MNC’s

PROJECT WORK SUBMITTED TO THE UNIVERSITY OF MUMBAI IN FULFILLMENT FOR THE AWARD OF DEGREE OF MASTER OF COMMERCE IN (MANAGEMENT) BY YUGANDHARA SUDHAKAR PATIL UNDER THE GUIDANCE OF PROF. GATTING KOLI

ST. JOSEPH COLLEGE OF ARTS & COMMERCE SATPALA, VIRAR (WEST)

CERTIFICATE
I certify that the Project entitled “MNC’S” submitted to Mumbai University in partial fulfillment for the a ard of de!ree of M"S#$% &' C&MM$%C$ (M"N")$M$N#* is a record of ori!inal research or+ done by ,U)"N-."%" SU-."/"% P"#I01 durin! the period of study 2345647 in the -epartment of Commerce1 Mumbai University under my )uidance and Supervision and the dissertation has not formed the basis for the a ard of any -e!ree8 -iploma8 "ssociation8 'ello ship or other similar title to any other Candidate of any University9

SIGNATURE OF THE HEAD OF DEPARTMENT

SIGNATURE OF THE GUIDE

Place: -ate:

DECLARATION
I1 ,U)"N-."%" SU-."/"% P"#I01 hereby declare the Project ;or+ entitled “MNC’S” submitted to Mumbai University in partial fulfillment of the re<uirement for the a ard of the de!ree of M"S#$% &' C&MM$%C$ (M"N")$M$N#* is ori!inal or+ done by me under the supervision and !uidance of P%&'9 )"##IN) /&0I it has not formed the basis for the a ard of any -e!ree8 -iploma8 "ssociation8 'ello ship or other similar title to any Candidate in any University9

Si!nature

,U)"N-."%" 9S9 P"#I0

Place: -ate:

INDEX
Sr.No Topics
Introduction -efinition .istory Characteristics of MNC’s Si!nificance of MNC’s "dvanta!es = -isadvanta!es of MNC’s Cultural Problems faced by MNC’s Mar+et Imperfection International po ers Mana!ement 'unctions in MNC’s )ro th of MNC’s %eason’s for the !ro th of MNC’s )lobali>ation Criticism of MNC’s Micro Multinationals MNC’s and -evelopin! ;orld Conse<uences MNC’s in India ;hy MNC’s in India? %e!ulations of MNC’s in India 'eatures of MNC’s in India Profit of MNC’s in India "dvanta!es of MNC’s in India -isadvanta!es of MNC’s in India MNC’s and Indian Industries MNC’S and "!riculture MNC’s from Social and Moral vie point 'orei!n Collaborations in India 43 @est MNC’s all over Conclusion

Page No. Signature

!. (MN$* is a hich both produces and sells !oods or services in corporation that is re!istered in more than one country or that has operations in more than one country9 It is a lar!e corporation various countries9 It can also be referred to as an ' !.-' '!'# #here is more universally accepted definition of the term multinational corporation9 -ifferent authorities define the term differently "s ILO Report #he essential nature of the multinational enterprise lies in the fact that is mana!erial .ead<uarters are located in one country ( home country * hile the enterprise carries out operations in a number of other countries as ell (host countries* ell as the orld economy9 #he bud!et of some of the M9 N9 C9s are so hi!h that at times they even eDceed the )9 -9 P9 ()ross .I !"#$%&!'# " (%)!' *!'# *) &#"+#"*!'# (MNC* or (%)!' *!'# *) ."+"'s." *!'# *) &#"+#"*!'# 9 #hey play an important role in !lobali>ation9 #he first multinational corporation as the -utch $ast India Company1 founded March 231 4A32 Such a company is even +no n as international company or corporation9 "s defined by I9 09 &9 or the International 0abor &r!ani>ation1 a M9 N9 C9 is one1 head<uarters based in one country hich has its operational ith several other operatin! branches in different other countries9 #he country here the head <uarter is located is called the home country hereasB the other countries ith operational branches are called the host countries9 "part from playin! an important role in !lobali>ation and international relations1 these multinational companies even have notable influence in a countryCs economy as -omestic Product* of a nation9 D.

estern $urope to the underdeveloped countries or "sia1 "frica and "merica9 $n!land eDporter of capital1 follo ed by 'rance1 the Netherlands and )ermany9 In the early t entieth century @ritish Petroleum1 Standard &il1 "na Condo Copper and International Nic+el industries9 #he MNCs have attained their present dominatin! position in the orld economy throu!h a ere the major MNCs investin! mainly in minin! and petroleum as the leadin! ith the development of ban+s and money lendin! lon! process of !ro th9 S9"9 Coc+eril Steel .hen $urope and the Middle $ast steeped in feudalism resultin! in ars bet een feudal lords and church prohibited trade ho ith ere Muslim States9 0ater on1 merchants8traders of Italy established trade considered the fore runners of the multinational firms9 #he cities of )enoa1 Eenice1 'lorence and Pica became the supply depots of traders9 "ctive transnational operations flourished a!encies9 Multinationals in the form of tradin! companies started in the seventeenth and ei!hteenth centuries9 #he .&bviously1 hat is meant is1 " corporation that controls production facilities in more than one country1 such facilities havin! been ac<uired throu!h the process of forei!n6direct investment9 'irms that participate in international business ho ever lar!e they may be1 solely by eDportin! or b huntin! technolo!y is not Multinational enterprises9H's!#".ar9 #he field as captured mostly by the $uropean Companies such as Imperial #obacco1 orld over in those -unlop1 Siemens1 Philips1 etc9 #he )ro th of MNCs halted durin! the post6 ar period bet een 4H5364HG3 on account of recessionary situation prevailin! the days9 -urin! the second phase1 coverin! the decades of fifties and siDties1 "merican MNCs .orld .or+s established in Persia in 4F4G1 follo ed by several others such as @ayer of )ermany in 4FA51 Nestle of S it>erland in 4HAI1 Michelin of 'rance in 4FG5 and 0ever @rothers of U9/9 in 4FH39 #here are three phases in the !ro th of MNCs9 #he first phase lasted upto the 4st . #he !enesis of MNCs lies in transnational tradin! in early days conducted by the )ree+1 Phoenician and Mesopotamian merchants9 "fter the fall of the %oman $mpire1 trade bet een nations becomes difficult9 .udson @ay Company1 the $ast India Company1 the 'rench 0evant Company ere the major transnational companies established in those days9 -urin! the nineteenth century1 hu!e forei!n investment flo ed from the .

on! /on!1 Sin!apore1 South /orea1 Indonesia1 etc9 .such as )eneral Motors1 'ord Motors and I@M emer!ed on the phase of the !ro th of MNCs be!an since 4HI3s9 #his ne $uropean1 )erman and Japanese MNCs9 orld scene9 #he third era belon!ed to the In recent years1 MNCs have also emer!ed from developin! countries such as India1 Malaysia1 .

