SIMSR, MMM 2011-2014

MULTINATIONAL CORPORATIONS

Vikas Pandita - 40

Definition & Functional Nature of MNCs

What is a MNC?Any business corporation which has holdings,

management, production and marketing extended over several countries , owns huge resources and extensive potentiality , and encourages a collective transfer of resources among various countries with a view of increasing profitability under a centralized ownership is called a “ multinational corporation”.

Functional nature of MNC’s

Functional nature of MNCs means the functions of Multinational Organizations which they follow and succeed.

There may be five different functions of MNCs-PlanningOrganizingStaffingLeading and;Controlling

Functions in a MNCPlanning in MNC

Involves Study of International and External environment to do SWOT analysis.

Setting the objectives.To compete in world markets, form GSP (Global Strategic

Partnership) with the local players.Organizing in the MNC

To achieve corporate objectivesCan appoint VP for all foreign branches. He will control

these branches from Head Office.A MNC may organize the structure on the basis of

production line. E.g; one manager will be incharge of one product.

Functions in a MNCStaffing in MNC

Select managers from the home country. These mangers will know the values of the company clearly

Select mangers from the host country. They will know the culture of the host country.

Select mangers from the third country.Leading in MNC

Involves motivating and communicating.Managers must have effective leadership qualities.

Functions in a MNCControlling in MNC

Involves monitoring actual performance and taking corrective actions to correct deviations.

A bit difficult process because of –Revenue, cost, profits measured in different currencies.Foreign exchange fluctuations.

Ajinkya R.Jadhav - 26

( Source-Business Environment-Shaikh Salim)

Importance Of MNC’s and their Benefits to home/host countries.

Importance of MNC’s

1. Vehicles of technology transfer to developing countries.

2. They work to equalize the cost of factors of production around the

world.

3. Efficient means of integrating national economies.

4. Contribute to R & D due to enormous resources.

5. Help to increase competition & break down domestic monopolies.

Benefits of MNC’s to home country1. Expand the business beyond the boundaries of the parent company.

2. Minimize the cost of production, especially the labour cost.

3. Achieve greater efficiency by producing in local markets and

exporting the products.

4. Establish an international corporate image.

5. Make the best use of technological advantages by setting up

production facilities abroad.

6. Contribute towards the national exchequer by way of duties &

taxes.

Benefits of MNC’s to host countries1. Help to increase the investment level and thus income &

employment .

2. Enable host countries to increase their exports & decrease their import requirements.

3. They stimulate domestic enterprises.

4. Help to improve the standard of living in host countries.

5. Contribute towards professionalization of management.

6. Contribute to improve the balance of payment position.

7. Play a vital role in developing the ancillaries in host countries.

8. They pay high dividends to investors in host countries.

Nikhil Sawant- 49

Challenges Faced By MNC’s (Home and Host)

Challenges Faced by Home CountiesChallenges of Working Across Cultures.

EthnocentrismParochial Attitude.

Attitude towards appointment and Deadlines.Lack of Cohesion.Outward InvestmentEg: TATA Motors.

Challenges Faced by Host CountriesMonetary IssuesEthical ChallengesDistribution ChallengesMacro Economic Factors

Political issuesLegal Restrictions.

Eg: Daewoo Motors

Nitin Borhade- 10

Problems due to MNC’s

Economic problems due to MNC’s:-

1)Profit Maximisation is the main objective and not the development of poor countries.

2)They cause distraction of competition and acquire monopoly powers in the long run.

3) They can have an unfavorable effect on the Balance of Payment of the country through and outflow of large sums of money in the form of dividends, profits, royalties, interests, technical fees and so on.

4) Inflexible about terms & conditions

5) Feeling that Labour is being exploited by MNC

6) Depletion natural Resources

7) Due to tremendous powers MNCs can evade or undermine national economic autonomy and control.

8) More interested in Merger & Acquisitions.

9) The problem of Dumping ( Eg.Chinese low quality products in Indian Markets)

10) They raise very large part of their financial resource from

with in country and hence Indian( host) country companies likely

to loose economic sovereignty.

