MNCs AND THEIR MODE OF

OPERATIONS
 MNCs
A multinational corporation (MNC) or transnational
corporation (TNC) called multinational enterprise (MNE).

It is a corporation or an enterprise that manages production or delivers

services in more than one country and also referred to as
an international corporation.

The International Labour Organization (ILO) has defined an MNC as a

corporation that has its management headquarters in one country,
known as the home country, and operates in several other countries,
known as host countries.

Some Multinational corporations are very big, with budgets that

exceed some nations' GDPs.
 Why companies become MNCs?

To protect themselves from the uncertainties and risks of business

cycles, political policies and social uncertainties of the domestic
country.

To tap the growing global market for various goods and services.

To increase market share.

To reduce costs.

To overcome tariffs.

To have technological advantage.

 Operating Characteristics of MNCs

The subsidiaries and headquarters of MNCs are linked by a

common vision and mission.
MNCs prefer to relocate their operations in various based on low
wage rates, low transportation costs, closeness to suppliers of raw
materials and customers and threats posed by the other country
governments.
MNCs draw more or less the same resources both at home
country and host country.
MNCs resources include financial resources, human resources,
material resources, information, patents, trademarks etc.
The subsidiaries of MNCs should respond to the significant
environmental forces of both home country and host country.
 Factors contributed for the growth of MNCs
(A) Expansion of market territory
The growth of various economics along with the growth of GDP, and per capita
income resulted in the rise in the living standards.
These factors contributed towards the expansion of market territory.

(B)Market superiorities
Availability of more reliable and up-to-date data and information.
They enjoy market reputation.
They face less difficulties in marketing the products.
They adopt more affective advertise and sales promotion techniques.
They enjoy quick transportation and warehousing facilities.

(C)Product Innovation
MNCs, by virtue of their widespread operations in many countries, collect
information regarding customers, tastes and preferences.
 Cont---
(D)Technological superiorities
Industrialisation is in a backward state in developing countries and the
resources available in developing countries are insufficient to develop the
technology and thereby industrialisation.
Developing countries are rich in mineral and natural resources.
Local manpower, materials, capital etc. MNCs are invited by the
developing countries to help them in exploiting the resources.
Developing countries would be required to import raw materials, capital
equipment, technology etc.

(E) Financial superiorities

Huge financial resources at the disposal of the MNCs.
They have easy access to external capital markets.
They can mobilise different types of resources of high quality easily.
They can have access to international banks and financial institutions.
Advantages of the MNCs to the host country
Increases economic activity, industrial activity, employment and
income levels.
Domestic industry gets the latest technology.
Domestic industry gets sophisticated management techniques.
Domestic input suppliers get more business.
Improves the competitive ability of domestic business due to
competition.
Domestic business uses outcome of MNC’s R&D efforts.
Advantages of foreign culture through cultural transformation.
Reduction of imports and favourable effect on balance of payments.
MNCs earn foreign exchange by exporting to the neighbouring
countries.
Utilisation of natural resources of the host countries.
Disadvantages of the MNCs to the host country
Technology developed by the MNCs may not suit the needs of host
country.
MNCs may not operate within national autonomy and sovereignty.
Monopolistic practices of MNCs may kill the domestic industry.
MNCs may adopt ethnocentric approach in staffing.
MNCs may use the natural resources of the host country
indiscriminately.
A large sum of money may flow from the domestic country in the
form of dividends and royalty.
MNCs may distort the economic s structure of the host countries.
MNCs may interfere in the political activities of the host countries.
MNCs normally provide the out dated technology to the host country
industry.
Pollutes the environment of the host countries.
Advantages of the MNCs to the home country
Create the demand for the home country products.
Boost up the industrial activity of the home country.
Create employment for home country people.
Earns foreign exchange for the home country and contributes for the
balance of payment.
Get the benefit of foreign culture.
Produce the products required by the domestic consumers in foreign
countries with foreign resources.
Saves the domestic country from environmental pollution.
Get the customers/users for the country’s outdated technology.
Optimum utilisation of natural resources and conservation the
country’s scarce resources like petroleum resources in the USA.
Generates and accumulate capital for home country by earning
profits through business operations in host countries.
  