@ased U9N9 (4HH5* data1 the number of MNCs in 4HH2 had eDceeded 5I333 and their !lobal sales eDceeded G9G U9S9 dollar9 "merican1 $uropean and Japanese companies are the orldCs lar!est corporations9C/*"*&!."'s!'&s #.(%)!' *!'# *) &#"+#"*!'# s (MNCs)0 #he multinational corporations have certain characteristics hich may be discussed belo : (1) Giant Size: #he most important feature of these MNCs is their !i!antic si>e9 #heir assets and sales run into billions of dollars and they also ma+e supernormal profits9 "ccordin! to one definition an MNC is one ith a sales turnover of f 433 million9 #he MNCs are also super po erful ealth1 as many as 2H ere MNCs1 or!ani>ations9 In 4HI4 out of the top ninety producers of and the rest1 nations9 @esides the operations1 most of these multinationals are spread in a vast number of countries9 'or instance1 in 4HI5 out of a total of (1 333 firms identified nearly 7G per cent had affiliates in more than 23 countries9 (2) International Operation: " 'undamental feature of a multinational corporation is that in such a corporation1 control resides in the hands of a sin!le institution9 @ut its interests and operations spra l across national boundaries9 #he Pepsi Cola company of the U9S operates in 447 countries9 "n MNC operates throu!h a parent corporation in the home country9 It may assume the form or a subsidiary in the host country9 If it is a branch1 it acts for the parent corporation ithout any local capital or mana!ement assistance9 If it is a subsidiary1 the majority control is still eDercised by the forei!n parent company1 althou!h it is “incorporated in the host country9 #he forei!n control may ran!e any here bet een the minimum of G4 per cent to the full1 433 per cent9 "n MNC thus combines o nership ith control9 #he branches and subsidiaries of MNCs operate under the unified control of the parent company9 (3) Oligopolistic Structure: #hrou!h the process of mer!er and ta+eover1 etc91 in course of time an MNC comes to assume a esome po er9 #his coupled ith its !iant si>e ma+es it oli!opolistic in character9 So it enjoys a hu!e amount of profit9 #his oli!opolistic structure has been the cause of a number of evils of the multinational corporations9 .

(4) Spontaneous Evolution: &ne thin! to be observed in the case of the MNCs is that they have usually !ro n in a spontaneous and unconscious manner9 Eery often they developed throu!h KCreepin! instrumentalism9K Many firms become multinationals by accident9 Sometimes a firm established a subsidiary abroad due to the host country9 (5) ollective !rans"er o" Resources: "n MNC facilitates multilateral transfer of resources Usually this transfer ta+es place in the form of a Kpac+a!eK compleD of hich includes technical +no 6ho 1 e<uipmentCs and machinery1 materials1 finished products1 mana!erial services1 and soon1 KMNCs are composed of a idely varied modern technolo!y ran!in! from production and mar+etin! to mana!ement and financin!9 @9N9 )an!uly has remar+ed in the case of an MN) Kresources are transferred1 but not traded in1 accordin! to the traditional norms and practices of international trade9K (#) $%erican &o%inance: "nother important feature of the orld of multinationals is the "merican dominance9 In a!e differentials and better opportunity prevailin! in 4HI41 out of the top 2G MNCs1 as many as 4F ere of U9S9 ori!in9 In that year the U9S9 held G2 per cent of the total stoc+ of direct forei!n private investment9 #he U9$9 has assumed more of the role of a forei!n investor than the traditional eDporter of home products9 .

(%)!' *!'# *) &#"+#"*!'# s (MNCs)0 #he multinational corporations today have a revolutionary effect on the international economic system9 It is so because the !ro th of international transactions of the multinationals has affected the more traditional forms of capital flo s and international trade for many economies9 #oday they constitute a po erful force in the orld economy9 #he value of the products sold by the MNCs in 4HI4 as more than L G33 billion hich about one6fifth of the )NP of the entire host countries1 the volume of their production almost double the !ro th rate of the orld )NP9 In the field of international trade and international finance1 the multinational firms have come to eDercise enormous po er9 In early seventies the MNCs accounted for about one6ei!hth of all international trade6 'rom the nature of their !ro th it may be presumed that in the early ei!hties their share ill rise to one6fourth9 as orld1 eDceptin! that of socialist economies9 In the as about L 553 billion9 #he present !ro th hich is rate of their output in the host countries is a spectacular 43 per cent per annum . #.S'1 '-'&* &.

"mon! the developin! countries only India had an annual income t ice that of )eneral Motors1 hich is the bi!!est multinational corporation9 &ther ise the annual income of the other less developed countries is much less than that of the !iant MNCs9 @y their sheer si>e the MN)s can disrupt the economies of the less developed countries1 and may even threaten their political soverei!nty9W/*! *".MNC4s -#" !/.s #.outcomes of MNCCs9 I9 #he host country can reduce imports and increase eDports due to !oods produced by MNCCs in the host country9 #his helps to improve balance of payment9 F9 0evel of industrial and economic development increases due to the !ro th of MNCCs in the host country9 hich our to themselves ith no reasonable concept1 the public interest or social policy can accept9 MNCCs directly . MNCCs help the host country in the follo in! ays 49#he investment level1 employment level1 and income level of the host country increases due to the operation of MNCCs9 29 #he industries of host country !et latest technolo!y from forei!n countries throu!h MNCCs9 59 #he host countryCs business also !ets mana!ement eDpertise from MNCCs9 79 #he domestic traders and mar+et intermediaries of the host country !ets increased business from the operation of MNCCs9 G9 MNCCs brea+ protectionism1 curb local monopolies1 create competition amon! domestic companies and thus enhance their competitiveness9 A9 -omestic industries can ma+e use of % and . /#s! &#% !".s #.s * $ D's*$2* !*1. A$2* !*1. !/.M%)!' *!'# *) C#"+#"*!'# s3 Multinational Corporations no doubt1 carryout business ith the ultimate object of profit ider ma+in! li+e any other domestic company9 "ccordin! to I0& report Kfor some1 the multinational companies are an invaluable dynamic force and instrument for distribution of capital1 technolo!y and employmentB for others they are monsters present institutions1 national or international1 cannot ade<uately control1 a la and indirectly help both the home country and the host country9 A$2* !*1.

&#% !".MNC4s -#" !/. /#s! &#% !".s #.MNC4s -#" !/.s #.ome country can also !et the benefit of forei!n culture brou!ht by MNCCs9 D's*$2* !*1. /#(.s #. /#(. &#% !".A$2* !*1. 49MNCCs transfer the capital from the home country to various host countries causin! unfavorable balance of payment9 29 MNCCs may not create employment opportunities to the people of home country if it adopts !eocentric approach9 59 "s investments in forei!n countries are more profitable1 MNCCs may ne!lect the home countries industrial and economic development9 . MNCCs home country has the follo in! advanta!es9 49MNCCs create opportunities for mar+etin! the products produced in the home country throu!hout the orld9 29 #hey create employment opportunities to the people of home country both at home and abroad9 59 It !ives a boost to the industrial activities of home country9 79 MNCCs help to maintain favorable balance of payment of the home country in the lon! run9 G9 . 49MNCCs may transfer technolo!y hich has become outdated in the home country9 29 "s MNCCs do not operate ithin the national autonomy1 they may pose a threat to the economic and political soverei!nty of host countries9 59 MNCCs may +ill the domestic industry by monopoli>in! the host countryCs mar+et9 79 In order to ma+e profit1 MNCCs may use natural resources of the home country indiscriminately and cause depletion of the resources9 G9 " lar!e sums of money flo s to forei!n countries in terms of payments to ards profits1 dividends and royalty9 D's*$2* !*1.MNC4s -#" !/.

oney ell etc9 29 . !# +*"!'&%)*" 5%s' .here forei!n mana!ement eDpertise is needed e9!9 .ss MNCCs is suitable in the follo in! cases9 49.here it is desirable to diversify activities into untapped and priority areas li+e core and infrastructure industries1 e9!9 I#C is more acceptable to Indians 0=# etc9 G9 Pharmaceutical industries e9!9 )alaD1 @ayer etc9 .oney ell1 Samsun!1 0) $lectronics etc9 79 .industan 0ever9 59 .A++)'&*5')'!.here the )overnment ants to avail of forei!n technolo!y and forei!n capital e9!9 Maruti Udyo! 0imited1 .ind lever1 Philips1 .P1 .here it is desirable in the national interest to increase employment opportunities in the country e9!91 .

