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Multinational CorporationIn India

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What is a Multinational Corporation???

It is a corporation that:

And/or

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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.

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How Is A Company Classified As An MNC?

Subsidiaries in foreign countries;

Operations in a number of countries;

High proportion of assets in or/ and revenues from global operations;

Stakeholders are from different countries.

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Multinational corporation structure:

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Multinational corporate structure

Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products.

(example: McDonald's)

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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)

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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)

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Organization of Multinational CorporationsSubsidiaries

Joint Ventures Companies

Franchise Holders

Turn Key Project.

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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

traveling 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.

Service sector micro-multinationals, like Indigo Design & Engineering Associates Pvt. Ltd.

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Fortune Global 500 List 2013: Top 10

RANK COMPANY COUNTRY FIELD

1 Wal-Mart Stores  United States Retail

2 Royal Dutch Shell  Netherlands Petroleum

3 Exxon Mobil  United States Petroleum

4 BP  United Kingdom Petroleum

5 Sinopec  China Petroleum

6China National

Petroleum China Petroleum

7 State Grid  China Power

8 Toyota Motor  Japan Automobiles

9Japan Post Holdings

 Japan Diversified

10 Chevron  United States Petroleum

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SWOT Analysis of MNCStrengths

• 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

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Advantages of MNC in India

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Advantages of MNCs to the Host Country:

Transfer of technology, capital and entrepreneurship.

Increase in the investment level and thus, the income and employment in the host country.

Greater availability of products for local consumers.

Increase in exports and decrease in imports.

MNC’s generate jobs &income Technology transfer

Cost reduction

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Advantages of MNCs to the Home Country.

Acquisition of raw materials from abroad.

Technology and management expertise acquired from competing in global markets.

Export of components and finished goods for assembly or distribution in foreign markets.

Inflow of income from overseas profits, royalties and management contracts.

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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

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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

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MNC In India

MNC in India are attracted towards:

India’s large market potential

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

Labor competiveness

FDI attractiveness

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MNC In India

vast population

increasing its purchasing power

emerging as the manufacturing and sourcing location of choice for various industries

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MNC In India…

MNC in India represent a diversified portfolio of companies representing different nations.

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Indian companies in fortune global 500 list 2013:

COUNTRY RANK

COMPANY GLOBAL 500 RANK

CITY REVENUE($ millions)

1 Indian Oil 98 New Delhi 68,837

2 Reliance Industries

134 Mumbai 58,900

3 Bharat Petroleum

272 Mumbai 34,102

4 State Bank of India

292 Mumbai 32,450

5 Hindustan Petroleum

336 Mumbai 28,593

6 Tata Motors 359 Mumbai 27,046

7 Oil & Natural Gas

361 Dehradun 26,945

8 Tata Steel 370 Mumbai 26,065

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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

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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

And ………………Patience !

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International powers of MNC’s

International - Large MNC’s influence in international relations

Tax competition- Tax breaks, pledges of govt. assistance etc.

Market withdrawal-Eg. Pharmaceutical companies

Lobbying & Patents

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Threats to MNC

Nationalization

Lack of Govt. assistance

Opposition by local traders.

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