MNCs, also known as TNCs are huge

industrial organizations which extend their

industrial and marketing operations through
a network of their branches or their majority
owned foreign affiliates (MOFAs).

There are now 40,000 MNCs with 2,50,000

overseas affiliates throughout the world.
 A multinational company can organize it’s
operations in different countries either of
the following five alternatives
 Branches
 Subsidiary Companies
 Joint venture companies
 Franchise holders
 Turnkey Projects
 REASONS FOR GROWTH
The manifold reasons are
1. Expansion of market territory
2. Marketing Superiorities
3. Financial Superiorities
4. Technological Superiorities
5. Product Innovation
 Expansion of market
territory
As the operations of a large sized firm
expand and as it’s international image
builds up it seeks more and more
extension of it’s activities beyond the
physical boundaries of the country in
which it is incorporated.
 MARKETING SUPERIOROTIES
 It possesses a more reliable and up-to-
date market information system
 It enjoys market reputation and faces
less difficulty in selling it’s product
 It adopts more effective advertising and
sales promotion techniques
 Financial Superiorities
 It has huge financial resources to turn
adverse situation in favor
 It maintain high level of fund utilization
by generating funds in one country and
using them in another
 It has easier access to external capital
markets
 OBJECTIVES OF MNCs
 To expand the business beyond the boundaries
of a home country
 Minimize cost of production, especially labor
cost
 Capture lucrative foreign market against
international competitors
 Make diversification internationally effective so
that a steady growth of business could be
achieved
 Make best use of technological advantages by
setting up production facilities abroad
 Counter regulatory measures in the parent
country
 BENEFITS RECEIVED FROM MNCs
 Investment, income and employment
 Transfer of technology
 Increase in export and decrease in import
 Equalizing cost of factor of production around the world
 Integration of national economy into the world economy
 Contribution to research and development
 Stimulation to domestic enterprise
 Quality improvement and reduced domestic monopoly
 Increased standard of living
 Professionalization of management in the host country
 Improve balance of payment position
 MNCs are profit making organizations which pay high dividends,
motivating resource mobilization among investors in host country
 OPPOSITION LINES OF ARGUMENT
 It does not stand for social welfare, rather profit maximization
 Misutilisation of power and flexibility
 MNCs can have unfavorable effect on the balance of payment
position of the country through outflow of large sums of money in
the form of dividends, profits, royalties, interest, technical fees ,
and so on leading to an increasing volume of remittance which
rose from 72.25 crore in 1969-70 to 813.5 crore in 1989.
 MNCs can cause distraction and cause monopoly powers in the
long run
 A grave threat to sovereignty of the nations
 Direct and indirect interference in the political and other strategic
affairs
 depletion of nonrenewable natural resources