C%)!%"*) P"#5).s3 Multinational companies face a number of different cultural problems as they move for ard in todayCs !lobal mar+etplace9 Many of those problems are internal cultural problems1 but some may of an eDternal nature also9 )iven the nature of the !lobal environment1 multinational companies ill increasin!ly find themselves havin! to ma+e decisions that are based on cultural problems created by the !lobal mar+et9 49 D'2.$ 5. O"1* '7*!'# *) C%)!%". H%(* R.W/*! A".s o Companies of a multinational variety resources operations9 'or instance1 ill also face problems hen it comes to human hen it comes to recruitin!1 human resources mana!ers may find themselves havin! to overcome cultural barriers to find <ualified candidates for positions abroad9 In some cases1 mana!ement professionals may find themselves facin! a lac+ of <ualified talent to fill important positions that re<uire advanced de!rees and trainin!9 'indin! employees at home ho are <ualified or illin! to step in and fill such positions in a conteDt outside of their home country may also prove problematic9 Some employees may simply not ant to serve in certain parts of the orld9 . &ne of the main cultural challen!es faced by multinational companies is the diversity of cultural perspectives found ithin the or!ani>ation9 #his can cause problems in terms of ithout havin! to ta+e into consideration the variety of mana!ement and policy development1 because it ma+es it difficult for the or!ani>ation to ma+e company6 ide policy decisions cultural vie points represented ithin the or!ani>ation itself9 In short1 as companies move for ard in the !lobal conteDt1 too much diversity may create problems9 6.s#%"&. !/. M%)!' *!'# *) C#(+* '.(s E &#% !."."s'!. "lon! the same lines as an overabundance of diversity1 multinational companies also face the difficult tas+ of developin! a unified or!ani>ational culture from @ecause of the different cultural perspectives represented culture to ithin9 ithin the or!ani>ation as a hole1 company leaders !enerally face the difficult tas+ of havin! to create a or+place hich all employees can adhere9 Concepts of team or+ and unity may have different meanin!s across the national boundaries1 ma+in! it far more tric+y to develop a unified company perspective9 8.

%.9.S*).s o "nother problem that multinational companies may face in a !lobal environment is the ability to develop products and mar+et those products in a se!ment of the ay that appeals to a ide orldCs population9 Companies run the ris+ of developin! products and strate!ies that run contrary to the cultural norms of the people to hich they are attemptin! to mar+et the products9 Multinational companies face the challen!e of developin! and mar+etin! products that have !lobal appeal9 :.oo+er at Carne!ie Melon University points out that some forms of communication have implied and understood meanin!s that only ma+e sense traditions9 A9 E!'. * $ C%s!#(s form of Khi!h conteDt communicationK re<uires +no led!e of the culture and its understood .!!. C#((% '&*!'# * $ C%)!%"*) N#"(s o "nother si!nificant issue faced by multinational companies is ho understand cultural norms in the countries in business is conducted across international lines9 -ifferences in communication1 for instance1 ma+e it essential to hich these companies operate9 'or instance1 ithin a cultureCs conteDt9 #his John .

Multinational companies also have to have representatives and leaders ho +no ho to avoid violatin! or i!norin! cultural practices and customs in business meetin!s9 'or instance1 sendin! a oman to conduct business ne!otiations in the Middle $ast mi!ht be offensive to some Middle $astern businessmen ho typically donCt sociali>e in public ith omen9 In some "sian cultures1 bo in!1 rather than sha+in! hands1 is a more acceptable form of !reetin!9 &ther eti<uette concerns can include eatin! customs in business dinners1 brin!in! and !ivin! !ifts hen appropriate1 differences in body lan!ua!e and dress and even methods of ne!otiation9M*"<.ymer considered the emer!ence of multinational firms as Kan (ne!ative* instrument for restrainin! competition bet een firms of different nationsK .&!'# s It may seem stran!e that a corporation can decide to do business in a different country1 here it does not +no the la s1 local customs or business practices9 .ymer1 /indleber!er and Caves1 the eDistence of MNCs is reasoned by structural mar+et imperfections for final products9 In ."-.ymerCs eDample1 there are considered t o firms as monopolists in their o n mar+et and isolated from competition by transportation costs and other tariff and non6tariff barriers9 If these costs decrease1 both are forced to competitionB hich ill reduce their profits9 #he firms can hich ill lo er the competition in maDimi>e their joint income by a mer!er or ac<uisition1 the shared mar+et9 -ue to the transformation of t o separated companies into one MN$ the pecuniary eDternalities are !oin! to be internali>ed9 .hy is it not more efficient to combine assets of value overseas ith local factors of production at lo er costs by rentin! or sellin! them to local investors? &ne reason is that the use of the mar+et for coordinatin! the behaviour of a!ents located in different countries is less efficient than coordinatin! them by a multinational enterprise as an institution9 #he additional costs caused by the entrance in forei!n mar+ets are of less interest for the local enterprise9 "ccordin! to .! '(+.o ever1 this does not mean that there is an improvement for the society9 #his could also be the case if there are fe substitutes or limited licenses in a forei!n mar+et9 #he consolidation is often established by ac<uisition1 mer!er or the vertical inte!ration of the potential licensee into overseas manufacturin!9 #his ma+es it easy for the MN$ to enforce price discrimination schemes in various countries9 #herefore .

" *!'# *) +#=.! ='!/$"*=*) @ecause of their si>e1 multinationals can have a si!nificant impact on !overnment policy1 primarily throu!h the threat of mar+et ithdra al9 'or eDample1 in an effort to reduce health care costs1 some countries have tried to force pharmaceutical companies to license their patented dru!s to local competitors for a very lo fee1 thereby artificially lo erin! the price9 .hen faced ithdra n from the mar+et1 ith that threat1 multinational pharmaceutical firms have simply hich often leads to limited availability of advanced dru!s9 In these cases1 !overnments have been forced to bac+ do n from their efforts9 Similar corporate and !overnment confrontations have occurred hen !overnments tried to force MNCs to ma+e their intellectual property public ithdra in! from a national mar+et1 ith multinational in an effort to !ain technolo!y for local entrepreneurs9 . T*? &#(+." >.Mar+et imperfections had been considered by .ennart (4HII1 4HF2*9 "ll these authors claimed that mar+et imperfections are inherent conditions in mar+ets and MN$s are institutions that try to bypass these imperfections9 #he imperfections in mar+ets are natural as the neoclassical assumptions li+e full +no led!e and enforcement do not eDist in real mar+ets9I !.ymer as structural and caused by the deviations from perfect competition in the final product mar+ets9 'urther reasons are ori!inated from the control of proprietary technolo!y and distribution systems1 scale economies1 privile!ed access to inputs and product differentiation9 In the absence of these factors1 mar+et are fully efficient9 #he transaction costs theories of MN$s had been developed simultaneously and independently by McManus (4HI2*1 @uc+ley = Casson (4HIA* @ro n (4HIA* and .hen companies are faced ith the option of losin! a core competitive technolo!ical advanta!e or they may choose the latter9 #his ithdra al often causes !overnments to chan!e policy9 hich have viable indi!enous Countries that have been the most successful in this type of confrontation corporations are lar!e countries such as United States and @ra>il mar+et competitors9 .!'!'# Multinational corporations have played an important role in !lobali>ation9 Countries and sometimes subnational re!ions must compete a!ainst one another for the establishment of MNC facilities1 and the subse<uent taD revenue1 employment1 and economic activity9 #o compete1 countries and re!ional political districts sometimes offer incentives to MNCs such as taD brea+s1 pled!es of !overnmental assistance or improved infrastructure1 or laD environmental and labor standards enforcement9 #his process of becomin! more attractive to forei!n investment can be characteri>ed as a race to the bottom1 a push to ards !reater autonomy for corporate bodies1 or both9 6. M*"<.