11) The Indian companies may also experience some loss of control

over its own economy

Social Problems due to MNC'S-

MNCs more interested in business but not social justice.

Standard of living - Splurging

Causing of closure of small scale of Business (Eg. Grocery y Shops)

• Stress & Tensions in employees

Stress related ill habits (Alcoholism, smoking addiction)

Stress related diseases ( Heart Attack, High Cholestrol, Obesity)

Cultural Problems due to MNC'S-

Influence of Western Culture

Lack of awareness about Indian/ host country Cultures.

Western Dressing Trends

• Celebration of western festivals in rise at the cost of Indian/host festivals.

Western music against Indian classic music

Changes of food habits from Nutritious to Junk

Prashant Humane- 24

Case Study

Rank Company Revenues (USD Mio)1 Royal Dutch Shell 484,489

2 Exxon Mobil 452,926

3 Wal-Mart Stores 446,950

4 BP 386,463

5 Sinopec Group 375,214

6 China National Petroleum 352,338

7 State Grid 259,142

8 Chevron 245,621

9 ConocoPhillips 237,272

10 Toyota Motor 235,364

2012 Top Fortune Global 500 Companies(CNN Money July 23, 2012 issue)

Rank Company Revenues (USD Mio)83 Indian Oil 86,016

99 Reliance Industries 76,119

225 Bharat Petroleum 44,582

267 Hindustan Petroleum 38,885

285 State Bank of India 36,950

314 Tata Motors 34,575

357 Oil & Natural Gas 30,746

401 Tata Steel 27,739

2012 Top Fortune Global 500 CompaniesIndian Companies

(CNN Money July 23, 2012 issue)

Ranbaxy Laboratories Ltd.History : In 1938, Ranbaxy & Co. was started by B.M.Singh’s cousins, Ranjit

Singh and Gurbax Singh in Amritsar Punjab. Ranbaxy's name was a fusion of Ranjit and Gurbax's names known as “ Ranbaxy & Co.”

When Ranbaxy & Co. defaulted on a loan, B.M.Singh bought the company on August 1, 1952, for Rs 2.5 lakh.

Joint Venture with Foreign Company In 1952, RC became the solo Indian franchaise of Italian pharma

company Lepetit SpA (LS). In 1959, RC started a manufacturing joint venture with LS. RC had

no experience of running a manufacturing outfit.

Ranbaxy Laboratories Ltd.Milestones:- The Largest Pharmaceutical Company in India in terms of sales.

- The first Multinational Pharmaceutical Company in India.

- The 50th largest pharmaceutical company in the world. (10th largest Generic pharmaceutical company in the world)

- On June 11, 2008, Ranbaxy Laboratories Ltd and Daiichi Sankyo Company Ltd. announced a binding share purchase agreement between Daiichi Sankyo, Ranbaxy and the Singh Family, the largest and controlling shareholders of Ranbaxy.

Ranbaxy Laboratories Ltd.Year Milestone

1938 Ranbaxy & Co. was established.

1952 RC was the solo distributer of Lepetit SpA

1959 RC started a joint venture with Leptit SpA

1961 A joint venture with Lepetit SpA ended. RL incorporated.

1973 RL went Public

1977 RL’s first joint venture in Nigeria was set up.

1985 RL Research Foundation was established.

1987 RL became the largest manufacturer of antibiotics.

1988 RL’s Toansa Plant got USFDA approval.

1990 RL was granted its first US patent for Doxicyline

1992 RL entered into an agreement with Eli Lilly

1995 RL started R&D for new drug development.

Ranbaxy Laboratories Ltd.Year Milestone

1997 RL crossed a sales turnover of Rs. 10,000 million, with its export reaching an all time high of Rs.5,000 million.

1999 RL licensed its once-a-day ciprofloxacin formulations to Bayer in 1999.

2003 RL and GSK entered into a global alliance for drug discovery.

2005 RL started joint venture with Nihon Chemiphar .RL opened the stat of the art R&D facility .

2008 Daiichi Sankyo acquired 34.82% shareholding from the promoters of RL.