is the practice of MNCs to gain the economic power indeveloping countries and then get political power by giving help to thepoliticians at the time of elections and then manipulate industrial policies in

their favor they also interfere in the important political matters of thesecountries which can cause a big danger to the sovereignty of developing


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American MNC in India


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American MNC in India

India and U.S. have developed strong businessrelations with each other over the years.

The United States has got great influence over

Indian business. U.S. is the second largest sourceof FDI for India. It is also the second largest tradepartner of the nation after EU. Not only that, U.S. isthe largest services export destination for India as

well. In fact, American companies in India form the

major part of the foreign companies operating inthis country.

Wh A i C i i


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Why are American Companies inIndia

The biggest reason is the high potential of Indianmarket and economy. Along with China, India isthe only fast-growing country that can make adifference to majority of the companies' bottomlines.

Besides, established big brands have alreadyimpregnated the U.S. and European markets.

But, the Indian market still offers a lot of scopesand spaces for those to grow.

India is also a large depository of skilled yetcheap labor. Hence, it becomes easy for theAmerican companies to optimize their productions


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American Journey in India

The American companies in India started their dream runs during 1990 whenthey reaped huge profits.

The companies have seen double digit year-on-year growth in various sectorslike Technology, Colas, Agriculture, Automobiles, Equipments, Finance andBanking. According to the American Chamber of Commerce in India, theirmembership base has soared up from zero in 1992 to more than 300 till date.

However, the major success in terms of investment and growth came intechnology sector. Many of the top IT companies in India are American.

In fact, out of the top 20 IT companies operating in India, 9 are from the U.S.These American companies in India account for about 37% of the turnover of thetop 20 firms operating in India.

India has a vast market of agriculture, which employs almost 70% of thepopulation either directly or indirectly. 'Monsanto', an agro-chemical giant, iscurrently working on GM modified crops and fertilizers. It has also done well inforging sector also. The American retail giant 'Wal-Mart' has gone intocollaboration with Bharti enterprise in the Indian retail sector.

MNC LEAD TO


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MNC LEAD TOUNDVELOPMENT

. MNCs drain resources and exploit labor from poor

host countries and transfer wealth to already muchricher home countries.

MNCs often eliminate more jobs than they create inhost countries by introducing new and ofteninappropriate technologies; they overwhelm smallentrepreneurs, and, as the Asian economic crisisshows, the quixotic flow of capital across borders can

destabilize whole national economies and throw millionsinto poverty overnight.

Economic exploitation and instability increases theimmiseration of the local population which in turncreates an atmosphere of social unrest.

C titi d t i


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Competition and uncertainemployment

Large MNCs in the garment industry in Europe andAmerica order their products from Indian exporters. Theselarge MNCs with worldwide network look for thecheapest goods in order to maximize their profits. To getthese large orders, Indian garment exporters try hard to cuttheir own costs. As cost of raw materials cannot bereduced, exporters try to cut labor costs. Where earlier afactory used to employ workers on a permanent basis, nowthey employ workers only on a temporary basis so thatthey do not have to pay workers for the whole year.

Workers also have to put in very long working hours andwork night shifts on a regular basis during the peakseason. Wages are low and workers are forced towork overtime to make both ends meet.

While this competition among the garment exporters hasallowed the MNCs to make large profits, workers are


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Small producers: Compete or perish

For a large number of small producersand workers globalization has posedmajor challenges

Batteries, capacitors, plastics, toys, tyres, dairyproducts, and vegetable oil are some examples ofindustries where the small manufacturers havebeen hit hard due to competition. Several of the

units have shut down rendering many workersjobless. The small industries in India employthe largest number of workers (20 million)in thecountry, next only to agriculture


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Chinese and Indian Toys

Chinese manufacturers learn of an opportunity to export toys toIndia, where toys are sold at a high price. They start exportingplastic toys to India.

Buyers in India now have the option of choosing between Indianand the Chinese toys. Because of the cheaper prices and newdesigns, Chinese toys become more popular in the Indian markets.Within a year,70 to 80 per cent of the toy shops have replacedIndian toys with Chinese toys. Toys are now cheaper in theIndian markets than earlier.

What is happening here? As a result of trade, Chinese toys comeinto the Indian markets. In the competition between Indian andChinese toys, Chinese toys prove better. Indian buyers have agreater choice of toys and at lower prices. For the Chinese

toy makers, this provides an opportunity to expand business. Theopposite is true for Indian toy makers. They face losses, as their


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Conclusion

MNCs play positive or negative role in developingcountries?

Generally the governments of developingcountries don't keep control on the working of

MNCs, which is major fault on their side. MNCs can be helpful for developing countries

only when they are kept under control.

We should not give incentives to the MNCs onlybecause they are coming from some powerfuladvanced countries. So MNCs should face samerules and regulations as the domestic industriesof the developing countries are facing.


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Mnc Nep Presentation