Disadvantages of the MNCs to the home country

Transfer capital to other countries and causes unfavourable

balance of payments.
May neglect the industrial development of the home country
as the transnational companies follow the secular approach.
May cause erosion of the domestic culture.
May exploit the natural resources resulting in excessive
exploitation of natural resources.
May not create employment opportunities to domestic
people by following geocentric approach or outsourcing
business operations in various countries like USA software
companies outsourcing business operations in india.
 Control over MNCs
Some industries were not allowed to import technology where the products

are not essential and where domestic capacity was adequate.

The maximum rate of royalty was imposed on technology, imports for

those industries which were allowed to import technology.

Import of foreign capital was allowed but sometimes they were based on

administrative decisions.

Permissible period of agreement was reduced from 10 years to 5 years.

Exports and other marketing restrictions were imposed.

 Role of MNCs in India
Profit maximisation
International network marketing.
Diversification policy
Concentration in consumer goods
Location of central control offices
Techniques to achieve public acceptability
Existence of modern and sophisticated technology
Business, But not social justice
Unconcern Towards Social Responsibilities and business ethics
MNCs and process of planned economics development in india
Cultural Erosion
Unconcern for environmental pollution and ecological balance.
 Approaches to organisational structure of
MNCs
(1)Product Organisation structure
Advantage:-
The product organisation structure is more appropriate than the functional
form of organisation for firms producing multiple products.
It will result in fast decisions, enhancement of organisational competency to
compete in rapidly charging environment.
Responsibility and accountability for market share, sales, profit/loss are
clearly fixed.
Disadvantage:-
One of the major limitations is that there is unnecessary duplication of
equipment and personal and various department.
Some decisions like pay, promotion, product quality, design and pricing
strategy may be inconsistent between departments.
Inter- departments conflicts arise regarding sharing of common resources,
allocation of common and overhead expanses etc.
 Product Organisation structure

Managing
director

Product Head Office support

Divisions Department

Product A Product B Product C Product D Product E

 Cont---
(2) Geographical Organisation structure
Advantage:-
Products and services are better designed to the climatic and cultural needs
of specific geographical regions.
A geographical structure allows a firm to respond to technical needs of
different international area.
This organisation structure enables a company to adopt to varying legal
systems.
It also allows firms pinpoint the responsibility for profits or losses.
Disadvantage:-
There would be duplication of equipment and facilities.
Co-ordination of company-wide activities would be difficult.
There would be a problem of imposing a degree of uniformity and diversity.
It is difficult to maintain consistent company image of reputation.
This structure adds another layer of management to run geographic units.
Geographical Organisation structure

Managing Director

Headquarters Managers: Production,

Marketing, Finance, HR, & R&D

Afirca Asia Europe North

South America
America

Subsidiary Unit Manufacturing Sales

 Cont---
(3)Decentralised business divisions
Advantage:-
Diversification is generally managed by decentralised decision-making and
delegating authority and responsibility to a manger at each business unit.
Each business unit should be managed by an entrepreneurially oriented
general manger who is delegated with authority to formulate and execute
business strategies.
Each business unit is structured on the basis of either functional structure
or geographic structure depending upon strategy, key activities and
operating requirements.
Disadvantage:-
The major problem of this type of organisation is absence of mechanism
for co-ordinating related activities across business units.
General manger in charge of each business unit functions independently. It
makes co-ordinations a complicated task.
Decentralised business divisions structure

Managing Director

Headquarters Managers: Production, Marketing, Finance, HR, &

R&D

Chief Manager Chief Manager Chief Manager

Business Business Business
X Y Z

Product A Product B Product C Product D

Manager
Marketing Finance Production Manager
Manager Manager Manager R&D
HR
 Cont---
(4)Strategic business units
Advantage:-
This structure permits better coordination between divisions with similar
missions, products, markets and technologies.
It allows strategic management to be done at the most relevant level
within the total enterprise.
It helps to allocate corporate resources to areas with greatest growth
opportunities.
Business units are organised based on the strategically relevant method.
Disadvantage:-
Corporate headquarters becomes more distant from the division.
Conflicts between/among the strategies business unit managers for
greater share of corporate resources can become dysfunctional.
Corporate portfolio analysis becomes a complicated one in this structure.
Strategic business units structure
Managing
Director Marketing
Finance
Production
Headquarters, HR
Level Managers R&D

