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MNCs and International Business
 
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In this presentation, we will discuss role of MNCs in global economy, their merits and demerits, how to globalize a business by transforming the organizational structures according to international ...

In this presentation, we will discuss role of MNCs in global economy, their merits and demerits, how to globalize a business by transforming the organizational structures according to international standards.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit: http://www.welingkaronline.org/distance-learning/online-mba.html

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    MNCs and International Business MNCs and International Business Presentation Transcript

    • Chapter 3MNCs AND INTERNATIONAL BUSINESS International Marketing Chapter-3 MNCs And International Business
    • Learning ObjectivesWhat is multinational corporationWhat is organizational transformationWhat is globalization of businessWhat is the role of MNCs in globaleconomy International Marketing Chapter-3 MNCs And International Business
    • Learning ObjectivesWhat are the merits, demerits andperspective of MNCsWhat is code of conductWhat is the role of multinationals in India International Marketing Chapter-3 MNCs And International Business
    • IntroductionThe total foreign affiliates of MNCs, only littlewere developed countriesForeign investment has been growingsubstantially faster than world output andexportMultinationals have been emerging from thedeveloping countriesThe diversified corporations have many oddsagainst them and focus strategy is moresuccessful International Marketing Chapter-3 MNCs And International Business
    • Definition: Multinationalcorporation The essential nature of the multinational enterprises lies in the fact that its managerial headquarters are located in one country while the enterprise carries out operations in a number of other countries as well International Marketing Chapter-3 MNCs And International Business
    • Five Criteria of MNC1. It operates in many countries at different levels of economic development2. Its local subsidiaries are managed by nationals3. It maintains complete industrial organizations, including R and D and manufacturing facilities, in several countries International Marketing Chapter-3 MNCs And International Business
    • 4. It has a multinational central management5. It has multinational stock ownership International Marketing Chapter-3 MNCs And International Business
    • Organizational Transformation MNC is now increasingly assuming the role of an orchestrator of production and transactions within a cluster, or network, of cross border internal- external relationships, which may or may not involve equity investment, but which are intended to serve its global interests. International Marketing Chapter-3 MNCs And International Business
    • Globalization of business Globalization is a way of corporate life necessitated, facilitated and nourished by the transnationalisation of the world economy and developed by corporate strategies International Marketing Chapter-3 MNCs And International Business
    • Dimensions of Globalization1. Doing or planning of expand, business globally.2. Giving up the distinction between the domestic and foreign market and developing a global outlook of the business.3. Locating the production and other physical facilities on a consideration of the global business dynamics, irrespective of national considerations. International Marketing Chapter-3 MNCs And International Business
    • Dimensions of Globalization4. Basing product development and production planning on the global market consideration.5. Global sourcing of factors of production i.e., raw materials, components, machinery/technology, finance etc. are obtained from the best source anywhere in the world6. Global orientation of organizational structure and management culture. International Marketing Chapter-3 MNCs And International Business
    • Reno vision on the Art ofGlobal Dominance1. Source raw materials wherever they are cheapest.2. Manufacture wherever in the world is most cost effective.3. Sell in those global markets where prices are highest.4. Raise finances globally.5. Forge international strategic alliances.6. To manage all these, take on the best talent from all over the world. International Marketing Chapter-3 MNCs And International Business
    • Table 3.2 World’s Top 100TNCs International Marketing Chapter-3 MNCs And International Business
    • Dominance of MNCs andglobal economy The global liberalization has paved the way for fast expansion and growth of the MNCs The economic clout of the MNCs is indicated by the GDP of most of the countries is smaller then the value of the annual sales turnover of the multinational giants International Marketing Chapter-3 MNCs And International Business
    • MNCs and international tradeThe sale of foreign subsidiaries in the hostcountries are three to four times as large astotal world exportsSignificant increase in the export intensity ofthe foreign affiliates of MNCsThe abilities of multinationals to manipulatefinancial flows by the use of artificialtransfer prices is bound to be a matter ofconcern government MNCs And International International Marketing Chapter-3 Business
    • Merits of MNCs1. MNCs help increase the investment level and thereby the income and employment in host country.2. The transnational corporations have become vehicles for the transfer of technology, especially to the developing countries.3. They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques. International Marketing Chapter-3 MNCs And International Business
    • Merits of MNCs4. The MNCs enable the host countries to increase their exports and decrease their import requirements.5. They work to equalize the cost of factors of production around the world.6. MNCs provide an efficient means of integrating national economics.7. The enormous resources of the multinational enterprises enable them to have very efficient research and development systems. Thus they make a commendable contribution to inventions and innovations. International Marketing Chapter-3 MNCs And International Business
    • Merits of MNCs8. MNCs also stimulate domestic enterprise because to support their own operations, the MNCs may encourage and assist domestic suppliers.9. MNCs help increase competition and break domestic monopolies. International Marketing Chapter-3 MNCs And International Business
    • Demerits of MNCs1. The MNCs technology is designed for world wide profit maximization, not the development needs of poor countries. The imported technologies are not adapted to a. consumption needs b. size of domestic markets c. resource availabilities d. stage of development of many of the LDCs.2. Through their power and flexibility, MNCs can evade or undermine national economic autonomy and control and their activities may be inimical to the national interests of particular countries. International Marketing Chapter-3 MNCs And International Business
    • Demerits of MNCs3. MNCs may destroy competition and acquire monopoly powers.4. The tremendous power of the global corporations poses the risk that they may threaten the sovereignty of the nations in which they do business.5. MNCs retard growth of employment in the home country.6. The transnational corporations cause fast depletion of some of the non-renewable natural resources in the host country.7. The transfer pricing enables MNCs to avoid taxes by manipulating prices on intra-company transactions. International Marketing Chapter-3 MNCs And International Business
    • Growth Perspective of MNCs1. Increasing emphasis on market forces and a growing role for the private sector in nearly all developing countries.2. Rapidly changing technologies that are transforming the nature of organization and location of international production.3. The globalization of firms and industries4. The rise of services to constitute the largest single sector in the world economy5. Regional economic integration International Marketing Chapter-3 MNCs And International Business
    • Code of Conduct1. A framework to allow developing countries as well as transnational corporations to benefit from direct investments on terms contractually agreed upon2. Legislation3. Cooperation by governments4. Fiscal and other incentives and policies towards foreign investment5. An international procedure for discussions International Marketing and consultations MNCs And International Chapter-3 Business
    • Multinationals in India In India the government policy confined the foreign investment to the priority areas like high technology and heavy investment sectors of national importance and export sectors. Firms which had been established in non-priority areas prior to the implementation of this policy have, however, been allowed to continue in those sectors. International Marketing Chapter-3 MNCs And International Business
    • Multinationals in India Several Indian outfits of MNCs are in the low technology consumer goods sector. There are many MNCs which are in high technology area. Since the economic liberalization unshared in 1991, many multinationals in different lines of business have entered the Indian market. International Marketing Chapter-3 MNCs And International Business
    • Summary MNCs are corporations that control production facilities in more than one country, such facilities having been acquired through the process of foreign direct investment. Firms that participate in international business, however large they may be, solely by exporting or by licensing technology are not multinational enterprises. International Marketing Chapter-3 MNCs And International Business
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