Multi-National Organizations

Lead to uneven growth and development

Definition
Multinational corporation (MNC) is a enterprise

that manages production or delivers services in more than one country can also be referred to as an international corporation.

Multinational corporate structure

Horizontally integrated multinational

corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonald's)

Vertically integrated multinational

corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas)

Multinational corporate structure (Contd..)

Diversified multinational corporations

manage production establishments located in different countries that are neither horizontally nor vertically nor straight, nor non-straight integrated. (example: Hilton Hotels)

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 and

Amazon make it easier for the micro-multinationals to reach potential customers in other countries.

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

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 the domestic front demanded that there was a requirement of multinational organizations to set up their offices here. The market became more open and the economy started responding to the external (global) market. The directimpact of globalization was directly seen on the GDP of the country which increased significantly. The liberalization of the Indian economy along with globalization helped the country to step up its GDP growth rate considerably. The GDP growth rate picked up instantly from 5.6 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 managed to survive in the rat race and maintained a GDP growth of about 5 to 6 percent. Today India 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 in India. After liberalization in the 1990s, the scenario of employment in India has witnessed a phenomenal change. Cities like Bangalore, Delhi, Mumbai and Chennai provide employment to a chunk of the Indian population since it is in these cities only

Impact of globalization
It was in July 1991, when foreign currency reserves had tumbled

down to almost $1 billion; inflation was at a soaring high of 17%, highest level of fiscal deficit, and foreign investors loosing confidence in Indian Economy.
With all these coupling factors, capital was on the verge of flying

out of the country and we were on the brink of become loan defaulters. It was at this time that with so many bottlenecks at bay, a complete overhauling of the economic system was required. Policies and programs changed accordingly. This was the best time for us to realize the importance of globalization.
India welcomed globalization with open arms, the result of which

can be seen clearly. India's Export and Imports have grown significantly over the last two decades. Quite a large number of Indian companies have made a reputation for themselves on the global scenario. India has become a one a stop destination for many services specially related to IT and IT support.

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

the moment there was an announcement of devaluating the Indian currency 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 and

liberalization. Under the privatization scheme, bulk of the public sector undertakings 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 a

major step of globalization. The foreign investment regime has been quite transparent and thus the economy is getting boosted up. Various sectors were opened up for liberalizing the FDI regime.

Disadvantages of Globalization
Leads to unequal distribution of income within the

country
Globalization hampers the domestic policies of the

country
Globalization also increases the risk of spreading of

communicable diseases
Monopoly can also set in with globalization Outsourcing of jobs to the developing nations only

results in the loss of jobs for the developed nations.

MNC in India

MNC In India
MNC

in India are attracted towards:

Indias large market potential

India

presents a remarkable business opportunity by virtue of its sheer size and growth

Labor competiveness FDI attractiveness

MNC In India(Contd)
Indias

vast population is increasing its purchasing power

India is also emerging as the

manufacturing and sourcing location of choice for various industries

Trends Of MNCs In INDIA

First MNC in INDIA is EAST INDIA Co. in 1600. American companies accounts for around 37% of the

turnover of the top 20 firms operating in India.

The scenario for 'MNC in India' has changed a lot in

recent years, since more and more firms from European Union like Britain, Italy, France, Germany, Netherlands, Finland, Belgium etc have outsourced their work to India.
Finnish mobile handset manufacturing giant Nokia is the

largest Multinational Corporation In India.

Trends Of MNCs In INDIA(Contd..)

A host of automobile companies like Fiat, Ford

Motors, Piaggio etc from Italy have opened shop in India with R&D wing attached.
Oil companies, Infrastructure builders from Middle

East are also flocking in India to catch the boom.

South Korean electronics giants Samsung and LG

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

Trends Of MNCs In INDIA(Contd..)

Companies like SingTel of Singapore and Malaysian

giant Salem Group are showing huge interest for investment.