' 1 Multinational corporate lobbyin! is directed at a ran!e of business concerns1 from tariff structures to environmental re!ulations9 #here is no unified multinational perspective on any of these issues9 Companies that have invested heavily in pollution control mechanisms may lobby for very tou!h environmental standards in an effort to force non6compliant competitors In to a ea+er position9 Corporations lobby tariffs to restrict competition of forei!n industries9 'or every tariff cate!ory that one multinational that ants the tariff raised9 $ven imported components ants to have reduced1 there is another multinational hile others ithin the U9S9 auto industry1 the fraction of a companyCs ill vary1 so some firms favor ti!hter import restrictions1 favor looser ones9 Says $ly &liveira1 Mana!er -irector of the MC#8I%: #his is very serious and is very hard and ta+es a lot of or+ for the o ner9 Multinational corporations such as . L#55. P*!.8. !s Many multinational corporations hold patents to prevent competitors from arisin!9 'or eDample1 "didas holds patents on shoe desi!ns1 Siemens "9)9 holds many patents on e<uipment and infrastructure and Microsoft benefits from soft are patents9 #he pharmaceutical companies lobby international a!reements to enforce patent la s on others9 .al6Mart and Mc-onaldCs benefit from !overnment >onin! la s1 to create barriers to entry9 Many industries such as )eneral $lectric and @oein! lobby the !overnment to receive subsidies to preserve their monopoly9 9.

MNC Plannin! involves analyses of international and eDternal environment to find out the stren!ths1 ea+nesses1 opportunities and threats9 "fter conductin! the S. (* *1. S!*--' 1 ' MNC Staffin! involves selectin! the ri!ht man for the ri!ht job9 It also includes manpo er plannin!1 promotion1 transfers1 trainin! and development1 compensation1 etc9 Staffin! function of an international business is very important1 especially hile appointin! the top6level mana!ers9 #he top6level mana!ers must be competent and committed persons9 " MNC has three options to select mana!ers :6 .(. MNC &r!ani>ation is a structure1 hich helps to achieve corporate objectives9 " MNC can select an or!ani>ation structure from the follo in! options:6 49 " MNC may appoint one Eice6President for all its forei!n branches9 . ! -% &!'# s ' M%)!' *!'# *) C#"+#"*!'# 3 >.&# analysis1 the mana!ement sets the objectives9 It is very difficult to analysis the eDternal environment9 #his is because the orld mar+ets are chan!in! continuously9 $ven lar!e MNCs find it difficult to compete in the orld mar+ets9 #herefore1 they form )lobal Strate!ic Partnerships ()SPs* ith local companies9 -ue to )SPs1 plannin! becomes easier9 #hat is because the mana!ers of the local branches have full +no led!e about the local environment9 Some MNCs use consultants to study the eDternal environment of forei!n countries9 6.ead for the "sian re!ion or for IndiaB another mana!er may be in6char!e of the $uropean re!ion1 etc9 59 " MNC may also or!anise the structure on the basis of production lines9 'or e!9 &ne mana!er may be in char!e of one product9 "nother mana!er may be inchar!e of another product1 etc9 ill control all 8. P)* ' 1 ' !/.W/*! *".e the forei!n branches from the MNCCs head office9 29 " MNC may use !eo!raphic structures9 It may appoint a head in every sin!le country or re!ion in hich it operates9 'or e9!9 " mana!er may be appointed as a . O"1* '7' 1 ' !/. !/.

MNC 0eadin! is the process of influencin! the subordinates to perform effective leadership <ualities9 0eadin! and motivatin! employees re<uire an understandin! of employees and their cultural environment9 'or e!91 Participative mana!ement may or+ ell in democratic countries1 but it may confuse the employees in a country havin! a dictator9 Communication is a problem for MNCs because they do business in countries havin! local mana!ers9 :.o ever1 their communication problems can be solved by illin!ly to ards !roup objectives9 0eadin! involves motivatin! and communicatin!9 Mana!ers must have . C# !"#))' 1 ' MNC Controllin! involves monitorin! actual performance and ta+in! corrective measures1 to correct deviations1 if any9 Controllin! is a bit difficult in international business due to certain reasons:6 49 %evenues1 costs1 and profits are measured in different currencies9 29 #he ratios bet een currencies are subject to forei!n eDchan!e fluctuations9 59 "ccountin! practices and financial reportin! differ from country to country9 here different lan!ua!es are spo+en9 .*$' 1 ' !/.49 Mana!ers from the home country ho are or+in! in the head<uarters of the MNC9 #hese mana!ers +no about the MNCCs policies and operations9 29 Mana!ers from the host6country can be selected to mana!e the operations in that country9 #hese mana!ers +no success of the MNC9 59 Mana!ers from a third country ho have or+ed in the MNCCs parent head<uarters1 or eDperienced mana!ers from some other MNC1 can be selected9 their countries environment1 i9e9 culture1 le!al1 educational1 political1 etc9 #his environmental +no led!e is very important for the #he MNC must select the ri!ht mana!ers to mana!e the international business9 #hey must consider factors1 such as compensation1 labour la s of the host country1 level of competence of the mana!ers in the host country1 etc 9. L.

ashin!ton based institute of policy studies (IPS* that of the 433 lar!est economies in the are countries9 orld1 G4 are corporationsB only 7H .GROWTH OF MNCs #he rapidity ith the MNCs are !ro in! is indicated by the fact that hile accordin! to the orld investment report 4HHI there ere about 7G1333 MNCs ith 21F31333 overseas affiliatesB accordin! to the orld investment report 23341 there ere over A51333 of them ith about F1221333 overseas affiliates9 China as host to about 59A7 la+h of the affiliates (i9e91 more than 77M of the total* compared to more than 4733 in India9 #he developed countries have less than 42M if these affiliates9 #he possess sta!!erin! resources as corporations in4HF2 the ould be clear from the fact that the sales of 233 top orld’s )-P and have risen to 2F95 ere e<uivalent of 2792 per cent of the per cent of the orld )-P in 4HHF9 #his sho s that 233 top MNCs no control over a <uarter of orld’s economic activity9 In fact the combines sales of thee 233 MNCs estimated at =I94 e subtract the )-P of the trillion is 4HHF surpass the combined economies of 4F2 countries9 If bi! H economies 6US"1 Japan1 )ermany1 'rance1 Italy1 U/1 @ra>il1 Canada and china6from the orld’s )-P1 the )-P of the remainin! 4F2 countries of the orld comes to LA9H trillion in 4HHF hich is less than the sales of the 233 top MNCs9 "n idea of the !iant si>e of these MNCs can also be had from the revelation made in a study conducted by the .