Group Group Grooup

Manager Manager Manager
SBU1 SBU2 SBU3

Straegically Straegically Straegically

Related Related Related
Business Business Business
Unit Unit Unit
 Cont---
(5)Matrix Organisation structure
Advantage:-
Give formal attention to each dimension of strategies priority.
Create check and balances among competing viewpoints.
Facilities capture of functionality based strategies fits in diversified
companies.
Promoters making trade-off decisions on the basis of, ”what is best
for the organisation as a whole”.
Disadvantage:-
Very complex to mange
Hard to maintain balance between the two lines of authority
It is hard to move quickly and decisively without getting clearance
from many other people.
Violates unity of command.
 Cont---
(6) Virtual Organisation structure
 Advantage:-
These structures enable for doing business with less capital, less
human resources and less inputs.
These structure provided for flexibility of operations.
These structures react to environmental demands most effectively.
These structures develop the ancillary industries.
 Disadvantage:-
Companies do not have strong foundations or strengths in their
operations.
Organizations have to depend heavily on outsourcing.
Failure in the network results in the failure of the entire
organisation.
 Cont---
(7) Team Organisation structure
Project team

Task force team

Venture team
 Views of MNCs 
Whereas 30 or 40 year ago many countries, Developed as well as
Developing, were suspicious of FDI and regulated it heavily, FDI
has, especially since about 1985, come to be regarded as a
positive factor in the host economies. 
One should not fall into the opposite trap and regard all FDI as
benign. One senior executive of GM in the USA once famously
remarked that “ What is good for GM is good for the country.”
Host economies must guard against anti-competitive behavior,
tax evasion, adverse effects of production on the environment
and other harmful effects of some MNC actions.
There has been a recent counter-movement among NGOs which
is highly critical of MNCs on particular issues such as
The need for codes relating to labor standards (“sweatshops”),
corporate governance, actions that affect the environment
Criticisms of pharmaceutical corporations and patented drugseg
compulsory licensing in the WTO
 International power of MNCs
 Tax competition
 Multinational corporations have played an important role in
globalization.
 To compete, countries and regional political districts sometimes
offer incentives to MNCs such as tax breaks, pledges of
governmental assistance or improved infrastructure, or
lax environmental and labor standards enforcement.
 Multinationals are engaged in a 'race to the top.‘
 While multinationals certainly regard a low tax burden or low labor
costs as an element of comparative advantage, there is no evidence
to suggest that MNCs deliberately avail themselves of lax
environmental regulation or poor labour standards.
 MNC profits are tied to operational efficiency, which includes a
high degree of standardisation.
 Cont----
 Market withdrawal
 multinationals can have a significant impact on government policy, primarily
through the threat of market withdrawal.
 This withdrawal often causes governments to change policy.
 Lobbying
 Multinational corporate lobbying is directed at a range of business concerns,
from tariff structures to environmental regulations.
 Corporations lobby tariffs to restrict competition of foreign industries.
 Patents
 Many multinational corporations hold patents to prevent competitors from
arising.
ex:- Adidas holds patents on shoe designs, Siemens A.G. holds many patents on
equipment and infrastructure and Microsoft benefits from software patents.
 Government power
 Multinational corporations to affect governments, there is much government
action intended to affect corporate behaviour
 LARGEST MULTINATIONALS
Ranking Corporation Home Economy Foreign Assets Total Assets

