Mnc meaning growth origin

MNC

1. SEMINAR ON MULTI NATIONAL COMPANIES BY:GURUPRASAD N SHENOY J UNDER THE GUIDANCE AND CO OPERATION OF PROFESSOR PREMALATHA PAI,H O D OF ECONOMICS,SVS COLLEGE BANTWAL

2. A MNC is a company ,firm or enterprise with its HQ in a developed country such as US, JAPAN etc ,and also operates in other countries ,both developed an developing .Trans national countries and Global corporations. ILO says that ,”the essential nature of the multinational enterprise lies in the fact that its managerial HQ are located in one country while the enterprise carries out operations in a number of other countries as well.” Thus MNC is a corporation that controls production facilities in more than one country, such facilities having been acquired through the process of FDI.

3. With the implication of PM MODI’s MAKE IN INDIA. More and more companies started to invest in india ,

4. ORIGIN AND GROWTH OF MNC’S 1.BARTER SYSTEM 2.MONEY LENDING BANKING SYSTEM EMERGED Then after that in 17 and 18 century MN, the form of trading companies emerged. Ex. HUDSON BAY CO.,EAST INDIA CO., Then export and import between the countries started.

5. During 19 century ,FI flowed extensively from Western Europe to the developing areas like Asia, Africa and America. UK,FRANCE, GERMANY etc were exporters of capital. British made extensive investment in India, Canada ,Australia and RSA. 20 century ,MN corporate investment was mainly in mining and petrol industries. BIG OIL companies like BRITISH and STANDARD OIL were the first multinationals in this areas.

6. THE first world war encouraged MN investment. Due to PROTECTIONIST POLICY, firms replaced exports with foreign production. Gradually , manufacturing and merchandising multinationalists like U nilever l ever brothers, Nestle, Coca Cola, Singer, Ford motors and various German drugs and chemical firms , began their operations on a world wide scale. Thus, the concept of multinational enterprise is not new. But the modern multinational corporation is based on more than just trading. It tries to optimize its international production and marketing often doing so by the use of trade marks and patents.

7. In recent years , it is interesting to note that the multinational corporations have also been produced by the developing economies like I ndia, M alaysia, Hong Kong, S ingapore, South Korea etc. At present 90 percent of the top multinational corporations have their headquarters in E uropean union , J apan and the United S tates. According to the world investment report 2007, there were some 78000 MNC”s with around 9,86000 affiliates. The MNC’s account for a significant share of the worlds industrial investments, production, employment and trade .

8. The MNCs share in global investment, production, employment and trade has assumed considerable proportions. According to the UN, there are 63,000 MNCs with 6,90,000 affiliates all over the globe with 2,40,000 in China and only 1400 in India. The US was the forerunner in giving births to MNCs. Today, biggest MNC’s are Japanese.

9. The global liberalization wave, paved the path for faster expansion and growth of MNCs. The value added by the foreign affiliates of MNCs, as a percentage of global GDP grew from 5% in the 1980s to about 7% by the end of 90s. The MNCs control about a third of world output and the total sales of their foreign affiliates is almost equal to the GNP of all developing countries. The value of the annual sales of the largest manufacturing multinational General Motors, was about $178bn in 1996. The total sales of the 3 largest automobile firms of the world, namely, General Motors, Ford and Toyota is greater than the value of India’s GDP.

10. In terms of direct employment, the MNCs accounted for 73mn people worldwide and if indirect employment is considered, the figure approximates 150mn people. Over 350m people were employed by the foreign affiliates of MNCs in 1988.

11. FACTORS EFFECTING GROWTH OF MNC 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.

12. 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

13.      MNCs also enjoy a number of financial advantages over domestic firms. These are: – 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.

14. 3) Financial superiorities: -      MNCs have easy access to international capital markets, and    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 .

15. Industrialization is backward in developing countries and the resources available in developing countries are insufficient to develop the technology and thereby industrialization. Developing countries are rich in mineral and natural resources. They are unable to exploit them fully due to paucity of financial resources and low level technology. Local manpower , materials, capital etc cannot be optimally utilized by the developing countries to help them in exploiting the resources.