"'#"'!'.s0 "n MNC enjoys financial superiorities over domestic companies9 #hey are: a9 .#he MNCs are estimated to employ directly1 at home and abroad9 "roundI5 billion people representin! nearly 43 per cent of paid employment in non6a!ricultural activities orld ide and close to 23 per cent in the developed countries considered alone8 in addition 1 the indirect employment effect of the #NC activities ate at least e<ual toy he direct effects and probably much lar!er9 'or eDample1 the US foot ear company Ni+e currently employs H333 peopleB hile nearly IG1333 people are employed by is independent sub6 contractors located in different countries9 @ased on such information1 the total number of jobs associated ith #NCs orld ide may have been 4G3 million at the be!innin! of the 4HH3s9REASONS FOR THE GROWTH OF MNCs #he important reasons for the !ro th of multinationals are as follo s: 49 E?+* s'# #.! S%+.(*"<.! !."'#"'!'.&/ #)#1'&*) s%+.u!e financial resources at the disposal of the MNCs9 they can turn the environment and circumstances in their favor by utili>in! these resources: b9 #hey have easy access to eDternal capital mar+ets: c9 @ecause of its international re!ulation1 thy can raise funds from international ban+s and financial institutions easily9 79 T.""'!#".s0 $Dpansion or !ro th of MNCs is dot to the technolo!ical bac+ ardness of underdeveloped contraries9 Infect MNCs are rich in technolo!y9 #hee .0 #he increase in per capita income alon!side the !ro th of various economies and !ro th of )-P resulted in the rise of livin! standards of the people9 -ue to these factors9 #he mar+et territory of the firms eDpended9 In addition to this1 the lar!e operations of the MNCs builds up its international ima!e1 hich contributed to eDtend its mar+et territory beyond the physical boundaries of the country in hich it is incorporated? 29 M*"<.s0 " number of mar+et superiorities can e observed in MNCs over the domestic companies9 #hey may be: a9 "vailability of more reliable and up to date data and information: b9 #hey enjoy mar+et reputation: c9 #hey adopt more effective advertisin! and salad promotion techni<ue and thymus they face less difficulties in mar+etin! the products9 d9 #hey have efficient arehousin! facilities due to lo er inventory re<uirement and also enjoy <uic+ transportation 59 F' * &'*) s%+."'#"'!'.

and develop the advanced technolo!y9 #here are certain reasons due to a9 0ac+ of industriali>ation and insufficient resources b9 0ocal manpo er1 capital1 etc9 cannot be optimally utili>ed by the developin! countries on their o n: c9 -evelopin! countries are unable to import ra materials1 capital e<uipment1 technolo!y1 etc9 on their o n due to paucity of resources: d9 #he developin! countries also lac+ in mar+etin! the products due to competition: e9 0ac+ in eDploitin! mineral and nature of its o n9 hich the developin! countries re!ard the transfer of technolo!y from the MNCs9 #hese reasons are: G9 P"#$%&! ' #2*!'# 0 "dvanced %L.departments enable MNCs to develop ne products and superior desi!ns of their products9 -evelopin! and underdeveloped countries suffer from limitation in this re!ard9 #herefore1 they invite MNCs to their countries9 .rich financial resources of the MNCs enable them to invest on %L .

G)#5*)'7*!'# Multinational corporations are important factors in the processes of !lobali>ation9 National and local !overnments often compete a!ainst one another to attract MNC facilities1 eDpectation of increased ith the taD revenue1 employment1 and economic activity9 #o compete1 political po ers push to ards !reater autonomy for corporations1 or both9 MNCs play an important role in developin! the economies of developin! countries li+e investin! in these countries provide mar+et to the MNC but provide employment1 choice of multi !oods etc9 .

s "nti6corporate advocates critici>e multinational corporations for enterin! countries that have lo human ri!hts or environmental standards9 #hey claim that multinationals !ive rise to hu!e mer!ed con!lomerations that reduce competition and free enterprise1 raise capital in host countries but eDport the profits1 eDploit countries for their natural resources1 limit or+ersC a!es1 erode traditional cultures1 and challen!e national soverei!nty M'&"#@(%)!' *!'# *)s $nabled by Internet based communication tools1 a ne breed of multinational companies is !ro in! in numbers9 #hese multinationals start operatin! in different countries from the very early sta!es9 #hese companies are bein! called micro-multinationals. .C"'!'&'s( #.hat differentiates micro6 multinationals from the lar!e MNCs is the fact that they are small businesses9 Some of these micro6multinationals1 particularly soft are development companies1 have been hirin! employees in multiple countries from the be!innin! of the Internet era9 @ut more and more micro6multinationals are actively startin! to mar+et their products and services in various countries9 Internet tools li+e )oo!le1 .M%)!' *!'# *) &#(+* '.ahoo1 MSN1 $@ay and "ma>on ma+e it easier for the micro6multinationals to reach potential customers in other countries9 Service sector micro6multinationals1 li+e 'aceboo+1 "liabad etc9 started as dispersed virtual businesses ith employees1 clients and resources located in various countries9 #heir rapid !ro th is a direct result of bein! able to use the internet1 cheaper telephony and lo er travelin! costs to create uni<ue business opportunities9 .

s .s #..%. &.)#+' 1 &#% !"'.MNC’s # $.0o cost Saabs (Soft are as a Service* suites ma+e it easier for these companies to operate ithout a physical office9MNC AND DEVELOPING WORLD hich had &ne of the economic hope and aspirations to !et out poverty and under development pla!ued the developin! ('-I* into their various economies9 It therefore becomes a dream come true orld from the time immemorial is to attract forei!n direct investments hen Multinational Corporations (MNCs* decide to invest in developin! countries9 Currently1 there are over 5G1333 multinational corporations !lobally1 controllin! more than 4G1333 forei!n subsidiaries and accountin! for about one6third of the entire orld production9 #he developin! countries that received the most multinational investment are those perceived to have the hi!hest !ro th potential9 #hey are !enerally +no n as the ne ly industriali>ed countries and include "sian countries such as China1 Sin!apore1 Malaysia1 #hailand and 0atin "merican countries such as MeDico1 @ra>il and "r!entina9 #he ten bi!!est recipient of forei!n direct investment receive nearly HGM of the total1 hile all the "frican countries put to!ether receive less than 7M9 #he poorest G3 countries of the orld bet een them receive less than 2M9 &ri!inally1 most MNC investment in developin! countries minin! accounts for only AM as in mines and plantations9 #oday ith manufacturin! and services accountin! for over half and &il = )as for about one6third of the total9 #he value of the total MNC orld ide is estimated to be more than L49G trillion of hich approDimately one6third is in the developin! countries9 Eirtually many of the of the orld lar!est companies such as Coca cola1 Shell1 I@M1 )uinness @re eries1 )eneral motors to mention a fe have mana!ed to spread their tentacles in most parts orld9 In terms of turnover1 some of them eDceed the national incomes of many smaller hich are a mere fractions of the above mentioned ones1 that are also countries li+e our country1 but I must hasten to add that there are also thousands of very small specialists multinationals operatin! si!nificantly in the !lobal system9 MNCs cover the entire spectrum of business activity from manufacturin! to eDtraction a!ricultural production1 chemical processin!1 service provision and finance and therefore there is no peculiar line of activity of the multinationals9 C# s.2.