Also insurance companies like AIG and Max New York

Life Insurance doing business in India.

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, leverages

understanding of local environment Localized product / market business models : create customized products and services in response to unique environment in India Deliver the right product at the right price with right positioning for India

MNC In India
MNC in India represent a diversified portfolio of companies

representing different nations.

The Indian MNCs

Paints Asian Paints

Auto & Components Tata Motors, Bharat

Forge Chemicals Tata Chemicals, United Phosphorus Metals Sterlite Industries, TISCO Packaging Essel Pharmaceuticals Ranbaxy, Wockhardt, Sun, DRL Oil & Gas ONGC

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

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

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, IPR etc

Difficult operating environment

Weak infrastructure

Indias Big Dream

Harnessing the global trends by encouraging the MNCs to engage in product innovation for local consumers represents a big challenge in India. Policy-makers, industry leaders and academic institutes need 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 provides a powerful example

IBM-Top MNC in India

IBM India Private Limited, a part of IBM has been operating from

this country since the year 1992.

This global company is known for invention and integration of

software, hardware as well as services, which assist forward thinking institutions, enterprises and people, who build a smart planet.
The net income of this company post completion of the financial

year end of 2010 was $14.8 billion with a net profit margin of 14.9 %.
With innovative technology and solutions, this company is

making 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.

Vodafone
Vodafone Group Plc is an international telecommunication

company, which has got it's headquarter based in London in the United Kingdom (U. K.).
Earlier known as Vodafone Essar and Hutchison Essar, Vodafone

India is among the largest operators of mobile networking in the country.

The parent company Hutchison started its business in the year

1992 along with the Max Group, which was its business partner in India.
Much later in 2011, Vodafone Group Plc decided to buy out mobile

operating business of Essar Group, its partner.

The turnover of the Vodafone Group Plc after the completion of the

last financial year grew to 44, 472 m from 41, 017 m that was the turnover of the business year 2009.

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, 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.

Ranbaxy Laboratories Limited

Ranbaxy Laboratories Limited, one of the biggest pharmaceutical

companies in India, started their business in the country from the year 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 huge range of affordable cum quality medicines that are trusted by both patients and healthcare professionals all over the world.
In the business year 2010, the registered global sales of the

company 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 a

continuous endeavor to enter the new global markets, which have got high potential. For this, they are offering value adding products as well.

Tata Consultancy Services

Commonly known as T. C. S., this multinational company is a

famous name in the field of I. T. (Information Technology) services, Business Process Outsourcing (B. P. O.) as well as business solutions.
This company is a subsidiary of the Tata Group. The first center for

software researching was established in the country in 1981 in the city of Pune.
Tata Consultancy earned a growth of 8.9 % during the latest quarter

of this financial year, which ended on 30th September, 2011.

This 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.

Key Advantages of existence of MNCs in India .i.e what has India really 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

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, IPR etc Difficult operating environment Weak infrastructure Patience

Key gains NOW

Key gains NOW

Outsourcing Centres for key processes setup by various MNCs R&D Outsourcing Pharmaceuticals, Engineering, IT, Telecom

Product development centres (Telecom, IT)

MNC in Rural India -HUL

Hindustan Unilever Ltd. (HUL), the country's

largest consumer-products company owned by Anglo-Dutch Unilever.

It made waves in the hinterland in 2001 when its

Shakti Project enlisted self-help groups to develop a network of women -- largely from very low-income households -- into entrepreneurs, selling baskets of HUL products door to door.
Today, 42,000 women earn a living by selling HUL

products in more than 100,000 villages in 15 states.

Nokia
Taking a lead in that growth has been Nokia, the

US$55 billion Finnish mobile handset maker, which is one of the companies profiled in this special report.
As part of a global emerging market focus since

2006, rural India now accounts for 40% of Nokia India's US$5 billion annual revenue.
Along with Samsung, LG, Sony Ericsson and

Motorola, there are a number of handset makers not only from China selling cut-price handsets, but also from India's home-grown companies that are chipping away at Nokia's market share lead with hand sets that are cheaper, more practical or both.

