presentation on multinational corporation


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presentation on multinational corporation

  2. 2. MNC’S Definition-A corporation that controls production facilities in more than one country, such facilities having been acquired through the process of foreign direct investment.
  3. 3. According to an ILO report, 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.
  4. 4. MNC’S took birth in the early 1860’s it was after the Second World War that multinational have grown rapidly. In the early days, the United States was the home of the most of the MNC’S. Now there are a large number of Japanese and European multinationals. Now in the list of 10 or 20 largest MNC’S, Japan has the largest number.
  5. 5. MNC’S was the type of the corporation popular when many European countries internationalized during pre war (1920s & 1930s) when the trade barriers were very high. According to Bartlett and Ghoshal, the MNC’S are defined by the following characteristics:  a decentralized federation of assets and responsibilities  a management process defined by simple financial control systems overlaid on informal personal coordination
  6. 6. a dominant strategic mentality that viewed the company’s worldwide operations as a portfolio of national businesses.
  7. 7. MERITS OF MNCs  MNCs help increase the investment level and thereby the income and employment in host country.  The MNCs enable the host countries to increase their exports and decrease their import requirements.  They work to equalize the cost of factors of production around the world.
  8. 8.  MNCs provide an efficient means of integrating national economies.  The enormous resources of the multinational enterprises enable them to have very efficient research and development systems. Thus, they make commendable contribution to inventions and innovations.  MNCs help increase and break domestic monopolies.
  9. 9. DEMERITS OF MNCs  MNCs may destroy competition and acquire monopoly powers.  MNCs technology is designed for worldwide profit maximization, not the development needs of poor countries, in particular employment needs and relative factor scarcities in these countries.
  10. 10.  MNCs retard growth of employment in the home country.  The tremendous power of the global corporations poses the risk that may threaten the sovereignty of the nations in which they do business.  The MNCs have been criticized for their business strategies and practices in the host countries. They undermine local cultures and traditions, change the consumption habits for their benefits against the long term interests of local community.
  11. 11. TNCs  Transnational Corporations are incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates.  A parent enterprise is deemed as an enterprise that controls assets of other entities in countries other than its home country, usually by owing a certain equity capital state.
  12. 12. In a transnational, the specialized resources and capabilities are dispersed among the various operating units globally. These units are interdependent and integrated & have large flows of components, products, resources, people and information among them. An important feature of the transnational, it is a complex process of coordination and cooperation in an environment of decision making.
  13. 13. MERITS OF TNCs  The transnational corporations have become vehicles for the transfer technology, especially to the developing countries.  They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.
  14. 14. DEMERIT OF TNCs   The transnational corporations cause fast depletion of some of the nonrenewable natural resources in the host country. They have also been accused of the following environmental problems: polluting the environment, not paying compensation for the environmental damages, causing harmful changes in the local living conditions.
  15. 15. PERSPECTIVE  Increasing emphasis on market forces and a growing role for the private sector in nearly all developing countries.  Rapidly changing technologies that are transforming the nature of organization and location of international production.  The globalizations of firms and industries.  The rise in services to constitute the largest single sector in the world economy.
  16. 16. DOMINANCE OF MNCs & TNCs The global liberalization has paved the way for fast expansion and growth of the MNCs. The value added by all foreign affiliates of MNCs as a percentage of world GDP increased from about 5 percent in the beginning of the 1980s to nearly 7 percent at the end of the 1980s. The universe of TNCs is quite diverse & includes a number of small and medium sized enterprises.
  17. 17. MNCs AND INTERNATIONAL TRADE Peter Drucker remarks that multinationalism and expanding world trade are two sides of the same coin. He points out that the period of most rapid growth of multinationals- the fifties and sixties, was the period of most rapid growth of multinational trade. Indeed, during this period the world trading economy grew faster-at an annual rate of 15% or so in most years-than even the fastest growing domestic economy, that of Japan.
  18. 18. There was a very significant increase in the export intensity of the foreign affiliates of many MNCs. Apart from trade in commodities, other transactions also take place extensively between the different parts of these enterprises. Ex- granting of loans, licensing of technology & the provision of services.
  19. 19. MNCs IN INDIA Multinationals in several developing countries make substantial contribution to export earnings. The performance in case of India has, however been very dismal. This is mostly to the Government policy. We have consistently policies in India that discriminate against export production and in favor of production for the local market. In 1947, foreign companies did not have an anti-export image.
  20. 20. THANK YOU