#here is much uncertainties associated ith the operations of MNC9 #hey are hi!hly dynamic .s #aDation is also a plus in the operations of the MNCs for the domestic economy9 MNCs and domestic producers are re<uired to pay taDes and therefore contribute to the public finances9 )ivin! the hi!hly profitable nature of many MNCs1 the level of taD revenue raised from this source is mostly si!nificant9 #he host country’s balance of payment position is also li+ely to improve on a number of counts as a result of MNC investment9 'irstly1 the investment ill represent a direct flo of capital into the country and secondly1 in the lon! term1 the MNC investment is li+ely to result in both import substitution and eDport promotion1 for1 !oods previously purchased as imports could no either in the short or lon! term ith particular reference to the developin! be produced locally9 -espite the !ains1 multinational investment may not al ays be beneficial orld9 It is possible that jobs created in one re!ion of a host country by a ne MNC ith its superior technolo!y and or+in! practices may cause businesses to fold else unemployment in those re!ion9 Profits repatriation here and thus increase in the level of hich constitutes capital fli!ht mi!ht effectively undermine many or all of the potential !ains from multinational investment9 In addition to these concerns1 there are also the follo in! problemsB U &.2. ! )overnments in the developin! countries are al ays on the loo+6out to attract 'orei!n -irect Investment ('-I* and are prepared to put up considerable finance by ma+in! considerable concessions because of employment9 MNCs investment constitutes a stimulus to economic activity and employment creation9 #he employment that MNCs create is both direct in the form of people employed in the ne production facility and indirect throu!h the impact that the MNC has on the local economy9 #he )hanaian economy for eDample has benefited immensely ith the influD of many minin!1 petroleum1 ban+in! and telecommunication companies li+e M#N1 Eodafone1 and Nain to mention but a fe 9 #his has accounted for an increase in the domestic incomes and eDpenditure and hence the stimulus in domestic business as lots of jobs had been created9 #he or+ers also !ain from the technolo!y imported by the MNCs (technolo!y transfer* T*?*!'# "."!*' !.(. %."s much as MNCs investments can be si!nificantly re ardin! in developin! economies1 it could produce adverse conse<uences for the host developin! countries9 E(+)#.

" +"'&' 1 0i+e domestic producers1 MNCs are al ays findin! uni<ue ays to reduce their taD liabilities9 &ne ay that an MNC can do this is throu!h the process +no n as transfer pricin!9 #his ith lo rates of profit taD9 #his can be achieved by simply manipulatin! its here subsidiary " in one country supplies hich the materials are transferred enables the MNC to reduce its profits in countries ith hi!h rate of profit taD1 and increase them in countries internal pricin! structure9 'or eDample1 ta+e a MNC bet een the t o subsidiaries materials to subsidiary @ in another country9 #he price at made in each country9 "ssume that in the country ill ultimately determine the costs and hence the level of profit here subsidiary " is located1 the level of corporate taD is half of that of the country here subsidiary @ is located9 If materials are transferred from " to @ at very hi!h prices1 the @’s costs and its profitability ill fall9 &n the other hand1 "’s profitability ill rise ay ill rise9 #he MNC clearly benefits as more profits is taDed at a lo er rather than hi!her rate9 .and therefore can simply close do n their businesses in the forei!n countries and move9 #his is especially li+ely ith older plants hich ould need up!radin! if the MNC ere to remain or ith plants that can be easily sold multinational sector ithout much loss9 If a country has a lar!e forei!n ill become very vulnerable and face !reat hich ithin the economy1 it uncertainty in the lon! term9 It may thus be force to offer the multinational per+s in the form of !rants1 special taD relief and other concessions in order to persuade them to remain all of are costly to the taD payers in the developin! countries9 C# !"#) #he fact that MNC can shift production locations not only !ives them production advanta!es or economic fleDibility1 but it enables them to eDert control over their host nations9 #his is particularly the case in many of the developin! nations cases the principal or+ers safety and here MNCs are not only major employers but in many ealth creators9 #hus attempts by the host state1 for eDample to improve elfare or impose pollution controls may !o a!ainst the interest of the MNCs9 MNC mi!ht thus oppose such measures or even threaten to ithdra from the country if such measures are not modified or dropped1 renderin! those developin! economies vulnerable to serious economic fluctuations and shoc+s9 T"* s-.ad it been the other a lo price9 #his ould increase subsidiary @’s profits and reduce "’s9 around1 ith subsidiary @ facin! the lo er rate of taD1 then the materials ould be transferred at .

! .E 2'"# (.

MNCs ' I $'* -ifferent !overnment a!encies in India control MNCs .Many MNCs are accused of simply investin! in countries to !ain access to natural resources1 hich are subse<uently eDtracted in a ay that is not sensitive to the environment9 In the developin! nations here there is the dire need for forei!n direct investments1 they are fre<uently prepared to allo MNCs to do this9 .o ever1 the scene is chan!in! faster than ever1 and it is just a short time before even this picture chan!es si!nificantly9 W/.e often put premium on the short run !ains from the MNCs presence than on the lon! run depletion of precious natural resources or dama!e to the environment9 Perhaps1 e are a victim of this circumstance as a nation as far as the minin! sector of the country is concerned9 )overnments in the developin! orld often have a very short run focus9 #hey are concerned more ith their political survival throu!h the ballot boD rather than the lon! term interest of their people9MNC’S IN INDIA Earious MNCs’ contribution to India’s industrial development has been a very miDed blessin!9 #he entries of all hues of MNCs have made the industrial development scene even more uneven and patchy9 . M%)!' *!'# *) C#(+* '.s ' I $'*3 #here are a number of reasons hy the multinational companies are comin! do n to India9 orld9 India has !ot a hu!e mar+et9 It has also !ot one of the fastest !ro in! economies in the multinational companies in India9 'or <uite a lon! time1 India had a restrictive policy in terms of forei!n direct investment9 "s a result1 there as lesser number of companies that sho ed interest in investin! in Indian mar+et9 . *". #hese a!encies include: (i* the department of company affair (ii* #he %eserve @an+ of India (iii* #he Ministry of Industrial -evelopment and (iv* #he ministry of finance9 Control over MNCs in India is not efficient as these a!encies have no coordination amon! themselves9 #he !overnment of India imposed certain re!ulation to control MNCs9 #hese are: 4 9 Permissible period of a!reement as reduced from 43 to G years9 29 #he maDimum rate of royalty as imposed in technolo!y imports for those industries ere allo ed to import technolo!y9 hich .1%)*!'# #.o ever1 the scenario chan!ed durin! the financial liberali>ation of the country1 especially after 4HH49 )overnment1 no adays1 ma+es continuous efforts to attract forei!n investments by relaDin! many of its policies9 "s a result1 a number of multinational companies have sho n interest in Indian mar+et @esides1 the policy of the !overnment to ards '-I has also played a major role in attractin! the R.

s0 Collaboration ith MNCs should be allo ed only in heavy and basic industries9 Collaboration in consumer !oods industry should not be allo ed as it many hamper the domestic industry9 collaboration of MNCs for those . &.s."s/'+0 Majority or G4 per cent shares of the subsidiaries of MNCs should be held special industries of the host country9 c9 B." (.*2.* *++"#+"'*!.*"&/ #. ! ' !.ost country !overnment should have its representatives on the mana!ement of thee corporations9 Interferences of the representatives of the !overnment is must on such matters as influence or are li+ely to influence the economic development of the country9 It should be made clear to the MNCs that if they do not function in the Interest of the country they are li+ely to be nationali>ed9 b9 L#&*) #= .&/ #)#1.0 &nly in the initial sta!es of development the imported technolo!y should be used9 #hereafter that technolo!y should be developed indi!enously so that the dependence on MNCs could be reduced9 f9 C#))*5#"*!'# ' /.0 .&/ #)#1.59 #hose industries ate competent9 ere moot allo ed to import technolo!y here domestic companies 79 $Dports and other mar+etin! restrictions ere imposed9 Some re!ulations as stated above ere imposed9 .for the benefit of host country9 e9 S%5s!'!%!'# #.o ever these re!ulations are moot ade<uate and therefore MNCs be properly re!ulated to safe!uard the interest of the country9 'ollo in! su!!estions ate !iven to re!ulate them9 a9 G#2.-'&'*) &#))*5#"*!'# s0 )overnment should allo special industries here such collaboration is essential9 d9 R. !.".!."-. . * $ 5*s'& ' $%s!"'.0 MNCs many be compelled to spend a part of their profit in the development of appropriate % L .