Role of Multinational Corporations

1. Filling Savings Gap: The first important contribution of MNCs is its

role in filling the resource gap between targeted or desired investment and domestically mobilized savings. For example, to achieve a 7% growth rate of national output if the required rate of saving is 21% but if the 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 direct investments from the MNCs, it will be in a better position to achieve its target 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 reduce or even remove the deficit in the balance of payments if the MNCs can generate 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

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 to their local counterparts by means of training programs and the process of learning by doing.Moreover, MNCs bring with them the most sophisticated technological knowledge about production processes while transferring modern machinery and equipment to capital poor LDCs. Such transfers of knowledge, skills, and technology are assumed to be both desirable and productive for the recipient country. 5.Other Beneficial Roles: The MNCs also bring several other benefits to the host 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. For example, ancillary units can be set up to feed the main industries of the MNCs (d) MNCs expenditures on research and development(R&D), although limited is bound to benefit the host country. Apart from these there are indirect gains through the realization of external economies.

Criticism of MNC

1. Although

MNCs provide capital, they may lower domestic savings and investment rates by stifling competition through exclusive production agreements with the host governments. MNCs often fail to reinvest much of their profits and also they may inhibit the expansion of indigenous firms.

2. Although the initial impact of MNC investment is to improve the

foreign exchange position of the recipient nation, its long-run impact may reduce foreign exchange earnings on both current and capital accounts. The current account may deteriorate as a result of substantial importation of intermediate and capital goods while the capital account may worsen because of the overseas repatriation of profits, interest, royalties, etc.
3. While MNCs do contribute to public revenue in the form of corporate

taxes, their contribution is considerably less than it should be as a result of liberal tax concessions, excessive investment allowances, subsidies and tariff protection provided by the host government.

 4. The management, entrepreneurial skills, technology, and

overseas contacts provided by the MNCs may have little impact on developing local skills and resources. In fact, the development of these local skills may be inhibited by the MNCs by stifling the growth of indigenous entrepreneurship as a result of the MNCs dominance of local markets.
5. MNCs impact on development is very uneven. In many

situations MNC activities reinforce dualistic economic structures and widens income inequalities. They tend to promote the interests of some few modern-sector workers only. They also divert resources away from the production of consumer goods by producing luxurious goods demanded by the local elites.
6. MNCs typically produce inappropriate products and stimulate

inappropriate consumption patterns through advertising and their monopolistic market power. Production is done with capitalintensive technique which is not useful for labour surplus economies. This would aggravate the unemployment problem in the host country.

 7. The behaviour pattern of MNCs reveals that they do not

engage 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 influence

government policies in directions unfavorable to development. The host government has to provide them special economic and political concessions in the form of excessive protection, lower tax, subsidized inputs, cheap provision of factory sites. As a result, the private profits of MNCs may exceed social benefits.
9. Multinationals may damage the host countries by

suppressing domestic entrepreneurship through their superior knowledge, worldwide contacts, and advertising skills. They drive out local competitors and inhibit the emergence of small-scale enterprises.

MNC from a social and moral view point

Many MNCs are not paying their tax liability, they prefer to establish in that

country where tax laws are not strict similarly they prefer to establish in that country where environmental laws are also not much strict and these are mainly 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 country to country we can take the example of coca cola which is of superior quality in USA and is of inferior in India. MNCs also responsible for misallocation of resources in the developing countries. They provide mainly luxurious products because there is more profit in it. Thus demand for these products increase due to demonstration effect and this leads to misallocation of resources towards luxurious goods but the need of developing countries is to produce more and more necessary goods 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 in developing countries and then get political power by giving help to the politicians at the time of elections and then manipulate industrial policies in their favor they also interfere in the important political matters of these countries which can cause a big danger to the sovereignty of developing

American MNC in India

American MNC in India

India and U.S. have developed strong business

relations with each other over the years. The United States has got great influence over Indian business. U.S. is the second largest source of FDI for India. It is also the second largest trade partner of the nation after EU. Not only that, U.S. is the largest services export destination for India as well. In fact, American companies in India form the major part of the foreign companies operating in this country.