1. General Electric United States 401 290 797 769

Netherlands /
2. Royal Dutch Shell 222 324 282 401
United Kingdom

3. Vodafone Group United Kingdom 201 570 218 955

4. BP United Kingdom 188 969 228 238

5. Toyota Motor Japan 169 569 296 249

6. ExxonMobil United States 161 245 228 052
7. Total France 141 442 164 662
8. E.On Germany 141 168 218 573

9. Électricité de France France 133 698 278 759

10. ArcelorMittal Luxembourg 127 127 133 088

 LIMITATION OF MNCs
Inflation 

Changes in social values 

Increase in unrest and lack of personal life 

Competition to home industries 

Reduce transport and distribution costs

Avoid trade barriers

Meet different rules and regulations (avoid non-tariff barriers)

Secure supplies of raw materials or markets

Cost advantages - for example low labour costs

corporations making global assignments
ORGANIZATIONAL Multinational corpo Transnational corporat
CHARACTERISTICS ↓ Global corporations ions
rations

(1)centralised and
(1)decentralised and
CONFIGURATION OF
globally scaled, but (1)dispersed,
ASSETS & nationally self- interdependent, and
CAPABILITIES trending to specialised
sufficient
decentralised model.
(Unilever, Philips)
(2)differentiated
(2)sensing and (2)implementing contributions by
ROLE OF OVERSEAS
OPERATIONS exploiting local parent company national units to
opportunities strategies integrated worldwide
operations

(3)both: specialists and
TYPICAL EXPATRIATE (3)engineers,
ROLES (3)senior managers  managers, depending
specialists as needed on cultural climate

