What is MNC & MNE? Definition & History Characteristics of MNC Reasons for becoming MNC Advantages of MNC Disadvantages of MNC for Home Country How local companies keep MNC at bay?

1. “Achievers”
1-Hurriya Saeed Rana
2-Ameera Sohail
3-Alvina Ashique
4-Afia Abrar

2. Topics:
 What is MNC & MNE?
 Definition & History
 Characteristics of MNC
 Reasons for becoming MNC
 Advantages of MNC
 Disadvantages of MNC for Home Country
 How local companies keep MNC at bay?

3. “HURRIYA”
Topics:
Introduction
Features of MNC

4. What is MNC & MNE?
MNC MNE
“Multi-National “ Multi-National
Corporation” Enterprise”

5. Definition:
According to ILO (International Labor Organization):
“MNC is any corporation that has its
management head quarters in one country
i.e. (Home Country)
&
operates in several other countries i.e.
(Host Country).”

6. History
 The MNC’s originated in the 20th century
 The first multinational business organization
was the Knights Templar, founded in 1120.
 After that came the British East India
Company in 1600

7. Origin:
 The “Dutch East India”
company was the 1st MNC
in the world to issue stock
founded March 20, 1602 .

8. Characteristics of MNC
 Large size:
The firms are large in size means their
resources & capital are very huge.
Example: PC
 Multi-country Operations:
MNC operates in
several countries other than home country.
Example: McDonalds'

9. Characteristics of MNC
 Multiple Environments:
MNC operates in
different countries and face various
environments.
 Profit back to HQ:
The revenue generated in
host countries is ultimately dragged back to
home countries.

10. (2)
“AMEERA”
MUGHAL
Topics:
Reasons for becoming MNC
Advantages OF MNC

11. Reasons for becoming MNC
 Increase Market Share
 Secure cheaper premises & labor
 Avoid Tax & Trade barriers
 Enhance profitability

13. Advantages
• To diversify themselves against the risks and
uncertainties of the domestic business cycle.
• In response to foreign competition MNC move
toward the less competitive Countries.
• To Capture more potential Customers .A
company may have reached a plateau satisfying
domestic demand, which is not growing. Looking
for new markets.

14. Advantages
• To reduce costs, like cheap labor e.g. United
Fruit has established banana-producing
facilities in Honduras.
• Take advantage of local low cost & avoid middle
man.
• To avoid transportation cost, because
transportation costs are like tariffs in that they are
barriers which raise consumer prices. e.g. Toyota

15. (3)
“ALVINA”
ASHIQUE
Topic:
Disadvantages of MNC

16. Disadvantages of MNC
• Interference in the Economic dominion of
the Host Country :
MNCs affect the independence of any country.
Example: An East India company came in India
for business but it made India slave for 200 years
• Cultural Loss:
This is the one of biggest drawback of MNCs that
it is risky for our cultural loss.
Example: Indian culture is vegetarian but many
MNCs employees eat meat and chicken.

17. Disadvantages of MNC
• III-effects of Advertisements:
The MNCs spend large amount on competitive
advertisements which in effect may lead to high
prices of the products, manipulation of demand
and wastages of economic resources.
• Minimum Transfer of Technology:
It has been observed that the MNCs generally do
not transfer their advanced technology to the host
county. They carry out their research and
development in the home country only.

18. Disadvantages of MNC
• Creation of Monopolies:
MNCs with high advertising and other ways, these
MNCs do not live domestic companies. After this,
they increase prices and then get high profit by
exploiting consumers.
• Drain of Resources for Profit Maximization:
The basic objective of a MNC is profit
maximization through" exploitation of host
country's resources. It is least concerned with
development.

19. (4)
“AFIA”
ABRAR
Topic:
6 Strategies

20. Globalization
 Since the late “1970s” the winds of
global competition blow.
 Policy makers lowered tariff barriers and
permitted foreign investments.

21. How local companies
keep MNC at bay?
 Create customized products or services:
 Develop business models to overcome key
obstacles:
 Deploy the latest technologies:
 Take advantage of low-cost labor, and train
staff in-house:
 Scale up quickly:
 Invest in talent to sustain rapid growth:

22. 1-Create customized products or
services:
Simple customization techniques, based on
intimate knowledge of local consumers, have
sparked major success for homegrown
champions.
Example:
Goodbaby Group of china.
(The largest manufacturers and supplier of infants & children's
product.)

23. 2-Develop business models to
overcome key obstacles:
 Adapt at identifying the key challenges i.e.
lack of distribution channel, infrastructure
hurdles, limited telecom width.
 Sharpen their first mover advantage.
Example:
Shanda Games (Chinese) vs. Microsoft

24. 3-Deploy the latest
technologies
Innovative technologies keep operating on low
cost but deliver good quality products.
New technologies can help older companies get
a second wind after economic liberalization.
Example:
GCMMF( Gujarat cooperative milk marketing
federation)
*India's largest dairy company, manufactures wide
range of products under brand Amul.

25. 4-Take advantage of low-cost
labor, and train staff in-house:
“Many local champions have at their core a
business model that taps a pool of low cost
labor instead of relying on automation.”
Example:
Apollo Hospital India

26. 5-Scale up quickly:
 Go national as soon as possible.
 Scale up quickly.
(Expansions by mergers & acquisition)
 Create regional entities to speed up organic
growth
 Strike local distribution
 Open new point of presence quickly

27. 6-Invest in talent to sustain
rapid growth:
 Domestic strength
Enterprenual zeal
Great local managers
Management depth and capability
Not need to negotiate headquarters.
 Strategy to maintain rapid growth

28. How to achieve competitive
advantage in local markets??
• Low-Cost Leadership
• Differentiation
• Niche Strategies
• Operational Effectiveness
• Innovation

29. Outcomes of Local business
 Community Well-Being
 Keeping Dollars in the Local Economy
 Job and Wages
 Public Benefits and Costs
 Environmental Sustainability
 Product Diversity