Why are American Companies in India

The biggest reason is the high potential of Indian

market and economy. Along with China, India is the only fast-growing country that can make a difference to majority of the companies' bottom lines. Besides, established big brands have already impregnated the U.S. and European markets. But, the Indian market still offers a lot of scopes and spaces for those to grow. India is also a large depository of skilled yet cheap labor. Hence, it becomes easy for the American companies to optimize their productions

American Journey in India

The American companies in India started their dream runs during 1990 when

they reaped huge profits.

The companies have seen double digit year-on-year growth in various sectors like Technology, Colas, Agriculture, Automobiles, Equipments, Finance and Banking. According to the American Chamber of Commerce in India, their membership 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 in technology 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 the top 20 firms operating in India.
India has a vast market of agriculture, which employs almost 70% of the

population either directly or indirectly. 'Monsanto', an agro-chemical giant, is currently working on GM modified crops and fertilizers. It has also done well in forging sector also. The American retail giant 'Wal-Mart' has gone into collaboration with Bharti enterprise in the Indian retail sector.

MNC LEAD TO UNDVELOPMENT

.
MNCs drain resources and exploit labor from poor

host countries and transfer wealth to already much richer home countries.
MNCs often eliminate more jobs than they create in

host countries by introducing new and often inappropriate technologies; they overwhelm small entrepreneurs, and, as the Asian economic crisis shows, the quixotic flow of capital across borders can destabilize whole national economies and throw millions into poverty overnight.
Economic exploitation and instability increases the

immiseration of the local population which in turn creates an atmosphere of social unrest.

Competition and uncertain employment

Large MNCs in the garment industry in Europe and

America order their products from Indian exporters. These large MNCs with worldwide network look for the cheapest goods in order to maximize their profits. To get these large orders, Indian garment exporters try hard to cut their own costs. As cost of raw materials cannot be reduced, exporters try to cut labor costs. Where earlier a factory used to employ workers on a permanent basis, now they employ workers only on a temporary basis so that they do not have to pay workers for the whole year. Workers also have to put in very long working hours and work night shifts on a regular basis during the peak season. Wages are low and workers are forced to work overtime to make both ends meet. While this competition among the garment exporters has allowed the MNCs to make large profits, workers are

Small producers: Compete or perish For a large number of small producers and workers globalization has posed major challenges Batteries, capacitors, plastics, toys, tyres, dairy products, and vegetable oil are some examples of industries where the small manufacturers have been hit hard due to competition. Several of the units have shut down rendering many workers jobless. The small industries in India employ the largest number of workers (20 million)in the country, next only to agriculture

Chinese and Indian Toys

Chinese manufacturers learn of an opportunity to export toys to

India, where toys are sold at a high price. They start exporting plastic toys to India.
Buyers in India now have the option of choosing between Indian

and the Chinese toys. Because of the cheaper prices and new designs, Chinese toys become more popular in the Indian markets. Within a year,70 to 80 per cent of the toy shops have replaced Indian toys with Chinese toys. Toys are now cheaper in the Indian markets than earlier.
What is happening here? As a result of trade, Chinese toys come

into the Indian markets. In the competition between Indian and Chinese toys, Chinese toys prove better. Indian buyers have a greater choice of toys and at lower prices. For the Chinese toy makers, this provides an opportunity to expand business. The opposite is true for Indian toy makers. They face losses, as their

Conclusion
MNCs play positive or negative role in developing

countries? Generally the governments of developing countries 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 only because they are coming from some powerful advanced countries. So MNCs should face same rules and regulations as the domestic industries of the developing countries are facing.