PRESENTATIONPRESENTATIONONON

MULTINATIONAL MULTINATIONAL & &

TRANSNATIONAL TRANSNATIONAL CORPORATIONSCORPORATIONS

SUBMITTED TOSUBMITTED TO: : SUBMITTED BYSUBMITTED BY::

MNC’SMNC’S

DefinitionDefinition-A corporation that -A corporation that controls production facilities in controls production facilities in more than one country, such more than one country, such facilities having been acquired facilities having been acquired through the process of foreign through the process of foreign direct investment.direct investment.

According to an ILO report,According to an ILO report,the essential nature of the multinational the essential nature of the multinational

enterprises lies in the fact that its managerial enterprises lies in the fact that its managerial headquarters are located in one country headquarters are located in one country

while the enterprise carries out operations in while the enterprise carries out operations in a number of other countries as well.a number of other countries as well.

MNC’S took birth in the early 1860’s it MNC’S took birth in the early 1860’s it was after the Second World War that was after the Second World War that multinational have grown rapidly.multinational have grown rapidly.

In the early days, the United States was In the early days, the United States was the home of the most of the MNC’S. the home of the most of the MNC’S. Now there are a large number of Now there are a large number of Japanese and European multinationals.Japanese and European multinationals.

Now in the list of 10 or 20 largest MNC’S, Now in the list of 10 or 20 largest MNC’S, Japan has the largest number.Japan has the largest number.

MNC’S was the type of the corporation MNC’S was the type of the corporation popular when many European countries popular when many European countries internationalized during pre war (1920s internationalized during pre war (1920s & 1930s) when the trade barriers were & 1930s) when the trade barriers were very high.very high.

According to Bartlett and Ghoshal, According to Bartlett and Ghoshal, the the

MNC’S are defined by the following MNC’S are defined by the following characteristics:characteristics:

a decentralized federation of assets a decentralized federation of assets and responsibilitiesand responsibilities

a management process defined by a management process defined by simple financial control systems simple financial control systems overlaid on informal personal overlaid on informal personal coordinationcoordination

a dominant strategic mentality that viewed a dominant strategic mentality that viewed the company’s worldwide operations as a the company’s worldwide operations as a portfolio of national businesses.portfolio of national businesses.

MERITS OF MNCsMERITS OF MNCs

MNCs help increase the investment level MNCs help increase the investment level and thereby the income and employment and thereby the income and employment in host country.in host country.

The MNCs enable the host countries to The MNCs enable the host countries to increase their exports and decrease their increase their exports and decrease their import requirements.import requirements.

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

MNCs provide an efficient means of MNCs provide an efficient means of integrating national economies.integrating national economies.

The enormous resources of the The enormous resources of the multinational enterprises enable them to multinational enterprises enable them to have very efficient research and have very efficient research and development systems. Thus, they make development systems. Thus, they make commendable contribution to inventions commendable contribution to inventions and innovations.and innovations.

MNCs help increase and break domestic MNCs help increase and break domestic monopolies.monopolies.

DEMERITS OF MNCsDEMERITS OF MNCs

MNCs may destroy competition and MNCs may destroy competition and acquire monopoly powers.acquire monopoly powers.

MNCs technology is designed for MNCs technology is designed for worldwide profit maximization, not the worldwide profit maximization, not the development needs of poor countries, in development needs of poor countries, in particular employment needs and relative particular employment needs and relative factor scarcities in these countries.factor scarcities in these countries.

MNCs retard growth of employment in the MNCs retard growth of employment in the home country.home country.

The tremendous power of the global The tremendous power of the global corporations poses the risk that may corporations poses the risk that may threaten the sovereignty of the nations in threaten the sovereignty of the nations in which they do business.which they do business.

The MNCs have been criticized for their The MNCs have been criticized for their business strategies and practices in the business strategies and practices in the host countries. They undermine local host countries. They undermine local cultures and traditions, change the cultures and traditions, change the consumption habits for their benefits consumption habits for their benefits against the long term interests of local against the long term interests of local community.community.

TNCs TNCs

Transnational Corporations are Transnational Corporations are incorporated or unincorporated enterprises incorporated or unincorporated enterprises comprising parent enterprises and their comprising parent enterprises and their foreign affiliates.foreign affiliates.

A A parent enterprise parent enterprise is deemed as an is deemed as an enterprise that controls assets of other enterprise that controls assets of other entities in countries other than its home entities in countries other than its home country, usually by owing a certain equity country, usually by owing a certain equity capital state.capital state.

