A multinational corporation (MNC) owns or controls production facilities in multiple countries. MNCs play an important role in globalization. Some of the first MNCs were the Knights Templar in 1120 and the British East India Company in 1600. There are several reasons why MNCs invest in India, including its large market size and fast-growing economy. The government has also encouraged foreign direct investment.
4. A multinational corporation (MNC) or multinational enterprise (MNE)[1]
are organizations that own or control production or services facilities in
one or more countries other than the home country.
For example, when a corporation is registered in more than one country
or has operations in more than one country, it may be attributed as
MNC.
Usually, it is a large corporation which both produces and sells goods or
services in various countries.
It can also be referred to as an international corporation or
"transnational corporation".
They play an important role in globalization. Arguably, the first
multinational business organization was the Knights Templar, founded in
1120.
After that came the British East India Company in 1600and then the
Dutch East India Company, founded March 20, 1602, which would
become the largest company in the world for nearly 200 years.
5. There are a number of reasons why the multinational companies are
coming down to India.
India has got a huge market.
It has also got one of the fastest growing economies in the world.
Besides, the policy of the government towards FDI has also played a
major role in attracting the multinational companies in India.
For quite a long time, India had a restrictive policy in terms of foreign
direct investment.
As a result, there was lesser number of companies that showed
interest in investing in Indian market.
However, the scenario changed during the financial liberalization of
the country, especially after 1991.
Government, nowadays, makes continuous efforts to attract foreign
investments by relaxing many of its policies.
As a result, a number of multinational companies have shown interest
in Indian market.
6. Huge market potential of
the country
FDI attractiveness
Labor competitiveness
Macro-economic stability
7. A number of factors have contributed to the phenomenal growth of
MNCs. Some of the important factors are as follows: -
1) Expansion of market territories: -
Rapid economic growth in a number of countries resulting in rising
GDPs and per capita incomes contributed to the growing standards
of living. This in turn contributed to the continuous expansion of
market territories. MNCs, both contributed to the expansion of
market territories and also grew in size and spread as a result of
expansion of market territories.
2) Market superiorities: -
In many ways, MNCs have an edge over domestic firms, such as: -
a) Availability of reliable and current data,
b) MNCs enjoy market reputation,
c) MNCs encounters relatively less problems and difficulties in
marketing the products,
d) MNCs adopt more effective advertising and sales promotion
techniques, and
e) MNCs enjoy faster transportation and adequate warehousing
facilities
3) Financial superiorities: -
MNCs also enjoy a number of financial advantages over
8. a) Availability of huge financial resources with the MNCs helps them
to transform business environment and circumstances in their favor.
b) MNCs can use the funds more effectively and economically on
account of their activities in numerous countries.
c) MNCs have easy access to international capital markets, and
d) MNCs have easy assessed to international banks and financial
institutions.
4) Technological superiorities: -
MNCs are technologically prosperous on account of high and sustained
spend on R&D. developing countries on account of their technological
backwardness welcome MNCs to their countries because of the
attendant benefits of technology transfer.
9.
10.
11. ADVANTAGES
MNC's create opportunities for marketing the
products produced in the home country
throughout the world.
They create employment opportunities to the
people of home country both at home and
abroad.
It gives a boost to the industrial activities of
home country.
MNC's help to maintain favourable balance of
payment of the home country in the long run.
Home country can also get the benefit of
foreign culture brought by MNC's.
DISADVANTAGES
MNC's transfer the capital from the home
country to various host countries causing
unfavourable balance of payment.
MNC's may not create employment
opportunities to the people of home country if
it adopts geocentric approach.
As investments in foreign countries is more
profitable, MNC's may neglect the home
countries industrial and economic development.
12.
13.
14. ADVANTAGES
The investment level, employment level, and
income level of the host country increases
due to the operation of MNC's.
The industries of host country get latest
technology from foreign countries through
MNC's.
The host country's business also gets
management expertise from MNC's.
The domestic traders and market
intermediaries of the host country gets
increased business from the operation of
MNC's.
MNC's break protectionalism, curb local
monopolies, create competition among
domestic companies and thus enhance their
competitiveness.
DISADVANTAGE
MNC's may transfer technology which has
become outdated in the home country.
As MNC's do not operate within the national
autonomy, they may pose a threat to the
economic and political sovereignty of host
countries.
MNC's may kill the domestic industry by
monpolising the host country's market.
In order to make profit, MNC's may use
natural resources of the home country
indiscriminately and cause depletion of the
resources.
A large sums of money flows to foreign
countries in terms of payments towards
profits, dividends and royalty.
15.
16. IBM
Coca Cola and
PepsiCo
Citigroup
Apple Inc
Procter &
Gamble
INDIA
99X Technology
AIA Insurance Lanka
Akzo Nobel Paints
Lanka
Ceylon Tobacco
Company
Classic Travel
SRI LANKA
