SEMINAR ON

MULTI NATIONAL COMPANIES BY:GURUPRASAD N SHENOY J

UNDER THE GUIDANCE AND CO OPERATION OF PROFESSOR PREMALATHA PAI,H O D OF

ECONOMICS,SVS COLLEGE BANTWAL

A MNC is a company ,firm or enterprise with its

HQ in a developed country such as US, JAPAN

etc ,and also operates in other countries ,both

developed an developing .Trans national countries

and Global corporations.

ILO says that ,”the essential nature of the

multinational enterprise lies in the fact that its

managerial HQ are located in one country while

the enterprise carries out operations in a number of

other countries as well.”

Thus MNC is a corporation that controls

production facilities in more than one country,

such facilities having been acquired through the

process of FDI.

With the implication of PM MODI’s MAKE IN INDIA. More and more companies started to invest in india ,

ORIGIN AND GROWTH OF MNC’S

1.BARTER SYSTEM

2.MONEY LENDING BANKING SYSTEM

EMERGED

Then after that in 17 and 18 century MN, the

form of trading companies emerged.

Ex. HUDSON BAY CO.,EAST INDIA CO.,

Then export and import between the countries

started.

During 19 century ,FI flowed extensively from

Western Europe to the developing areas like

Asia, Africa and America.

UK,FRANCE, GERMANY etc were exporters of

capital. British made extensive investment in

India, Canada ,Australia and RSA.

20 century ,MN corporate investment was

mainly in mining and petrol industries. BIG OIL

companies like BRITISH and STANDARD OIL

were the first multinationals in this areas.

THE first world war encouraged MN investment. Due to PROTECTIONIST POLICY, firms replaced exports with foreign production. Gradually , manufacturing and merchandising multinationalists like Unilever lever brothers, Nestle, Coca Cola, Singer, Ford motors and various German drugs and chemical firms , began their operations on a world wide scale. Thus, the concept of multinational enterprise is not new. But the modern multinational corporation is based on more than just trading. It tries to optimize its international production and marketing often doing so by the use of trade marks and patents.

In recent years , it is interesting to note that the

multinational corporations have also been

produced by the developing economies like

India, Malaysia, Hong Kong, Singapore, South

Korea etc. At present 90 percent of the top

multinational corporations have their

headquarters in European union , Japan and the

United States. According to the world investment

report 2007, there were some 78000 MNC”s with

around 9,86000 affiliates. The MNC’s account for

a significant share of the worlds industrial

investments, production, employment and trade.

The MNCs share in global investment,

production, employment and trade has

assumed considerable proportions.

According to the UN, there are 63,000

MNCs with 6,90,000 affiliates all over

the globe with 2,40,000 in China and only

1400 in India. The US was the forerunner

in giving births to MNCs. Today, biggest

MNC’s are Japanese.

The global liberalization wave, paved the path for

faster expansion and growth of MNCs. The value

added by the foreign affiliates of MNCs, as a

percentage of global GDP grew from 5% in the

1980s to about 7% by the end of 90s. The MNCs

control about a third of world output and the total

sales of their foreign affiliates is almost equal to the

GNP of all developing countries. The value of the

annual sales of the largest manufacturing

multinational General Motors, was about $178bn in

1996. The total sales of the 3 largest automobile

firms of the world, namely, General Motors, Ford

and Toyota is greater than the value of India’s GDP.

In terms of direct employment, the MNCs

accounted for 73mn people worldwide and if

indirect employment is considered, the figure

approximates 150mn people. Over 350m

people were employed by the foreign affiliates

of MNCs in 1988.

FACTORS EFFECTING GROWTH OF MNC

Expansion of market territories: –

Rapid economic growth in a number of countries

resulting in rising GDPs and per capita incomes

contributed to the growing standards of living.

This in turn contributed to the continuous

expansion of market territories. MNCs, both

contributed to the expansion of market territories

and also grew in size and spread as a result of

expansion of market territories.

2) Market superiorities: –

In many ways, MNCs have an edge over domestic

firms, such as: –

a) Availability of reliable and current data,

b) MNCs enjoy market reputation,

c) MNCs encounters relatively less problems and

difficulties in marketing the products.

d) MNCs adopt more effective advertising and sales

promotion techniques, and

e) MNCs enjoy faster transportation and adequate

warehousing facilities

MNCs also enjoy a number of

financial advantages over domestic firms.

These are: –

a) Availability of huge financial resources

with the MNCs helps them to transform

business environment and circumstances

in their favor.

b) MNCs can use the funds more

effectively and economically on account

of their activities in numerous countries.

