Multi national companies notes in detail

These notes are relevant to MNC

1. Multi National Companies

2. Contents Defination Distinction among IC,MNC,GC Factors contributing to growth of MNC Criticism on MNC

3. Meaning A multinational corporation is an organisation doing business in more than one country. MNC’s consider opportunities throughout the globe though they do the business in a few countries MNC engage in international production & operate plants in a number of countries. MNC’s invest considerable portion of their assests internationally. MNC’s take managerial decision based on global perspective.

4. As per International Labour Organisation “ the essential nature of the multinational enterprises lies in the fact that its mangerial headquarters are located in one country[Home country]while the enterprise carries out operations in a number of other countries.[host country].

5. Top MNC’s in world Microsoft corporation Toyota Intel Coca cola Sony corporation International Business Machines[IBM] General electric Niki Citigroup Nestle Procter & Gamble

6. Why companies become MNC? To protect themselves from uncertainties & risks of business cycles. To tap global market. To increase market share To reduce costs To have technological advantages

7. Advantages of MNC to home country Create the demand for the home country products. Boost industrial activity of home country. Earns foreign exchange for the home country & contributes for the balance of payment. Saves the domestic country from environmental pollution. Get users for countries outdated technology. Generates & accumulate capital for home country by earning profits through business operations in host countries. Get benefit of foreign culture.

8. Disadvantages of MNC’s to host countries Transfer capital to other countries May neglect industrial development of home country. May cause erosion of domestic culture. May cause exploitation of natural resources resulting in excessive of natural resources. May not create employment opportunities for home country

9. Advantages of MNC’s to host country Increases economic activity Increases industrial activity Increases employment & income levels Domestic industry gets latest technology. Domestic input suppliers may get more business. Improves competitive ability of domestic business due to competition. Advantage of foreign culture Domestic consumers will get variety of goods. MNC earn foreign exchange by exporting to neighbouring countries. Utilisation of natural resources of the host countries.

10. Disadvantages of MNC’s to host country Technology developed by MNC’s may not suit the needs of host country. MNC’s may not operate within national autonomy & sovereignty. Monopolistic practices may kill the domestic industry. MNC’s may adopt ethnocentric approach in staffing. MNC’s focuses on consumer goods but not capital goods & infrastructure in host country. MNC’s may distort the economic structure of host countries. MNC’s normally provide the outdated technology to host country industry. Pollutes environment of host country

11. Factors contributing for the growth of MNC’s Expansion of market territory Market superiorities Technological superiorities Product innovation

12. Organisation structure of MNC’s Product organisation Geographical organisation structure Decentalised business unit Stratergic business unit Matrix organisation structure Team organisational structure Project team The task force team The venture team Virtual team Global structure

13. Relationship between Headquarters & subsidiries Information sharing Resource sharing Decision flow Coordination of activities Control of operations Stratergy formulation