16. Developing countries would be required to import raw materials , capital equipment, technology etc. on their own. This in turn needs heavy foreign exchange resources. Developing countries which suffer from paucity of foreign exchange resources invite MNC’s in this regard. Developing countries, though they produce goods and services on their own by importing technology and materials they fail in marketing products due to severe competition. This inability of developing countries , force them to invite MNC’s on their own. Therefore MNC’s are invited by them.

17. Product innovation : MNC’s , by the virtue of their wide spread operations in many countries ; collect information regarding customers , taste and preferences . Furthur , the MNC’s with their strong R & D departments invent new products. Developing countries suffer from limitations in this regard . Therefore , they invite MNC’s to their countries.

18. Reasons for the Growth of MNCs: ( i ) Non-Transferable Knowledge: It is often possible for an MNC to sell its knowledge in the form of patent rights and to licence foreign producer. This relieves the MNC of the need to make foreign direct investment. However, sometimes an MNC that has a Production Process or Product Patent can make a larger profit by carrying out the production in a foreign country itself. The reason for this is that some kinds of knowledge cannot be sold and which are the result of years of experience.

19. (ii) Exploiting Reputations: In some situation, MNCs invest to exploit their reputation rather than protect their reputation. This motive is of particular importance in the case of foreign direct investment by banks because in the banking business an international reputation can attract deposits. If the goodwill is established the bank can expand and build a strong customer base. Quality service to a large number of customers is bound to ensure success. This probably explains the tremendous growth of foreign banks such as Citibank, Grind-lays and Standard Chartered in India

20. (iii) Protecting Reputations: Normally, products, develop a good or bad name, which transcends international boundaries. It would be very difficult for an MNC to protect in reputation if a foreign licensee does an inferior job. Therefore, MNCs prefer to invest in a country rather than licensing and transfer expertise, to ensure the maintenance of their good name. (iv) Protecting Secrecy: MNCs prefer direct investment, rather than granting a license to a foreign company if protecting the secrecy of the product is important. While it may be true that a license will take precautions to protect patent rights, it is equally true that it may be less conscientious than the original owner of the patent

21. ( v) Availability of Capital : The fact that MNCs have access to capital markets has been advocated as another reason why firms themselves moved abroad. A firm operating in only one country does not have the same access to cheaper funds as a larger firm. However, this argument, which has been put forward for the growth of MNCs has been rejected by many critics . ( vi) Product Life Cycle Hypothesis : It has been argued that opportunities for further gains at home eventually dry up. To maintain the growth of profits, a corporation must venture abroad where markets are not so well penetrated and where there is perhaps less competition. This hypothesis perfectly explains the growth of American MNCs in other countries where they can fully exploit all the stages of the life cycle of a product. A prime example would be Gillette, which has revolutionized the shaving systems industry.

22. (vii) Avoiding Tariffs and Quotas: MNCs prefer to invest directly in a country in order to avoid import tariffs and quotas that the firm may have to face if it produces the goods at home and ship them. For example, a number of foreign automobile and truck producers opened plants in the US to avoid restrictions on-selling foreign made cars. Automobile giants like. Fiat, Volkswagen, Honda and Mazda are entering different countries not with the products but with technology and money . (viii) Strategic FDI: The strategic motive for making investments has been advocated as another reason for the growth of MNCs. MNCs enters foreign markets to protect their market share when this is being threatened by the potential entry of indigenous firms or multinationals from other countries .

23. (ix) Symbiotic Relationships: Some firms have followed clients who have made direct investment. This is especially true in the case of accountancy and consulting firms. Large US accounting firms, which know the parent companies special needs and practices have opened offices in countries where their clients have opened subsidiaries. These US accounting firms have an advantage over local firms because of their knowledge of the parent company and because the client may prefer to engage only one firm in order to reduce the number of people with access to sensitive information. Templeton, Goldman Sachs and Earnest and Young are moving with their clients even to small countries like Sri Lanka, Panama and Mauritius.