3) Financial superiorities: -

MNCs have easy access to international capital

markets, and

MNCs have easy assessed to international banks and

financial institutions.

4) Technological superiorities: -

MNCs are technologically prosperous on account of

high and sustained spend on R&D. developing

countries on account of their technological

backwardness welcome MNCs to their countries

because of the attendant benefits of technology .

Industrialization is backward in developing

countries and the resources available in

developing countries are insufficient to develop

the technology and thereby industrialization.

Developing countries are rich in mineral and

natural resources. They are unable to exploit

them fully due to paucity of financial resources

and low level technology.

Local manpower , materials, capital etc cannot be

optimally utilized by the developing countries to

help them in exploiting the resources.

Developing countries would be required to

import raw materials , capital equipment,

technology etc. on their own. This in turn needs

heavy foreign exchange resources. Developing

countries which suffer from paucity of foreign

exchange resources invite MNC’s in this regard.

Developing countries, though they produce goods

and services on their own by importing

technology and materials they fail in marketing

products due to severe competition. This inability

of developing countries , force them to invite

MNC’s on their own. Therefore MNC’s are

invited by them.

Product innovation: MNC’s , by the virtue of

their wide spread operations in many countries ;

collect information regarding customers , taste

and preferences . Furthur , the MNC’s with their

strong R & D departments invent new products.

Developing countries suffer from limitations in

this regard . Therefore , they invite MNC’s to

their countries.

Reasons for the Growth of MNCs:

(i) Non-Transferable Knowledge:

It is often possible for an MNC to sell its knowledge in the form of patent rights and to licence foreign producer. This relieves the MNC of the need to make foreign direct investment.

However, sometimes an MNC that has a Production Process or Product Patent can make a larger profit by carrying out the production in a foreign country itself. The reason for this is that some kinds of knowledge cannot be sold and which are the result of years of experience.

(ii) Exploiting Reputations:

In some situation, MNCs invest to exploit their reputation rather than protect their reputation. This motive is of particular importance in the case of foreign direct investment by banks because in the banking business an international reputation can attract deposits.

If the goodwill is established the bank can expand and build a strong customer base. Quality service to a large number of customers is bound to ensure success. This probably explains the tremendous growth of foreign banks such as Citibank, Grind-lays and Standard Chartered in India

(iii) Protecting Reputations:Normally, products, develop a good or bad name,

which transcends international boundaries. It would be very difficult for an MNC to protect in reputation if a foreign licensee does an inferior job. Therefore, MNCs prefer to invest in a country rather than licensing and transfer expertise, to ensure the maintenance of their good name.

(iv) Protecting Secrecy:MNCs prefer direct investment, rather than granting

a license to a foreign company if protecting the secrecy of the product is important. While it may be true that a license will take precautions to protect patent rights, it is equally true that it may be less conscientious than the original owner of the patent

(v) Availability of Capital:

The fact that MNCs have access to capital markets has been advocated as another reason why firms themselves moved abroad. A firm operating in only one country does not have the same access to cheaper funds as a larger firm. However, this argument, which has been put forward for the growth of MNCs has been rejected by many critics.

(vi) Product Life Cycle Hypothesis:

It has been argued that opportunities for further gains at home eventually dry up. To maintain the growth of profits, a corporation must venture abroad where markets are not so well penetrated and where there is perhaps less competition.

This hypothesis perfectly explains the growth of American MNCs in other countries where they can fully exploit all the stages of the life cycle of a product. A prime example would be Gillette, which has revolutionized the shaving systems

(vii) Avoiding Tariffs and Quotas:

MNCs prefer to invest directly in a country in order to avoid import tariffs and quotas that the firm may have to face if it produces the goods at home and ship them. For example, a number of foreign automobile and truck producers opened plants in the US to avoid restrictions on-selling foreign made cars. Automobile giants like. Fiat, Volkswagen, Honda and Mazda are entering different countries not with the products but with technology and money.

(viii) Strategic FDI:

The strategic motive for making investments has been advocated as another reason for the growth of MNCs. MNCs enters foreign markets to protect their market share when this is being threatened by the potential entry of indigenous firms or multinationals from other countries.

(ix) Symbiotic Relationships:

Some firms have followed clients who have made direct investment. This is especially true in the case of accountancy and consulting firms. Large US accounting firms, which know the parent companies special needs and practices have opened offices in countries where their clients have opened subsidiaries.

