Key learning of Day 2

A multinational company or corporation is an organization with extensive international

operations in two or more countries simultaneously. It is typically involved in producing and
selling goods or services in two or more countries. It consists of a parent company in the
home country and two or more countries. It consists of a parent company in the home country
and two or more subsidiaries in other host countries. The parent company and subsidiaries
functions with a high degree of strategic integration
Characteristics of MNCs
A. Simultaneous operations in multiple countries:It is large organization with operations with operations spread simultaneously over two or
more countries i.e. , multiple countries. If a country operates two years in one country and
starts operations in another country by closing the first country operations, it will not be an
MNC. Instead, it should operate in both countries or more simultaneously.
B. Factors of production from multiple countries:It obtains or accumulates factors of production from multiple countries. It is facilitated by the
increased flow of capital, labour and technology freely across national borders. For example
Dabar Nepal would use technology and management styles form India while using labour and
raw materials from Nepal and many other nations.
Impact of MNCs on host countries
MNC business helps promote good diplomatic relationship between trading partner countries.
It helps in promote transfer of technology, capital and managerial and entrepreneurial skills in
favour of the host country.
It helps to increase revenue of the host countries, as they are major sources of payments of
tariff, taxes and other charges. Unilever Nepal Ltd is one of the top income tax payers in
Nepal.
Problems or disadvantages to host countries
Economic Disadvantages
1. They cause the host country to depend overly on MNCs for capital supply, technology
transfer, exports and product availability.
2. They compel small industries of the host country to close down their operations
unless they get strong protection form the state. Small industries cannot compete with
them.

Political Disadvantages:1. Economic power of the MNCs may influence politics and policy making of the host
country.
2. To get their job done and secure political influence, MNCs are also accused of paying
bribes. They may develop undue linkage with powerful political parties in that
country.
Cultural Disadvantages:MNCs may cause socio-cultural and environmental disruptions. MNCs impose their own
dress code, food-habits and other behaviours not only of its employees but also of consumers,
so that the country local culture gets destroyed or degraded.
Environmental Disadvantages:MNCs may cause industrial accidents, like the US union carbide gas leak disaster in Bhopal
(India). MNCs production works also cause air and water pollution in the most countries
MNCs deplete natural resources quickly. US multinationals like Exxon, Tamoil and Shell are
accused of exploiting petroleum products so fast in Arbian/gulf nations that experts now fear
that petrol reserves of those nations is likely to get depleted in next 50-70 years.

Key Learning of day 3

Economic Environment:The most significant of all the external forces with which a business firm must contend is the
economic environment of the country. The general economic conditions and trends are crucial
to success of business firm. How the scarce resources of land, labour, and capital are being
allocated to the production and distribution of goods and services, and the manner in which
they are consumed are of paramount importance for business.
Economics systems of the nations are categorised as
Market Economy:-A market economy system is one, which relies upon the customers or
consumer to allocate resources. Consumer choice or purchases under a market system decides
what will be produced and by whom. The market system is economic democracy or resources
are primarily owned and controlled not by the public/government sector, but the private
sector. It is consumer sovereignty that makes this system work. Prices of factors of
production are determined by the supply and demand forces of the market.
Command or planned economy

It is centrally planned system. All dimensions of economic activity-including pricing and

production decisions-are determined by a central government plan. If you think of economic
system as a spectrum with markets economy on one end, youll find the command economy
on the other. The government owns and controls all resources; it sets goals for every business
enterprise, i.e for deciding on resources allocation.
Mixed Economy
According to experts, no economy in actuality is purely market or completely commands
economy in actuality is purely market or completely command economy. Most market
economies have some degree of government ownership and control, while most command
economies are increasingly recognising and addressing the private sector role issue in the
economy. As a result most countries in the world have adopted a mix of market and command
economies. Theyve tried a variety of combinations of ownership and control.
Political Environment:A political system integrates the parts of a society into a viable, functioning unit. A major
challenge of the political system is to bring together people of different ethnic or other
backgrounds to allow them to work together to govern themselves. The political climate in a
country in which a business firm operates is a very important force.
Political system and ideologies
The role of the political system is to integrate the parts of a society into a viable, functioning
unit. A major challenge of the political system is to bring together people of different ethnic
and other backgrounds and allow them to work together to govern themselves.
A county political system influences how business is conducted domestically and
internationally. These days as matter of practice in most of the countries, the government
identifies policy alternatives to select a specific policy to pursue. It is implemented and
modified according to the reaction form the constituents that include:
a.
b.
c.
d.

Executive (i.e., council of ministers and government bureaucracy)

Legislature(i.e parliament with upper and lower houses)
Judiciary(i.e courts and other judicial and quasi-judicial authorities/ institutions)
People i.e political parties, civil society