ARE THEY
(4)mostly bees &
'EXPORTING' BEARS, (4)bees and spiders (4)bears, mostly spiders
BEES or SPIDERS?
Type:- Public(NYSE: WMT), Dow Jones Indust. Average Component
Industry:-Retailing
Founded:-Rogers, Arkansas, U.S. (1962)
Founder(s):-Sam Walton
Headquarters:-Bentonville, Arkansas, U.S.
Area served:-Worldwide
Key people:-Mike Duke(CEO)
S. Robson Walton (Chairman)
Products:-Discount Stores, Supercenters, Neighborhood Markets
Revenue:-▲ US$408.21 billion (2009)
Operating income:- ▲ US$ 23.95 billion (2009)
Net income:-▲ US$ 14.33 billion (2009)
Total assets:- ▼ US$ 170.70 billion (2010)
Total equity:-▲ US$ 70.74 billion (2009)
Employees:-approx. 2,100,000 (2009)
 INTRODUCTION OF WAL MART
2010 world's largest public corporation by revenue, according to the
Forbes Global 2000 for that year.
Largest majority private employer and the largest grocery retailer in the
United States.
It operates under its own name in the U.S., including the 50 states.
The company was incorporated as Wal-Mart Stores, Inc. on Oct. 31, 1969.
In 1970, it opened its home office and first distribution center
in Bentonville, Arkansas.
38 stores operating with 1,500 employees & sales of $44.2 million.
publicly held company on October 1, 1970, and was soon listed on
the New York Stock Exchange.
The first stock split occurred in May 1971 at a market price of $47.
It moved into Texas in 1975, there were 125 stores with 7,500 employees
and total sales of $340.3 million.
 CONT----
25th anniversary in 1987 there were 1,198 stores with sales of $15.9
billion and 200,000 associates.
Same year also marked the completion of the company's satellite network
and it was the largest private satellite network, allowing the corporate
office to track inventory and sales and to instantly communicate to stores.
In 1988, the first Walmart Supercenter opened in Washington, Missouri.
In 1998, Walmart introduced the "Neighborhood Market" concept with
three stores in Arkansas.
2005, estimates indicate that the company controlled about 20% of the
retail grocery and consumables business.
2005, Walmart had $312.4 billion in sales, more than 6,200 facilities
around the world—including 3,800 stores in the United States and 2,800
elsewhere, employing more than 1.6 million "associates" worldwide.
In March 2006, Walmart sought to appeal to a more affluent demographic.
 CONT---
September 12, 2007, Walmart introduced new advertising with the slogan,
"Save Money Live Better," replacing the "Always Low Prices, Always"
slogan.
On June 30, 2008, Walmart unveiled a new company logo, featuring the
non-hyphenated name "Walmart" and in place of the star, a symbol that
resembles a sunburst or flower.
On March 20, 2009, Wal-Mart announced that it is paying a combined
$933.6 million in bonuses to every full and part time hourly worker of the
company.
On February 22, 2010, the company confirming it was acquiring video
streaming company Vudu, Inc. for an estimated $100 million.
Wal-Mart's operations are organized into three divisions: Wal-Mart Stores
U.S., Sam's Club, and Wal-Mart International.
Nine different retail formats: supercenters, food and drugs, general
merchandise stores, bodegas , cash and carry stores, membership
warehouse clubs, apparel stores, soft discount stores and restaurants.
Type:-Limited liability company
Industry:-Automotive
Founded:-1908
Founder(s):-William C. Durant
Headquarters:-Renaissance Center,
Downtown Detroit, Michigan, USA
Area served:-Worldwide
Key people:- Edward Whitacre(Chairman)
Daniel Akerson(CEO)
Products:-Automobiles
Owner(s):-United States Department of the Treasury(61%)
Canada Development Investment Corporation(7.9%)
Government of Ontario(3.8%)
Bond holders of Motors Liquidation Company(9.8%)
Employees:-204,000 (2009)
Divisions:-Chevrolet, Buick, Cadillac, GMC
 CONT--
Subsidiaries:-Vauxhall
AC Delco
General Motors Canada
General Motors do Brasil
General Motors India
General Motors Ventures
Global Hybrid Cooperation
General Motors South Africa
GM-AvtoVAZ
GM Daewoo(70.1%)
GM Holden Ltd
GM Performance Division
OnStar
Opel
 INTRODUCTION
By sales, GM ranked as the largest U.S. automaker and the world's
second-largest for 2008 having the third-highest 2008 global revenues
among automakers on the Fortune Global 500.
The company plans to focus its business on its four core North
American brands: Chevrolet, Buick, GMC, and Cadillac.
In 2008, GM sold 8.35 million cars and trucks globally.
GM Defense 1950–2003 was once part of General Motors Diesel
Division and as General Dynamics Land Systems division of General
Dynamics
Electro Motive Division of General Motors was also once part
of General Motors Diesel Division and now known as Electro-Motive
Diesel
Transit division was sold to Motor Coach Industries & Transportation
Manufacturing Corporation.
 CONT---
Detroit Diesel sold to Penske Corporation; broken up &
portion sold to the former Daimler-Chrysler AG ( Now
Daimler AG)
RTS and Classic bus rights owned by MCI And TMC were
sold off to Nova Bus; now produced by Millennium Transit
Services.
Diesel Division of General Motors of Canada Limited spun
off and later acquired by General Motors Canada as Diesel
Division of General Motors of Canada Limited
EDS – Electronic Data Systems
Hughes Electronics (Now The DirecTV Group[Liberty
Media])
1999 GM spun off its parts making operations as Delphi.
 GM worldwide vehicle sales by country 2008 [13]
(thousands) Top-four markets/regions by
Rank Vehicle Market
vehicle sales in 2008
Country (thousands)
in GM sales share (%)
1   United States 2,981 22.1%
2   China 1,095 12.0%
Rank Market Mkt.
3   Brazil 549 19.5% in Vehice
/Regio share
sales
4   United Kingdom 384 15.4% GM n (%)
5   Canada 359 21.4%
6   Russia 338 11.1%
North
7   Germany 300 8.8% 1 3,552 21.9%
8   Mexico 212 19.8% Ameria
9   Australia 133 13.1%
10   South Korea 117 9.7%
2 China 1,095 12.0%

11   France 114 4.4%

Europe
12   Spain 107 7.8% 3 an 905 12.3%
13   Argentina 95 15.5% Union
14   Venezuela 91 33.3%
South
15   Colombia 80 36.3% 4 Americ 815 20.8%
16   India 66 3.3% a
 Compression of Old GM & New GM
Old GM (before July 10, 2009) New GM (after July 10, 2009)

