Meaning and features of global enterprises

2. INTRODUCTIONINTRODUCTION
 MNCs as is evident from what we see aroundMNCs as is evident from what we see around
us, are gigantic corporations which have theirus, are gigantic corporations which have their
operations in a number of countries.operations in a number of countries.
 They are characterised by their huge size, largeThey are characterised by their huge size, large
number of products, advanced technology,number of products, advanced technology,
marketing strategies and network of operationsmarketing strategies and network of operations
all over the world.all over the world.

3.  Global enterprises thus are huge industrialGlobal enterprises thus are huge industrial
organisations which extend their industrial andorganisations which extend their industrial and
marketing operations through a network of theirmarketing operations through a network of their
branches in several countries. Their branches arebranches in several countries. Their branches are
also called Majority Owned Foreign Affiliatesalso called Majority Owned Foreign Affiliates
(MOFA).(MOFA).

4.  They do not aim at maximising profits from one or twoThey do not aim at maximising profits from one or two
products but instead spread their branches all over.products but instead spread their branches all over.
 They have an impact on the international economy also.They have an impact on the international economy also.
 This is evident from the fact that the sales of top 200This is evident from the fact that the sales of top 200
corporations were equivalent to 28.3 percent of thecorporations were equivalent to 28.3 percent of the
world’s GDP in 1998. This shows that top 200 MNCsworld’s GDP in 1998. This shows that top 200 MNCs
control over a quarter of the world economy.control over a quarter of the world economy.
 Therefore, MNCs are in a position to exercise massiveTherefore, MNCs are in a position to exercise massive
control on the world economy because of their capitalcontrol on the world economy because of their capital
resources, latest technology and goodwill.resources, latest technology and goodwill.

5.  By virtue of this, they are able to sell anyBy virtue of this, they are able to sell any
product in different countries.product in different countries.
 Some of these corporations may be slightlySome of these corporations may be slightly
exploitative in nature and concentrate more onexploitative in nature and concentrate more on
selling consumer goods and luxury items whichselling consumer goods and luxury items which
are not always desirable for developingare not always desirable for developing
countries.countries.

6. FEATURESFEATURES
 Huge capital resources:Huge capital resources:
These enterprises areThese enterprises are
characterised by possessingcharacterised by possessing
huge financial resources andhuge financial resources and
the ability to raise funds fromthe ability to raise funds from
different sources. They maydifferent sources. They may
issue equity shares,issue equity shares,
debentures or bonds to thedebentures or bonds to the
public. They are also in apublic. They are also in a
position to borrow fromposition to borrow from
financial institutions andfinancial institutions and
international banks. Eveninternational banks. Even
investors and banks of theinvestors and banks of the
host country are willing tohost country are willing to
invest in them.invest in them.

7.  Foreign collaboration:Foreign collaboration: Global enterprises usually enter intoGlobal enterprises usually enter into
agreements with Indian companies pertaining to the sale ofagreements with Indian companies pertaining to the sale of
technology, production of goods, use of brand names for thetechnology, production of goods, use of brand names for the
final products, etc. These MNCs may collaborate with companiesfinal products, etc. These MNCs may collaborate with companies
in the public and private sector. There are usually variousin the public and private sector. There are usually various
restrictive clauses in the agreement relating to transfer ofrestrictive clauses in the agreement relating to transfer of
technology, pricing, dividend payments, tight control by foreigntechnology, pricing, dividend payments, tight control by foreign
technicians, etc. Big industrial houses wanting to diversify andtechnicians, etc. Big industrial houses wanting to diversify and
expand have gained by collaborating with MNCs in terms ofexpand have gained by collaborating with MNCs in terms of
patents, resources, foreign exchange etc. But at the same timepatents, resources, foreign exchange etc. But at the same time
these foreign collaborations have given rise to the growth ofthese foreign collaborations have given rise to the growth of
monopolies and concentration of power in few hands.monopolies and concentration of power in few hands.

8.  Advanced technology:Advanced technology: These enterprises possessThese enterprises possess
technological superiorities in their methods oftechnological superiorities in their methods of
production. They are able to conform to internationalproduction. They are able to conform to international
standards and quality specifications. This leads tostandards and quality specifications. This leads to
industrial progress of the country in which suchindustrial progress of the country in which such
corporations operate since they are able to optimallycorporations operate since they are able to optimally
exploit local resources and raw materials.exploit local resources and raw materials.
Computerisation and other inventions have come dueComputerisation and other inventions have come due
to the technological advancements provided by MNCs.to the technological advancements provided by MNCs.

9.  Product innovation:Product innovation: These enterprises areThese enterprises are
characterised by having highly sophisticatedcharacterised by having highly sophisticated
research and development departments engagedresearch and development departments engaged
in the task of developing new products andin the task of developing new products and
superior designs of existing products. Qualitativesuperior designs of existing products. Qualitative
research requires huge investment which onlyresearch requires huge investment which only
global enterprises can affordglobal enterprises can afford

10.  Marketing strategies:Marketing strategies: The marketing strategies ofThe marketing strategies of
global companies are far more effective than otherglobal companies are far more effective than other
companies. They use aggressive marketing strategies incompanies. They use aggressive marketing strategies in
order to increase their sales in a short period. Theyorder to increase their sales in a short period. They
posses a more reliable and up-to-date marketposses a more reliable and up-to-date market
information system. Their advertising and salesinformation system. Their advertising and sales
promotion techniques are normally very effective. Sincepromotion techniques are normally very effective. Since
they already have carved out a place for themselves inthey already have carved out a place for themselves in
the global market, and their brands are well-known,the global market, and their brands are well-known,
selling their products is not a problem.selling their products is not a problem.

11.  Expansion of market territory:Expansion of market territory: TheirTheir
operations and activities extend beyond theoperations and activities extend beyond the
physical boundaries of their own countries.physical boundaries of their own countries.
Their international image also builds up andTheir international image also builds up and
their market territory expands enabling them totheir market territory expands enabling them to
become international brands. They operatebecome international brands. They operate
through a network of subsidiaries, branches andthrough a network of subsidiaries, branches and
affiliates in host countries. Due to their giantaffiliates in host countries. Due to their giant
size they occupy a dominant position in thesize they occupy a dominant position in the
market.market.

12.  Centralised control:Centralised control: They have theirThey have their
headquaters in their home country and exerciseheadquaters in their home country and exercise
control over all branches and subsidiaries.control over all branches and subsidiaries.
However, this control is limited to the broadHowever, this control is limited to the broad
policy framework of the parent company. Therepolicy framework of the parent company. There
is no interference in day-to-day operations.is no interference in day-to-day operations.