You are on page 1of 5

Assignment No.

1
Global Business Strategy

Submitted to: - Submitted by:-


Prof. Upendra Kachru Chinmaya parija

A National Company:-
A domestic company is a company that operates within the country of its own
origin.

A firm incorporated under the laws of the country or state to which it is subjected to
and where it does business. For example, a firm incorporated in India is considered
a domestic corporation in India but a foreign corporation elsewhere.

A Multinational Company:-
UN (1973) - A multinational enterprise is a company which controls assets, factories,
mines, sales offices, and the like in two or more countries.

UN (1984) - An enterprise or company:-

• Comprising entities in two or more countries, regardless of the legal


form and fields of activity of those entities;
• Which operates under a system of decision making permitting coherent
policies and a common strategy through one or more decision making
centers, and in which the entities are so linked, by ownership and
otherwise, that one or more of them may be able to exercise a
significant influence over the activities of the others, in particular to
share knowledge, resources and responsibilities.

Risks Common to both types of companies:-


1. Social and Cultural: It includes differences in religion, language, literature,
music, values, ethnicity etc.
2. Government Regulations: It comprises of small scale reservations, tariffs,
taxes, trade barriers, intellectual property rights etc.
3. Customer Tastes and Preferences: It consists of lifestyles, usage, price,
attributes, familiarity etc.
4. Economic and Competitive Context: GDP, Buying Parity, Infrastructure, Nature
of Industry and Players.
Special Risk of an MNE:-
➢ They have an active coordinated management of operations located
in different countries.
➢ Sovereignty: They are abiding by the laws of all the countries where
they operate and cannot bent on them.
➢ Competitive Strategy: They function in multiple markets so they can
use the profits from one market to subside the losses of the other.
➢ Performance Measurement: Their performance evaluation is
subjected to currency changes, economic parameters and competitive
environment.

What is RECESSION:-
In economics, the term recession generally describes the reduction of a country's
gross domestic product (GDP) for at least two quarters. The usual dictionary
definition is "a period of reduced economic activity", a business cycle contraction.
The United States-based National Bureau of Economic Research defines economic
recession as: "a significant decline in the economic activity spread across the
economy, lasting more than a few months, normally visible in real GDP growth, real
personal income, employment (non-farm payrolls), industrial production, and
wholesale-retail sales."
Global Economic Meltdown 2008:-
The state of the economy dominated state and national politics for 2008, surpassing
even the historic presidential election
The first half of the year was marked by record prices for food and fuel around the
world. The year closed with a financial meltdown that threatened not just the U.S.
economy but the global one.
In Asia, the price of rice rose from about $400 a ton to more than $1,000 a ton.
American big box stores like Costco and Sam's Club had a hard time keeping rice in
stock, even as retail prices soared. In America, the price of a gallon of regular
unleaded peaked at more than $4 a gallon.
In March, Wall Street giant Bear Stearns failed, followed by Indy Mac Bank in July
and Lehman Brothers, Merrill Lynch and Washington Mutual (WaMu) in September.
In September, the Federal Reserve stepped in to take over Fannie Mae and Freddie
Mac as well as one of the world's largest insurance firms, AIG (American
International Group). In October, the Fed announced it would lend money directly to
U.S. corporations.

Reasons for the Global Economic Crisis:-


In 2008, an economic recession was suggested by several important
indicators of economic downturn. These included:
• High oil prices, which led to drastic high food prices (owing to a
dependence of food production on petroleum, as well as using food
crop products such as corn ethanol and biodiesel as an alternative to
petroleum).
• Global inflation.
• A substantial credit crisis leading to the drastic bankruptcy of large and
well established investment banks as well as commercial banks in
various, diverse nations around the world.
• Increased unemployment; and signs of contemporaneous economic
downturns in major economies of the world,
• Global recession.
Comparison between National & MNE as Per 2008
Data:-
NATIONAL COMPANIES MNES
DLF HUL
UNITECH NESTLE
MOSER BAER HERO HONDA
TCS ICICI

FINANCIAL ANALYSIS:-
COMPANY SHARE SHARE MKT CAP07 MKT CAP 08
NAME PRICES 07 PRICES08
DLF 1089.00 328.80 183,066.79 48,059.72
UNITECH 495.00 49.35 79,262.51 6591.00
MOSER BAER 311.00 75.90 5147.15 1188.20
FINANCIAL ANALYSIS:-
COMPANY SHARE SHARE MKT CAP07 MKT CAP 08
NAME PRICES 07 PRICES08
TCS 1133.95 591.70 106,016.63 46,786.87
HUL 220.00 237.00 47,222.70 55,297.74
NESTLE 1530.00 1450.00 14,462.04 14.007.42
HEROHONDA 715.00 840.00 13,932.07 16,007.85
ICICI 1226.00 450.90 137,109.43 49,913.01

In other data we can see that the sales of HUL in 1st quarter 2008 was
3793.94 ,while in 3rd quarter is 4027.87.In case of gross profit 507.73cr in 1st
quarter and 708.98 in 3rd quarter.
In the case of HERHONDA net sales in sept.2008 are 3189.71 as compared
to 2788.65 in mar.08.The gross profit is 497.11 as compared 475.10.
In the case of DLF the net sales decreases from 1613.32 in mar’08 to
1074.95 in Sep’08.while in case of is 800.69 in sep’08 as compared to
712.05cr in mar’08.
The net profit of ICICI bank was 1149.84cr in mar’08 as compared to
1014.21cr in Sep ’08.
The net sales of NESTLE was 1090.01in mar’08 as compared to 1107.08 in
mar’08.In case of it is down to 214.58cr in sep’08 from 245.23crin mar’08.
In the article published in THE FINANCIAL EXPRESS, it is said that the
companies like HUL,ITC are doing well irrespective of the fact that there is
recession is going on. The main reason behind this is these are FMCG
companies. It is also clearly visible in the data.
In other facts it is also evident that the domestic companies suffer most in
comparison to MNES. Since most of the MNES which are operate in FMCG or
pharmacy sector are safe in comparison to other companies.
The market capitalization of domestic companies dropped significantly by
over 50% in comparison to 35.9% of MNEs.

In that article it is said that most of the MNEs are operate in FMCG and
Pharmacy sector which are defensive in nature. But in case of domestic
companies it is different, since they operate in various sectors like
infrastructure, real state, automobile etc. That is why there is decline in the
profit of UNITECH, DLF and TCS etc.

REFERENCE:-

www.google.co.in
www.wikipedia.com
www.businessstandard.com
www.businessstatistic.com
Ppt of GBS by Prof. Upendra Kachru

You might also like