24. Some of the top MNC OF WORLD

25. ABN AMRO Accenture Accor Activision Blizzard Adidas Aditya Birla Group Advanced Micro Devices Affiliated Computer Services Airbus Air France-KLM Aitken Spence Akzo Nobel Alcatel-Lucent

26. Allianz Alstom Altria Group American International Group Apple Arcor Asian Paints Assicurazioni Generali Atari AXA Bacardi Banco Santander Bank of Montreal Barrick Gold Corporation Barilla Group BASF Baskin-Robbins Bayer BBVA

27. Bic BIDV Barclays Billabong Black & Decker BMW BNP Paribas Boeing Bombardier Inc. Bouygues Bridgestone British Airways BP (British Petroleum) Cadbury Schweppes Canon Inc Capital One Caterpillar Inc. Celestica Chevron

28. Citigroup CapGemini Cognizant Technology Solutions ConocoPhillips Coca-Cola Costco Creative Labs Credit Suisse Crédit Agricole Cummins Dabur Daikin Daimler AG Danone Datang Telecom Dell Deloitte Delta Airlines

29. Deutsche Bank Deutsche Telekom DHL Dow Chemical Dunkin' Donuts EDF Enviroway Bioscience Electronic Arts Electronic Data Systems Electrolux Emerson Electric Eni Enel Embraer Epson Ericsson Ernst & Young Etisalat ExxonMobil

30. Faber- Castell Facebook FedEx Express France Télécom Ferrero Fiat Ficosa Finmeccanica Ford Motor Company FPT Group Fujitsu Gazprom General Electric General Motors Generali Gerdau Gillette Glaxo Smith Kline Goodyear Tire and Rubber Company

31. Google Halliburton Haier Hearst Corporation Heineken Hewlett-Packard Hilti Hindustan Computers Limited Hitachi Honda Honeywell HSBC HTC Huawei Hutchison Whampoa Limited Hyundai Motor Company IBM ICAP company ICICI IKEA Indesit Infosys Ingersoll Rand

32. ING Group Intel Corporation Intesa Sanpaolo Isuzu Jardine Matheson Johnson & Johnson JPMorgan Chase & Co. Kenya Airways Kingston Technology Knorr (brand) Komatsu Limited Konami KPMG Krispy Kreme Lagardère Lactalis

33. Lear Leoni AG Lenovo Lexmark LG LG Electronics LiuGong Lockheed Martin L'Oréal Lukoil Luxottica Maggi Marriott Martini & Rossi Masterfoods Mattel McDonald's Mercedes-AMG Mercedes-Benz

34. Michelin Microsoft Mitsubishi Electric Mobil Motorola Millipore Corporation Monsanto Company Namco Bandai Games Namco Bandai Holdings Nestlé NetApp Inc. News Corporation Nike, Inc. Nintendo Nishat Group Nissan Nokia

35. Novartis Oracle Corporation Panasonic Corporation Parmalat Pepper Lunch PepsiCo Petronas Petrovietnam Pfizer Philips Pirelli Procter & Gamble Proton (carmaker) PSA Peugeot Citroën Ranbaxy Red Bull Regus Renault Repsol

36. Ricoh Rockstar Energy Robert Bosch GmbH Rohde & Schwarz Royal Dutch Shell Royal Bank of Canada Royal Bank of Scotland Rusal SABMiller plc Samsung Electronics SanDisk Sanofi Aventis SAP AG Sapient Corporation SAS Sasken Communication Technologies Limited Sasol Schlumberger

37. Viettel Mobile VNPT Vimpelcom Virgin Group Vodafone Wal-Mart Whirlpool Corporation Wipro Towers Watson Tech Mahindra Telefonica Tejas Networks Tesco The Harrison International Group Thomson Reuters Toshiba Total S.A. Toyota TRW Automotive Tyco Unicredit Unilever Unisys United Airlines

38. VNPT Vimpelcom Virgin Group Vodafone Wal-Mart Whirlpool Corporation Wipro Yakult

39. THANK U FRIENDS ANY QUERRIES