Managing MNC

1. MANAGING MNCs Presented by: Mahendra Singh Chauhan Shashank Shekher Singh Shudhanshu Sharma

2. CONTENT What is an MNC Difference between multinational and non-multi-national Types of multi-national on the basis of investment on the basis of operation Impact of MNC –INDIA Positive/negative effect What INDIA offers Indian companies in fortune 500 list Trend of MNC in INDIA Advantage of MNC in INDIA Key issues in Indian context Example: Asian paints

3. WHAT IS AN MNC? It is a corporation that: And/or

4. According to Franklin Root (1994), an MNC is a parent company that: engages in foreign production through its affiliates located in several countries, exercises direct control over the policies of its affiliates, implements business strategies in production, marketing, finance and staffing that transcend national boundaries. WHAT IS AN MNC?....continued

5. A firm to be an MNC following criteria has to be fulfilled: The firm should own or control operations in multiple countries, typically across the world It should generate a substantial portion of its revenue by its operations from foreign countries Should employ workforce from multiple countries, including employees at the senior levels It should have a strategic management perspective and a vision of multinational operations

6. What differs a multinational firm from a non multi-national firm For this one must know what constitutes a non- multinational firm. The key attributes of a non-multinational firm are: It produces and market goods and services in one country It is headquartered in one country It faces low international risk exposure

7. ASSOCIATES: an enterprise in which a non resident investors own between 10 and 50% SUBSIDIARIES: an enterprises in which a non-resident investor owns more than 50% BRANCHES: unincorporated enterprises wholly or jointly owned by a non-resident investor ON THE BASIS OF INVESTMENT TYPES OF MULTINATIONALS

8. P 100% A 6 0% B C D 65% E 25% F 12 % G 60% 3 0% H I K I 55 % 20 % 3 % 15 % 80% COUNTRY Z COUNTRY X COUNTRY Y 80 % 7 % MNC: ownership & control

9. ON THE BASIS OF OPERATIONS HORIZAONTALLY INTEGRATED MULTINATIONALS ... have manufacturing operations located in different countries to produce same or similar products. They have multi-plant firms replacing roughly the same activities in many locations VERTICALLY INTEGRATED MULTINATIONALS ... have manufacturing operations in certain country/countries to manufacture products that serve as inputs to their production establishments in other country/countries. Such firms fragment production geographically into stages in multiple countries on the basis of factor intensities. DIVERSIFIED INTEGRATED MULTINATIONALS ... have manufacturing operations located in different countries that are either horizontally or vertically integrated

10. ON THE BASIS OF MANAGEMENT ORIENTATION ETHNOCENTRIC FIRMS... The HQ of the parent company, located in the home country, dominate the strategic decisions and exert high level of control over the subsidiaries through centralized decision making. eg …MAKSAT, SUKHOI POLYCENTRIC FIRMS... Such firms have level of market orientation wherein subsidiaries have autonomy in decision making.eg….ELBIT SYSTEM INDIA

11. GEOCENTRIC FIRMS... Such follow a collaborative approach to decision- making between HQ and subsidiaries. Eg …Phillips REGIOCENTRIC FIRMS... Foreign affiliates consolidates their decision making and organization on regional basis. Eg …Mc Donald

12. ON THE BASIS OF MANAGEMENT ORIENTATION continued…… ORIENTATION ETHNOCENTRIC POLYCENTRIC REGIOCENTRIC GEOCENTRIC Mission Profitability (viability) Public acceptance (legitimacy) Both profitability and public acceptance Governance Direction of goal setting Top down Bottom up Mutually negotiated between region & subsidiaries Mutually negotiated at all level communication Hierarchical with HQ giving high volumes of orders, commands and advice Little communication to & from HQ & between subsidiaries Both vertical & lateral communication within region Both vertical and lateral communication within company

13. ORIENTATION ETHNOCENTRIC POLYCENTRIC REGIOCENTRIC GEOCENTRIC Allocation of resources Investment opportunities decided at HQ Self-supporting subsidiaries, no cross-subsidiaries Regions allocate resources under guidelines from HQ Worldwide projects allocation influenced by local and HQ’s manager STRATEGY Global integrative National responsiveness Regional integrative and national responsiveness Global integrative and national responsiveness STRUCTURE Hierarchical product division Hierarchical area division, with autonomous national units Product & regional organizations tied through a matrix A network of organizations CULTURE Home country Host country Regional Global

14. IMPACT OF MNC

15. POSITIVE EFFECT OF MNCs Bring in FDI Transfer of technology Promote competition Promote research and development Benefit customer Promote export in the host economies