In a transnational, the specialized resources In a transnational, the specialized resources and capabilities are dispersed among the and capabilities are dispersed among the various operating units globally.various operating units globally.

These units are interdependent and These units are interdependent and integrated & have large flows of integrated & have large flows of components, products, resources, people components, products, resources, people and information among them. and information among them.

An important feature of the transnational, An important feature of the transnational, it is it is a complex process of coordination and a complex process of coordination and cooperation in an environment of decision cooperation in an environment of decision making.making.

MERITS OF TNCsMERITS OF TNCs

The transnational corporations have The transnational corporations have become vehicles for the transfer become vehicles for the transfer technology, especially to the developing technology, especially to the developing countries.countries.

They also kindle a managerial revolution in They also kindle a managerial revolution in the host countries through professional the host countries through professional management and the employment of management and the employment of highly sophisticated management highly sophisticated management techniques.techniques.

DEMERIT OF TNCsDEMERIT OF TNCs

The transnational corporations cause The transnational corporations cause fast depletion of some of the non-fast depletion of some of the non-renewable natural resources in the host renewable natural resources in the host country.country.

They have also been accused of the They have also been accused of the following environmental problems: following environmental problems: polluting the environment, not paying polluting the environment, not paying compensation for the environmental compensation for the environmental damages, causing harmful changes in damages, causing harmful changes in the local living conditions.the local living conditions.

PERSPECTIVEPERSPECTIVE

Increasing emphasis on market forces and Increasing emphasis on market forces and a growing role for the private sector in a growing role for the private sector in nearly all developing countries.nearly all developing countries.

Rapidly changing technologies that are Rapidly changing technologies that are transforming the nature of organization transforming the nature of organization and location of international production.and location of international production.

The globalizations of firms and industries.The globalizations of firms and industries.The rise in services to constitute the The rise in services to constitute the

largest single sector in the world economy.largest single sector in the world economy.

DOMINANCE OF MNCs DOMINANCE OF MNCs & &

TNCsTNCsThe global liberalization has paved the way The global liberalization has paved the way

for fast expansion and growth of the for fast expansion and growth of the MNCs. The value added by all foreign MNCs. The value added by all foreign affiliates of MNCs as a percentage of world affiliates of MNCs as a percentage of world GDP increased from about 5 percent in the GDP increased from about 5 percent in the beginning of the 1980s to nearly 7 percent beginning of the 1980s to nearly 7 percent at the end of the 1980s.at the end of the 1980s.

The universe of TNCs is quite diverse & The universe of TNCs is quite diverse & includes a number of small and medium includes a number of small and medium sized enterprises.sized enterprises.

MNCs AND INTERNATIONALMNCs AND INTERNATIONALTRADETRADE

Peter Drucker remarks that multinationalism Peter Drucker remarks that multinationalism and expanding world trade are two sides and expanding world trade are two sides of the same coin. He points out that the of the same coin. He points out that the period of most rapid growth of period of most rapid growth of multinationals- the fifties and sixties, was multinationals- the fifties and sixties, was the period of most rapid growth of the period of most rapid growth of multinational trade. Indeed, during this multinational trade. Indeed, during this period the world trading economy grew period the world trading economy grew faster-at an annual rate of 15% or so in faster-at an annual rate of 15% or so in most years-than even the fastest growing most years-than even the fastest growing domestic economy, that of Japan. domestic economy, that of Japan.

There was a very significant increase in the There was a very significant increase in the export intensity of the foreign affiliates of export intensity of the foreign affiliates of many MNCs.many MNCs.

Apart from trade in commodities, other Apart from trade in commodities, other transactions also take place extensively transactions also take place extensively between the different parts of these between the different parts of these enterprises.enterprises.

Ex- Ex- granting of loans, licensing of granting of loans, licensing of technology & the provision of services.technology & the provision of services.

MNCs IN INDIAMNCs IN INDIAMultinationals in several developing Multinationals in several developing

countries make substantial contribution to countries make substantial contribution to export earnings. The performance in case export earnings. The performance in case of India has, however been very dismal. of India has, however been very dismal. This is mostly to the Government policy.This is mostly to the Government policy.

We have consistently We have consistently policies in India that discriminate against policies in India that discriminate against export production and in favor of export production and in favor of production for the local market. production for the local market.

In 1947, foreign companies did not have an In 1947, foreign companies did not have an anti-export image. anti-export image.

THANK YOUTHANK YOU