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
(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.

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(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 t e MNCs to t e ost ountr
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 t e MNCs to t e ost ountr
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 t e MNCs to t e ome ountr
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
y Profit maximisation y International network marketing. y Diversification policy y Concentration in consumer goods y Location of central control offices y Techniques to achieve public acceptability y Existence of modern and sophisticated technology y Business, But not social justice y Unconcern Towards Social Responsibilities and business ethics y MNCs and process of planned economics development in india y Cultural Erosion y 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

Mana in dir t r

Pr duct Divisi ns

Head Office support Department

Pr duct A

Pr duct B

Pr duct C

Pr duct D

Pr duct 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

Mana in Director Headquarters Mana ers: Production, Marketin , Finance, HR, & R&D Afirca Asia Europe Nort America Sout America

Subsidiary Unit

Manufacturin

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 usiness divisions structure

Mana in Director Headquarters Mana ers: Production, Marketin , Finance, HR, & R&D Chief Mana er Business X Product A Marketin Mana er Chief Mana er Business Y Chief Mana er Business Z Product D Mana er HR Mana er R&D

Product B Finance Mana er

Product C Production Mana er

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 usiness units structure
Mana in Director Marketin Finance Production HR R&D

Headquarters, Level Mana ers

Group Mana er SBU1 Strae ically Related Business Unit

Group Mana er SBU2 Strae ically Related Business Unit

Grooup Mana er SBU3 Strae ically Related Business Unit

Cont--(5)Matrix Organisation structure Advantage:Give formal attention to each dimension of strate ies priority. Create check and balances amon competin viewpoints. Facilities capture of functionality based strate ies fits in diversified companies. Promoters makin 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 ³ 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 (³sweatshops´), 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.µ  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 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Corporation General Electric Royal Dutch Shell Vodafone Group BP Toyota Motor ExxonMobil Total E.On Home Economy United States Foreign Assets 401 290 Total Assets 797 769 282 401 218 955 228 238 296 249 228 052 164 662 218 573 278 759 133 088

Netherlands / 222 324 United Kingdom United Kingdom United Kingdom Japan United States France Germany 201 570 188 969 169 569 161 245 141 442 141 168 133 698 127 127

Électricité de France France ArcelorMittal Luxembourg

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 CHARACTERISTICS

Multinational corpo Global corporations rations

Transnational corporat ions

CONFIGURATION ASSETS CAPABILITIES

OF &

(1)centralised and (1)decentralised and (1)dispersed, globally scaled, but interdependent, nationally selftrending to specialised sufficient decentralised model. (Unilever, Philips) (2)sensing exploiting opportunities

and

ROLE OF OVERSEAS OPERATIONS

(2)differentiated and (2)implementing contributions by units to local parent company national integrated worldwide strategies operations (3)both: specialists and managers, depending on cultural climate (4)mostly spiders bees &

TYPICAL EXPATRIATE ROLES ARE THEY 'EXPORTING' BEARS, BEES or SPIDERS?

(3)engineers, (3)senior managers specialists as needed (4)bees and spiders (4)bears, mostly

T pe:- Public(NYSE: WMT), Dow Jones Indust. Average Component Industr :-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

AL 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.

CON ---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 world²including 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 hitacre(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) Rank in GM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 China Brazil United Kingdom Canada Russia Germany Mexico Australia South Korea France Spain Argentina Venezuela Colombia India Country United States Vehicle sales 2,981 1,095 549 384 359 338 300 212 133 117 114 107 95 91 80 66 Market share (%) 22.1% 12.0%

Top-four markets/regions by vehicle sales in 2008 (thousands)

Rank Market Mkt. Vehice 19.5% in /Regio share sales 15.4% GM n (%)
21.4% 11.1% 8.8% 1 19.8% 13.1% 9.7% 4.4% 7.8% 3 15.5% 33.3% 36.3% 4 3.3%

North 3,552 21.9% Ameria 2 China 1,095 12.0%

Europe 905 an Union South Americ 815 a

12.3%

20.8%

Compression of Old GM & New GM
Old GM (before July 10, 2009) New GM (after July 10, 2009)

Vauxhall, Pontiac, Chevrolet, Cadillac, GMDaewoo (48.2%), Brands Hummer, GMC, Saturn, Holden, Saab, Buick, Opel 5,900 U.S. Dealerships

Vauxhall, GMDaewoo (70.1%), Chevrolet, Cadillac, GMC, Holden, Buick, Opel 5,000 U.S. Treasury, Canada Development Investment Corporation, Government of Ontario, Old GM bondholders, and the United Auto Workers sponsored VEBA 34 US$17 billion 68,500

Common bondholders creditors

shareholders, and secured Ownership

47 US$94.7 billion 91,000

U.S. Plants Debt U.S. employees

Year wise sell of GM product of different markets
Marque Buick Cadillac GMC Chevrolet Vauxhall Opel Years used since 1908 since 1909 since 1912 since 1917 since 1925 since 1929 Markets North America, China, Israel, Taiwan Global (except South America, India, SE Asia, Australia) North America, Middle East Global (except Australia) United Kingdom Europe (except UK), Africa, Asia, Oceania, South America Australia, New Zealand, China, Middle East (not Kuwait),South Korea, South Africa, UK, Japan (by Autoprestige) South Korea, Latin America, Europe

Holden

since 1948

Daewoo

since 2002

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 ² the "Turbo PC", sold for US$795 In 1988 after changed its name to "Dell Computer Corporation" and began expanding globally²first 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 zerocarbon 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 planet³

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

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