Business Environment

V. NEELAMEGAM M.A., M.Phil., M.B.A., A.M.T., MIMA. Senior Lecturer School of Commerce and Business Administration Faculty of Science and Humanities SRM University Tamil Nadu VRINDA PUBLICATIONS (P) LTD. DELHI - 110 091. www.vrindaindia.com
2

CHAPTER 35
Multinational Corporations

Introduction
Multinational Corporations (MNCs) is a business unit which operates simultaneously in different countries of the world. In some cases the manufacturing unit may be in one country, while the marketing and investment may be in other country.

Previously American based multinationals ruled the world, but today, many Japanese, Korean, European and Indian Multination companies have spared their wings in many parts of world.
5

List of MNC
ABN Amro Airbus HSBC Honda LG Sony HP Pepsi Wipro Wal-Mart
6

Characteristics of MNCs
Mode of Transfer Value of Money Flexibility

Strategic MNCs

Approach

to

A. Innovation Multinationals B. The Multinationals C. The Multinationals

based mature Senescent

8

Reasons for the Growth of MNCs

1. 2. 3. 4. 5. 6.

Non-transferable Knowledge Exploiting Reputations Protecting Reputations Protecting Secrecy Availability of Capital Product Life Cycle Hypothesis
9

Country Risk
When making over direct investment it is necessary to allow for risk due to investments being made in a foreign country. Country risk is one of the special issues faced by MNC when investing abroad. In involves the possibility of losses due to country specific economic political

10

Methods of Reducing Country Risk and Control

1.Controlling Crucial Elements Corporate Operations 2.Programmed Stages Disinvestment 3.Joint Venture of of

Planned

11

MNCs in India
MNCs have been operating in India even prior to independence, like Singer, Parry, Philips, Unit-Lever, Proctor and Gamble. They either operated in the form of subsidiaries or entered into collaboration with Indian companies involving sale of technology as well as use of foreign brand names for the final products. Now, the entry of MNCs in India was controlled by existing industrial Policy statements, MRTP Act and FERA.
12

Criticisms against MNCs in India

1.They are interested more on mergers and acquisitions and not on fresh projects. 2.They have raised very large part of their financial resources from with in the country. 3.They are mainly profit oriented and have short term focus on quick profits. National interests and problems are generally ignored.
13

THE END

14