Vauxhall, Pontiac, Chevrolet,

Cadillac, GMDaewoo Vauxhall, GMDaewoo
(48.2%), Hummer, GMC, Brands (70.1%), Chevrolet, Cadillac,
Saturn, Holden, Saab, Buick, GMC, Holden, Buick, Opel
Opel

5,900 U.S. Dealerships 5,000

U.S. Treasury, Canada
Development Investment
Common shareholders,
Corporation, Government of
bondholders and secured Ownership
Ontario, Old GM bondholders,
creditors
and the United Auto
Workers sponsored VEBA

47 U.S. Plants 34
US$94.7 billion Debt US$17 billion
91,000 U.S. employees 68,500
 Year wise sell of GM product of different
markets
Marque Years used Markets
 Buick since 1908 North America, China, Israel, Taiwan

Global (except South America, India, SE Asia,

 Cadillac since 1909
Australia)

 GMC since 1912 North America, Middle East

 Chevrolet since 1917 Global (except Australia)
 Vauxhall since 1925 United Kingdom

Europe (except UK), Africa, Asia, Oceania, South

 Opel since 1929
America

Australia, New Zealand, China, Middle East (not

 Holden since 1948 Kuwait),South Korea, South Africa, UK, Japan (by
Autoprestige)

 Daewoo since 2002 South Korea, Latin America, Europe

 Type:- Public, NASDAQ: Dell
Industry:- Computer Systems, Computer Peripherals,
Computer Software, IT consulting & services
Founded:- Austin, Texas, November 4, 1984
Founder(s):-Michael Dell
Headquarters:-T exas,U.S.
Area served:-Worldwide
Key people:-Michael S. Dell(Chairman & CEO)
Products:-Desktops, Servers, Notebooks, Netbooks, Peripherals,
Printers, Televisions, Scanners, Storage, Smart Phones
Operating income:-▼ $2.172 billion (2010)
Net income:-▼ $1.433 billion (2010)
Total assets:- ▲ $33.652 billion (2010)
Total equity:-▲ $5.641 billion (2010)
Employees:-96,000 (2010)
 HISTORY
In 1984, when Michael Dellcreated PCs Limited while a student at
the University of Texas at Austin.
Dell started trading by selling personal computer directly to customers,
better understand customers' needs and provide the most effective computing
solutions to meet those needs
After getting about $300,000 in expansion-capital from his family Dell
dropped out of school .
In 1985, the company produced the first computer of its own design — the
"Turbo PC", sold for US$795
In 1988 after changed its name to "Dell Computer Corporation" and began
expanding globally—first in Ireland and market capitalization grew by $30
million to $80 million in july 1988
In 1996, Dell began selling computers via its web site, and in 2002, Dell
expanded its product line to include televisions, handhelds, digital audio
players, and printers.
On August 16, 2010, Dell announced its intent to acquire the data storage
company 3PAR
 Green initiatives
Dell became the first company in the information technology industry to
establish a product-recycling goal (in 2004) and completed the
implementation of its global consumer recycling-program in 2006.
On February 6, 2007, the National Recycling Coalition awarded Dell its
"Recycling Works" award for efforts to promote producer responsibility.
On July 19, 2007, Dell announced that it had exceeded targets in working
to achieve a multi-year goal of recovering 275 million pounds of
computer equipment by 2009. 
On June 5, 2007 Dell set a goal of becoming the greenest technology
company on Earth for the long term. The company launched a zero-
carbon initiative that includes:-
Reducing Dell's carbon intensity by 15 % by 2012
Requiring primary suppliers to report carbon emissions data during
quarterly business reviews
Partnering with customers to build the "greenest PC on the planet“
 BRANDS
OptiPlex (office desktop computer systems)

N-Series (desktop and notebook computers shipped with Linux or Free

DOS installed)

Latitude (business-focused notebooks)

Precision (workstation systems & high-performance notebooks),

PowerEdge (business servers)

Power Vault (direct-attach and network-attached storage)

Power Connect (network switches)

Dell/EMC (storage area networks)

Equal Logic 
PRESENTED BY:-
SANTU KUMAR
PATEL
SANTOSH KUMAR
SAROJ KUMAR