16. NEGATIVE EFFECT Influencing host-country government decisions Transfer of inappropriate technology Dumping of obsolete technology Cultural imperialism Exploitation of host country resources Perceived as agents of neo-colonialism

17. Promotes unhealthy market competition Promotes hostile mergers and acquisitions Crowding out domestic entrepreneurship Limited benefits to host countries Circumventing host countries’ regulatory framework

18. Mnc in india MNC IN INDIA

19. What India offers…. to the world One billion plus population. India is ranked as the 10th largest economy, 3 rd largest in terms of Purchasing Power Parity. 200-250 million middle class. Gross Domestic Product 6.48 %, (avg. of last 5 years) making it one of the fastest growing economies in the world. Opportunities for world exporters with the right products or services. Easier access to capital.

20. INDIAN MNCs TATA STEEL TATA MOTORS Wipro HCL Tally Solutions Infosys NIIT  I-Flex Solutions Zenith Computers Microtek

21. Trends Of MNCs In INDIA First MNC in India was the EAST INDIA Company. in 1600 American companies account for around 37% (approx.)of the turnover of the top 20 firms operating in India Oil companies and Infrastructure builders from the Middle East are also flocking in India to catch the boom  Hewlett-Packard (HP) is the largest multinational corporation operating in INDIA

22. Increasing flocking of European Union companies to India. JCB owned by INDIOPHILE is one of the most successful multinational corporation in India. Italian automobile giants like Fiat, Ford Motors, Piaggio etc expanded their operations in India with R&D wing attached. South Korean Electronics giants Samsung and LG Electronics and small and mid-segment car giant Hyundai Motors are doing excellent business and using India as a hub for global delivery.

23. India currently has some 750 captive centres of foreign multinationals; of these around 350 are engaged in engineering R&D

24. Key Advantages of existence of MNCs in India Work culture of employees. Training and Learning. Technology – especially concept of working with better technologies. Safety, Health and Environmental Learning. Excellent training grounds for many entrepreneurs.

25. What are the key issues in the Indian context which have hindered MNCs growth? “Global parent strategy” dictates India plans Limitations of growth due to regulatory / legislation / IPR issues Limited Autonomy for top MNC Managers Sometimes bureaucratic setups have delayed decision making – sharp contrast to most Indian entrepreneur companies Insistence of some companies on having expats

26. Rigidity and insistence on evaluating India like any other market Not being able to recognize early enough that India is a price and quality conscious market Limitations of following aggressive M&A options Many MNCs have got consistently caught in rounds of “parent consolidation” 100% subsidiary conundrum

27. Case study : Asian Paints Asian Paints rise from a mid sized domestic focused coatings company to a $ 1.6 billion multinational with a global presence across 17 markets. Among the top 10 decorative coatings companies globally. Key strengths are continuous innovations in all spheres of operations, economies of scale, strong management team, IT capabilities, stronghold over the distribution network, width of product portfolio and strong brand equity Consistently generated EBITDAs of 14.2% and ROEs of 20%+ - higher than most Indian and global peers Operates in 17 countries across the world - manufacturing facilities in each of these countries and is the largest paint company in 11 of these market

28. DELMEGE FORSYTH Sri Lanka October 1999 76% 3.6 crore PACIFIC PAINTS Australia November 2001 100% $375,000 HAWCOPLAST India November 2001 100% 16 crore SCIB Egypt August 2002 60% 25 crore BERGER INTERNATIONAL Global August 2013 75.82%(+25.72%) SD 0.25 per share TAUBMANS Fiji September 2003 100% $ 1.4 m COMPANY COUNTRY YEAR STAKE ACQUIRED COST

29. Caribbean Region ( Barbados, Jamaica, Trinidad and Tobago) the revenue from paint sales has increased by 15% to 197.2 crores from 171.8 crores PBIT (profit before interest and tax) for the region is 11.2 crores as compared to ` 7.6 crores during the previous year(2012) Continuing economic slowdown in all the Caribbean economies, impacted demand conditions Middle East Region (Egypt, Oman, Bahrain and UAE) the revenue from paint sales has increased by 26% to 726.7 crores from 578.4 crores during the previous year(2012) PBIT for the region is 73.9 crores as compared to 61.5 crores during the previous year(2012)

30. Asia Region (Bangladesh, Nepal, Sri Lanka and Singapore) Revenue from paint sales has increased by 21% to ` 380 crores from ` 314.7 crores during the previous year The PBIT for the region is ` 35.6 crores as compared to ` 24.6 crores during the previous year(2012)

31. any questions?