&'.s0 a company is called a subsidiary company if atleast G3per cent of its paid up capital is held by another company9 Presently there are FF subsidiaries of MNCs9 &ut of these F5 companies the share of MNC varies I3 to 433 per cent of their share capital9 as 57M hereas that of Indian private companies as 449G per cent9 Similarly the profitability of forei!n public limited as 27 per cent as a!ain only 44 per cent in case of domestic public limited .+"#-'!*5')'!.0 #he rate of profitability of MNCs in comparison to domestic industry is very hi!h9 Profitability of MNCs (private* on an avera!e companies companies9 -.s #. ='s. $'s!"'5%!'# 0 &f all the MNCs operatin! in India 53 per cent are en!a!ed in plantation (tea* and minin!9 0ar!e of their branches are also found in the field of trade ban+in! and services their number is relatively less in case of industries9 Share of commerce trade and finance in the total assets of these corporations is IA per cent9 Share of processin! industry and transport is A per cent each respectively9 . $s #.0 Most of the MNCs functionin! in India have the rheas offices in t o countries i9e9 and U9S9"99. &ut of 4I4 subsidiary companies 44A had their head offices in U9/9 and 2G in U9S9"9 b9 T".s0 &li!opolistic or monopolistic tendencies of MNCs should be closely atched to safe!uard the interest of consumers as ell as of local producers9 S*)'.MNCs ' I $'*0 #he salient features of MNCs in India are as follo s: a9 B'@C#% !". #.&< # (# #+#)'s!'& !..MNCs0 Numbers of MNCs in India have !one do n but the volume of their assets increased considerably9 In 4HI71 the number of MNCs in India as GIG hich came do n to 5G3 in 4HF39 @ut their assets increased from %s9 4I74 crore to %s9 2734 crore9 -urin! the same period the number of subsidiaries also came do n to 42G from 4FF9 c9 S#%"&.H'1/ "*!.&*+'!*)0 0ar!e numbers of subsidiaries operatin! in India have mobili>ed their financial resources from ithin India9 d9 I $%s!".C/. S%5s'$'*"'.*!%". $. ! -. #.

$ !"* s-.'(+"#2.*2.&/ #)#1.H.s *5"#*$0 accordin! to -r9/9N9%aj1 rate of profitability on MNCs is very hi!h9 In a short period they repatriate the amount of initial investment to their head office9 @esides they also remit to their parent companyB lar!e amounts by ay of royalty and technical services9 'or eDample $ssoan "merican Petroleum Company had remitted to its head office %s9 F5 crore as a part of profit on investment of %s9 53 crore in India9L'('!.s !." #. ".0 #he MNCs in India have +ept their technolo!y a closely !uarded secret9 #ransfer of improved technolo!y by MNCs to India has ta+en place on a very limited scale9 It is the old technolo!ies hich mostly continue to prevail in India9 I $'* 's*!'# 0 MNCs have accepted the proposal of Indianisation9 "ccordin! to the provision of forei!n eDchan!e mana!ement act ('$M"*1 all forei!n companies had to reduce their o nership to I7 per cent or they had to reduce their share in the share capital of Indian branches to 73 per cent9 Most of the MNCs have accepted these conditions9 Many of them have already ta+en steps to reduce the amount of forei!n capital9 .('!!* &.

s!' *!'# -#" 5%s' .!/. !/. 1"#=' 1 MNCs !# I $'* #here are certain advanta!es that the underdeveloped countries li+e and the developin! countries li+e India derive from the forei!n MNCs that establishes9 #hey are as under: 49 Initiatin! a hi!her level of investment9 29 %educin! the technolo!ical !ap 59 #he natural resources are utili>ed in true sense9 79 #he forei!n eDchan!e !ap is reduced G9 @oosts up the basic economic structure D's*$2* !*1. (%)!' *!'# *) &#(+* '." I $'* *s * +".$ $.u!e mar+et potential of the country 29 '-I attractiveness 59 0abor competitiveness 79 Macro6economic stability A$2* !*1.MNCs ' I $'* It is too specify that the companies come and settle in India to earn profit9 " company enlar!es its jurisdiction of or+ beyond its native place hen they !et a ide scope to earn a profit and such is the case of the MNCs that have flourished here9 More over India has ide mar+et for different and ne !oods and services due to the ever increasin! population and the varyin! consumer benefited them and dra n their attention too9 are ho ever ithdra n and the taste9 #he !overnment '-I policies have someho #he restrictive policies that stopped the companyCs inflo country has sho n much interest to brin! in forei!n investment here9 @esides the forei!n directive policies the labor competitive mar+et1 mar+et competition and the macro6economic stability are some of the +ey factors that ma!neti>e the forei!n MNCs here9 F#))#=' 1 *".*s# s =/.-.ss: 49 .!/. 1"#=' 1 MNCs !# I $'* Some of disadvanta!es are .s &# s'$.P"#-'! #."".s #.s #. ".

s0 Some economists thin+ that MNCs are helpful for Indian industrial sector they thin+ that Indian companies learn ne techni<ue of production and ne mana!ement techni<ues ith the arrival or+in!9 .ith of MNCs in the Indian economic scene9 MNCs increase competition in the industrial sector so hen Indian companies compete ith !lobal !iants they also improve in their the entrance of MNCs in India demand for s+illed persons increased to a !reat eDtent so more and more people are becomin! s+illful and the problem of s+illed persons is solved for Indian industries also9 MNCs also brin! forei!n capital in the country1 hich help to eDpand the mar+et and Indian industries also ta+e benefit of it9 .49 Supplant domestic savin!s by destroyin! competition1 remove local entrepreneur1 unstable industrial !ro th 29 Cause strain to @&P i9e9 balance of payment by repetration of profits1 interests1 loyalities1 mana!ement fees9 59 0ocal professional cannot access to or+in! strate!ies of MNCs 79 Mncs by introducin! ne technolo!y cause technolo!ical unemployment9 mncs adopt capital intensive techni<ue9 so machine ta+es place of or+ers MNCs * $ I $'* I $%s!"'.