These US accounting firms have an advantage over local firms because of their knowledge of the parent company and because the client may prefer to engage only one firm in order to reduce the number of people with access to sensitive information. Templeton, Goldman Sachs and Earnest and Young are moving with their clients even to small countries like Sri Lanka, Panama and Mauritius.

Some of the top MNC OF WORLD

ABN AMRO

Accenture

Accor

Activision Blizzard

Adidas

Aditya Birla Group

Advanced Micro Devices

Affiliated Computer

Services

Airbus

Air France-KLM

Aitken Spence

Akzo Nobel

Alcatel-Lucent

Allianz

Alstom

Altria Group

American International Group

Apple

Arcor

Asian Paints

Assicurazioni Generali

Atari

AXA

Bacardi

Banco Santander

Bank of Montreal

Barrick Gold Corporation

Barilla Group

BASF

Baskin-Robbins

Bayer

BBVA

Bic BIDV Barclays Billabong Black & Decker BMW BNP Paribas Boeing Bombardier Inc. Bouygues Bridgestone British Airways BP (British Petroleum) Cadbury Schweppes Canon Inc Capital One Caterpillar Inc. Celestica Chevron

Citigroup

CapGemini

Cognizant Technology Solutions

ConocoPhillips

Coca-Cola

Costco

Creative Labs

Credit Suisse

Crédit Agricole

Cummins

Dabur

Daikin

Daimler AG

Danone

Datang Telecom

Dell

Deloitte

Delta Airlines

Deutsche Bank

Deutsche Telekom

DHL

Dow Chemical

Dunkin' Donuts

EDF

Enviroway Bioscience

Electronic Arts

Electronic Data Systems

Electrolux

Emerson Electric

Eni

Enel

Embraer

Epson

Ericsson

Ernst & Young

Etisalat

ExxonMobil

Faber-Castell

Facebook

FedEx Express

France Télécom

Ferrero

Fiat

Ficosa

Finmeccanica

Ford Motor Company

FPT Group

Fujitsu

Gazprom

General Electric

General Motors

Generali

Gerdau

Gillette

Glaxo Smith Kline

Goodyear Tire and Rubber Company

Google

Halliburton

Haier

Hearst Corporation

Heineken

Hewlett-Packard

Hilti

Hindustan Computers Limited

Hitachi

Honda

Honeywell

HSBC

HTC

Huawei

Hutchison Whampoa Limited

Hyundai Motor Company

IBM

ICAP company

ICICI

IKEA

Indesit

Infosys

Ingersoll Rand

ING Group

Intel Corporation

Intesa Sanpaolo

Isuzu

Jardine Matheson

Johnson & Johnson

JPMorgan Chase & Co.

Kenya Airways

Kingston Technology

Knorr (brand)

Komatsu Limited

Konami

KPMG

Krispy Kreme

Lagardère

Lactalis

Lear

Leoni AG

Lenovo

Lexmark

LG

LG Electronics

LiuGong

Lockheed Martin

L'Oréal

Lukoil

Luxottica

Maggi

Marriott

Martini & Rossi

Masterfoods

Mattel

McDonald's

Mercedes-AMG

Mercedes-Benz

Michelin

Microsoft

Mitsubishi Electric

Mobil

Motorola

Millipore Corporation

Monsanto Company

Namco Bandai Games

Namco Bandai Holdings

Nestlé

NetApp Inc.

News Corporation

Nike, Inc.

Nintendo

Nishat Group

Nissan

Nokia

Novartis

Oracle Corporation

Panasonic Corporation

Parmalat

Pepper Lunch

PepsiCo

Petronas

Petrovietnam

Pfizer

Philips

Pirelli

Procter & Gamble

Proton (carmaker)

PSA Peugeot Citroën

Ranbaxy

Red Bull

Regus

Renault

Repsol

Ricoh

Rockstar Energy

Robert Bosch GmbH

Rohde & Schwarz

Royal Dutch Shell

Royal Bank of Canada

Royal Bank of Scotland

Rusal

SABMiller plc

Samsung Electronics

SanDisk

Sanofi Aventis

SAP AG

Sapient Corporation

SAS

Sasken Communication Technologies Limited

Sasol

Schlumberger

Towers Watson

Tech Mahindra

Telefonica

Tejas Networks

Tesco

The Harrison International Group

Thomson Reuters

Toshiba

Total S.A.

Toyota

TRW Automotive

Tyco

Unicredit

Unilever

Unisys

United Airlines

VNPTVimpelcomVirgin GroupVodafoneWal-MartWhirlpool CorporationWiproYakult

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