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Multinational Corporation�

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Meaning

  • A multinational corporation (MNC) is a company that operates in its home country, as well as in other countries around the world. It maintains a central office located in one country, which coordinates the management of all its other offices, such as administrative branches or factories.
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Characteristics of a Multinational Corporation�

  • Very high assets and turnover
  • Network of branches
  •  The source of command is found in the home country.
  • Continued growth
  • Multinational corporations keep growing. Even as they operate in other countries, they strive to grow their economic size by constantly upgrading and by conducting merges and acquisitions.

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Characteristics of a Multinational Corporation�

  • Use Sophisticated technology
  • Multinational companies aim to employ only the best managers who have high Skills.
  • Multinational corporations spends a great deal of money on marketing and advertising.
  • Because they use capital-intensive technology, they are able to produce top-of-the-line products.

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Models of MNCs

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Centralized�

  • In the centralized model, companies put up an executive headquarters in their home country and then build various manufacturing plants and production facilities in other countries. Its most important advantage is being able to avoid tariffs and import quotas and take advantage of lower production costs.

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Regional�

  • The regionalized model states that a company keeps its headquarters in one country that supervises a collection of offices that are located in other countries. Unlike the centralized model, the regionalized model includes subsidiaries and affiliates that all report to the headquarters.

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Multinational�

  • In the multinational model, a parent company operates in the home country and puts up subsidiaries in different countries. The difference is that the subsidiaries and affiliates are more independent in their operations.

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Advantages of a Multinational Corporation�

  • It helps to fulfil customer needs in foreign countries. 
  • It reduces shipping and transaction taxes. 
  • It increases the market share abroad. 
  • It lowers production and labour expenses. 
  • It decreases taxes. 
  • It broadens product variety. 
  • It increases income margins. 
  • It expands the consumer base.

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The negative outcome of Multinational Corporation�

  • Decreased innovation
  • Depleted environmental resources
  • Complicated regulations
  • Hamper the sovereignty
  • Exploitation of labor
  • Minimum transfer of technology
  • Evasion of taxes
  • Monopoly
  • Drainage of resources
  • Cultural loss
  • Increase the inequality among individual
  • Pollution and environmental losses

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MNCs in INDIA

  • Before 1991 Indian economy was mainly operated by public enterprise but after liberalization in 1991, MNC and private investment led to the rapid economic growth of the Indian economy.

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Multinational Corporations in India �

  • There is a list of Multinational corporations in India:
  • Microsoft
  • Apple
  • LTI
  • Deloitte
  • Coca Cola
  • TCS
  • Accenture
  • IBM
  • Capgemini
  • Adidas

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Role of MNC in the Indian economy

  • �Backward linked companies or local company get benefitted
    • Many Indian supplies supplied raw materials for Maruti Udyog.
    • Farmers and small industries get benefitted from MNC like Nestle, Parle, Britannia, Pizza Hut, Dominoes, etc

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Role of MNC in the Indian economy

  • MNC provides Large scale investment.
    • Examples, Amazon, Walmart,
    • MNC investment in the Indian economy reduces the external commercial borrowing of the company and government.

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Role of MNC in the Indian economy

  • Export promotion by MNC helped to earn forex exchange that leads to an increase in the forex reserve of India. No balance of payment-like problems is seen after 1991 in India.
  • MNC brings the latest technology and skills to India that help in raising productivity and quality enhancement at international levels.
  • Investment in Infrastructures like road, railway, airport, telecommunication, and power sector that is the backbone of the economy help to boost development.
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Problems faced by MNC in India

  • No single rule book in India is extremely challenging for MNC to invest in plans.
  • In India each state is like a country in terms of population. The absence of a single legislation framework causes most problems. labor laws from the center and states add complexity.
  • Lack of educated and qualified workforces:
    • In India, the company has to spent time and money to train people in order to make them competent.

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Positive Impact of MNCs

  • Promotion of Exports
  • Investment in Infrastructure
  • The promotion of Foreign Investment
  • With extensive links all over the world and producing goods efficiently there are therefore lower costs.
  • Multinationals can play a significant role in promoting exports of a country in which they invest.

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Positive Impact of MNCs

  • MNCs can bridge the gap between the requirements of foreign capital for increasing foreign investment in India.
  • Multinational corporations could invest in infrastructure such as power projects, modernisation of airports and also telecomunication.
  • The investment in infrastructure will give a boost to industrial growth and help in creating income and employment in the India economy.
  • MNCs helped India fill it’s investment gap.
  • Growing middle class
  • Technology Transfer

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Negative Impact of MNCs

  • MNCs brought bad products to India

PepsiCo, Pizza Hut, McDonald are criticised for masking products which are inferior imitations

  • Harmful to producers and consumers
  • Currency Manipulation
  • Bad business ethics
  • MNC use child labour
  • MNCs can drive local businesses out of the market

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