#here are some economists ho have some different opinion accordin! to them the technolo!y transferred by them is not useful for countries li+e India because MNCs use capital intensive techni<ue and developin! countries have scarce capital and labour abundant so the technolo!y they transfer is of little use9 #he competition increased by MNCs is also disastrous for domestic industries only fe stron! domestic industries have enou!h stren!th to face the competition ith !lobal !iants9 "s ell as s+illed persons are concerned MNCs !ive hi!her salaries to the s+illed persons and thus able to eDplore the services of the most s+illed persons and the Indian industries are still out of the services of these s+illed people9 No doubt MNCs brin! forei!n capital in India but this capital later becomes the cause of reimbursement of profit to the MNC’s parent countries1 hich cause capital fli!ht from the country9 MNCs * $ *1"'&%)!%".E seeds1 pesticides1 fertili>ers and modern a!ricultural e<uipment’s to the Indian farmers and thus Indian a!riculture has turned itself from subsistence level to ma+in! profits9 MNCs also encoura!e research activities in the field of a!riculture in developin! countries li+e India9 If e see the other part of the picture India ith billion plus population1 has put a!riculture at material9 the heart of its economy and food security at the center of its a!riculture policy9 In developin! countries1 MNCs encoura!e commercial farmin! because they need cheap ra 'armers also !et !ood amount for their crop so the result is dan!er of food security ..0 Indian economy is an a!rarian economyB a major part of the population depends on a!riculture directly or indirectly9 If bac+ ard but no e !o bac+ to past fe decades Indian a!riculture as considered the time is chan!in! and MNCs such as Macho6Monsanto help in moderni>in! Indian a!riculture9 #hey provide modern a!ricultural inputs such as .

.=+#' !0 MNCs are not fair in their or+in! in the developin! countries9 Many MNCs are not payin! their taD liability1 they prefer to establish in that country here taD la s are not strict similarly they aste in these countries by ta+in! ith country to prefer to establish in that country here environmental la s are also not much strict and these are mainly developin! countries9 #hey even send their toDic country e can ta+e the eDample of coca cola advanta!e of loose environmental la s even the <uality of their products vary hich is of superior <uality in US" and is of inferior in India9 MNCs also responsible for misallocation of resources in the developin! countries9 #hey provide mainly luDurious products because there is more profit in it9 #hus demand for these products increase due to demonstration effect and this leads to misallocation of resources to ards luDurious !oods but the need of developin! countries is to produce more and more necessary !oods because most of the people belon! to poor or middle class9 .E seeds provided by them and thus the biodiversity of Indian varieties are in dan!er9MNCs -"#( s#&'*) * $ (#"*) 2'.hich the orld is facin! these days9 " bi! number of Indian farmers are small and medium farmers ho are not able to use eDpensive a!ricultural e<uipment’s so the !ap is idenin! amon! rich and poor farmers1 hich is disastrous for the a!riculture9 Moreover MNCs are ma+in! Indian farmers dependent on .

)oo!le1 an "merican multinational Internet and soft are corporation speciali>ed in Internet search1 cloud computin!1 and advertisin! technolo!ies is head<uarters in United States9 It develops numerous Internet6based services and products1 and ma+es profit primarily from advertisin! throu!h its "d . F.!A++ ith computin! throu!h its various Net"pp previously +no n as Net or+ "ppliance is a proprietary computer stora!e and data mana!ement company head<uartered in Sunnyvale1 California9 8.ss 'ed$D $Dpress is a car!o airline based in Memphis1 #ennessee1 United States9 It is considered the orldCs lar!est airline in terms of frei!ht tons flo n and the orldCs fourth lar!est in terms of fleet si>e :. M'&"#s#-! Microsoft Corporation1 an "merican multinational corporation is head<uartered in %edmond1 . C's&# Cisco Systems is1 an "merican multinational corporation head<uartered in San Jose1 California1 United States1 desi!ns1 manufactures1 and sells net or+in! e<uipment9 . G##1)."nother aspect1 hich jud!es MNCs morally1 is political interference9 )enerally it is the practice of MNCs to !ain the economic po er in developin! countries and then !et political po er by !ivin! help to the politicians at the time of elections and then manipulate industrial policy in their favor they also interfere in the important political matters of these countries hich can cause a bi! dan!er to the soverei!nty of developin! countries9>A B.$E? E?+".s! MNC’s >. N.ords pro!ram9 9.ashin!ton1 United States that develops1 manufactures1 licenses1 and supports a ide ran!e of products and services mostly associated product divisions9 6.

B.illard orldCs lar!est chain of hambur!er fast food restaurants1 servin! around AF million customers daily in 44H countries D.@C)*"< /imberly6Clar+ Corporation is an "merican corporation that manufactures mostly paper6 based consumer products9 E.aD is a privately held1 !lobal manufacturer of household cleanin! supplies and other consumer chemicals based in %acine1 . D'*1. K'(5. M*""'#!! Marriott Corporation1 a hospitality company Marriott and 'ran+ /imball as .isconsin >A.").# -ia!eo is a !lobal alcoholic bevera!es company head<uartered in 0ondon1 United /in!dom9 It is the orldCs lar!est producer of spirits and a major producer of beer and ine9 . SC J#/ s# S9C9 Johnson as earlier previously +no n as S9 C9 Johnson . M&D# *)$4s Mc-onaldCs Corporation today is the as founded ori!inally by J9 .ot Shoppes C.

o ever the ne "ct provides for only a civil remedy and for an offence the accused cannot be arrested unless he defaults in payment of penalty for contravention9 'or settin! up a forei!n collaboration1 approval from the !overnment under the relevant forei!n eDchan!e la s in force and the re<uisite )overnment policy is re<uired9 Under the "ct no a forei!n collaboration may be formed by a forei!n company ithout the necessity of formin! a company the !overnment9 #he )overnment has set up a forei!n investment promotion board to encoura!e forei!n investment in India9 Some of the functions of the @oard include: speed up clearance of proposals to revie the collaborations cleared $armar+in! and ascertainin! of contacts to invest in India9 ith an Indian counterpart9 "ny 'orei!n collaboration hich eDceeds the minimum limited set out in the automatic route re<uires approval from .e should not !ive incentives to the MNCs only because they are comin! from some po erful advanced countries9 So MNCs should face same rules and re!ulations as the domestic industries of the developin! countries are facin!9 F#".'1 C#))*5#"*!'# ' I $'* In India there are basically t o forms of forei!n collaboration9 #he collaboration may be either financial collaboration or it may be technical9 In case of financial collaboration the approvin! authority is the %eserve @an+ of India and in the case of technical collaboration the approvin! authority is department of Industrial -evelopment in the Ministry of Industry1 )overnment of India9 #he approach of the )overnment has been rou!hly the same since the year 4H7H that is to allo forei!n direct investment on preferential basis in sectors that ill be beneficial for the country9 #he forei!n or Indian underta+in!s ill have to conform to the Industrial policy of the country9 'orei!n investors are in all cases considered e<ual to their Indian partners9 #he )overnment has enforced #he 'orei!n $Dchan!e Mana!ement "ct 4HHH ('$M"* in place of the 'orei!n $Dchan!e %e!ulation "ct14HI5 ('$%"*9 #he &ld act aimed at controllin! forei!n eDchan!e hereas the ne "ct see+s to re!ulate forei!n eDchan!e9 " breach of the provisions of the old act resulted in a criminal offence ith the burden of proof lyin! on the !uilty9 .C# &)%s'# "fter discussin! various aspects of MNCs in developin! country li+e India the bi! <uestion before us is hether MNCs play positive or ne!ative role in developin! countries? )enerally or+in! of MNCs1 hich is the !overnments of developin! countries don’t +eep control on the major fault on their side9 MNCs can be helpful for developin! countries only hen they are +ept under control9 .