MNCs: Definition, features and Advantages -Disadvantages

1. MNCs

2. Multi National Corporation
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.

3. Cont……
Multinational Corporations or Multinational Companies are corporate
organizations that operate in more than one country other than home country.
Multinational Companies (MNCs) have their central head office in the home
country and secondary offices, facilities, factories, industries, and other such
assets in other countries.
These companies operate worldwide and hence also known as global
enterprises. The activities are controlled and operated by the parent company
worldwide. Products and services of MNCs are sold around various countries
which require global management.
High turnover and many assets, aggressive marketing are some of the features
of Multinational Companies. LTI, TCS, Tech Mahindra, Deloitte, Capgemini
are some of the examples of MNCs in India.

4. Multi National Corporation

5. Features of Multinational Corporations (MNCs):
(i) Huge Assets and Turnover: Because of operations on a global basis, MNCs have huge
physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in
terms of assets and turnover, many MNCs are bigger than national economies of several
countries.
(ii) International Operations Through a Network of Branches: MNCs have production
and marketing operations in several countries; operating through a network of branches,
subsidiaries and affiliates in host countries.
(iii) Unity of Control: MNCs are characterized by unity of control. MNCs control business
activities of their branches in foreign countries through head office located in the home
country. Managements of branches operate within the policy framework of the parent
corporation.
(iv) Mighty Economic Power: MNCs are powerful economic entities. They keep on adding
to their economic power through constant mergers and acquisitions of companies, in host
countries.

6. Cont…..
(v) Advanced and Sophisticated Technology: Generally, a MNC has at its
command advanced and sophisticated technology. It employs capital intensive
technology in manufacturing and marketing.
(vi) Professional Management: A MNC employs professionally trained managers
to handle huge funds, advanced technology and international business operations.
(vii)Aggressive Advertising and Marketing: MNCs spend huge sums of money
on advertising and marketing to secure international business. This is, perhaps, the
biggest strategy of success of MNCs. Because of this strategy, they are able to sell
whatever products/services, they produce/generate.
(viii) Better Quality of Products: A MNC has to compete on the world level. It,
therefore, has to pay special attention to the quality of its products.

7. Advantages
• Globalisation of under developed countries improves the
efficiency of resource, reduce the capital output ratio and
increase labour productivity, increase the inflow of capital,
update technology that gives a boost to the average growth
rate of the economy.
• Restructures the production and trade pattern in a capital
scarce, labour abundant economy in favour of labour-
intensive goods and techniques.

8. Advantages….
• With the entry of foreign competition and the removal of
import tariff barriers, domestic industry will be subject to
price and quality improving effects in the domestic economy.
• Efficiency of banking and financial sectors will improve, as
there will be competition from foreign capital and foreign
banks.

9. Disadvantages
• Globalization is helping the developed economies more than the
developing economies.
• Multinational companies and cheaper goods will flood the market at
cheaper rates and there will be no takers for local products.
• Entry of MNC supermarket and hypermarket chains would cause
severe displacement of small and unorganized shopkeepers and
traders.
• None of the multinationals that has set up manufacturing
plants in India has signed any technology transfer
agreement with any Indian company.

10. Present Scenario:
According to the Fortune Global 500 List, the top five
multinational corporations in the world as of 2019 based on
consolidated revenue were:
1. Walmart ($514 billion),
2. Sinopec Group ($415 billion),
3. Royal Dutch Shell ($397 billion),
4. China National Petroleum ($393.01 billion),
5. State Grid ($387 billion).

11. Which country has the most MNC?
1. The world's 500 largest MNCs have, on average, 58%
of their equity affiliates located within their home countries and
42% placed internationally.
2. The United States, Japan, and the major economic forces of
Western Europe are developed countries whose infrastructures
and well-established financial markets are conducive to the
operation and potential success of multinational corporations
(MNCs).

12. Fortune Global 500 list of 2019

13. Breakdown by Country: As of July 2019, this is the
list of the top 10 countries with the most Global 500 companies.

14. THANKYOU