Gunit Chadha is a member of the Global Group Executive Committee of Deutsche Bank AG

and co-CEO for Asia Pacific. Recently in India, he spoke to TOI about the evolving economic
situation. Excerpts:
How do you see the global economic situation?
The US will be a key driver as it should grow from 1.8% in 2013 to 3.2% in 2014 on the back
of growing retail confidence, uptick in housing and shale gas impact on manufacturing.
Europe still has some way to go on its fiscal adjustments. We are constructive about China,
projecting 8.6% growth in 2014, around the recently announced market oriented reforms.
Put together, while risks remain, global growth should accelerate to 3.7% in 2014 from 2.7%
this year. So, 2014 may be around US growing, Europe stabilizing, China re-balancing and
India recovering.
Is uncertainty holding investors back from pumping money into India?
Not really. Last year, FIIs invested $25 billion into equity markets. This year they're on track
to do close to that number. Similarly, last year, India attracted $15 billion in net FDI. This
year net FDI has already surpassed last year's levels in the first nine months. India can get
more FDI. Debt investors put $8 billion into India last year, they pulled it out this year.
But companies such as Walmart and BHP Billiton have recently announced
plans to scale down operations in India. Are they over pessimistic?
Entering India has been very challenging for MNCs, but staying invested and growing as a
franchise is much more promising and profitable. As the world competes for global capital
and jobs, India must attract MNCs with more predictable policies. Some structural
challenges need definite policy action by the government, especially in infrastructure and
manufacturing. Brownfield projects, stuck for approvals , need urgent de-bottlenecking .
While there are some MNCs which have been disappointed , there are several Fortune 500
companies which view India as a strategic growth market. Let us also highlight the good,
rather than bury all of it under the bad. While portfolio flows may flow West with tapering,
the West still looks East when it comes to allocating FDI into strategic strong demographic
markets like China, India and Indonesia.
Will India see lower allocations by FIIs in 2014?
It depends on the pace of India's reforms. India must focus on the controllable. In many
ways, portfolio investors come in before rather than later into growth. But it's a function of
whether India continues its path of restoring the confidence. De-bottlenecking
infrastructure and FDI reform in insurance will send a strong signal. If India opens up its
debt market to global investors more - whether through joining global bond indices or
trading on Euroclear - it can only help, as experience of other markets shows.
What's your assessment of challenges facing Indian banks and how things will

change once the new banking licenses are issued?

The new licences are important but not a transformational event over the next three years.
While, overall Indian banking system is in fairly good shape, there is a need to focus on
three-four big themes to achieve strategic re-calibration. One, India will have to evolve the
best way of dealing with stressed or restructured assets. Is CDR ( corporate debt
restructuring) way the most effective mechanism? Is it worth considering Chapter 11 route
of the US? Financial inclusion is the second topic of focus for India. While it's absolutely a
social imperative, equally, the question is how do you make financial inclusion economically
viable? For instance, a new definition of priority sector and differentiated models of delivery
need to be framed. The third topic, which needs serious attention is how to build the capital
and bond markets. The final theme is the direction of regulation. Globally, regulators and
governments are moving towards increasing regulation. India needs to evaluate what best
suits its priorities.

Definition and Challenges of a

Global Corporation
READ
EDIT FEEDBACK VERSION HISTORY USAGE

SHARE THIS CONTENT

Register for FREE to remove ads and unlock more features!Learn more
Register for FREE to remove ads and unlock more features! Learn more

Assign Concept Reading

View Quiz
View PowerPoint Template

Global corporations operate in two or more

countries and face many challenges in their
quest to capture value in the global market.
LEARNING OBJECTIVE[ EDIT ]

Point out the most meaningful challenges encountered by multinational

corporations (MNCs) when pursuing global markets and efficiencies

KEY POINTS[ EDIT ]

A multinational corporation (MNC) is present in several countries,

which improves the company's ability to maintain market share and earn
higher profits.
o
As GDP growth migrates from mature economies, such as the US and EU
member states, to developingeconomies, such as China and India, it becomes highly
relevant to capture growth in higher growth markets.
o
Despite the general opportunities a global market provides, there are
significant challenges in penetrating these markets. These consist of public
relations, ethics, corporate structure, and leadership.
o
Combining these challenges with the inherent opportunities a global
economy presents, companies are encouraged to pursue high value opportunities
while carefully controlling the risks involved.
o

TERMS[ EDIT ]

economies of scale
The characteristics of a production process in which an increase in the scale of the
firm causes a decrease in the long run average cost of each unit.

economies of scope
Lowering average cost for a firm in producing two or more products through the
common and recurrent use of proprietary know-how or an indivisible physical asset.

value-chain
The series of operations necessary for a business to operate.
Give us feedback on this content:

Register for FREE to remove ads and unlock more features! Learn more
FULL TEXT[ EDIT ]

Global Corporations
A global company is generally referred to as a multinational corporation
(MNC). An MNC is a company that operates in two or more countries,
leveraging the global environment to approach varying markets in
attaining revenue generation. These international operations are pursued as
a result of the strategic potential provided by technological developments,
making new markets a more convenient and profitable pursuit both in
sourcing production and pursuing growth.
International operations are therefore a direct result of either achieving higher
levels of revenue or a lower cost structure within the operations or valuechain. MNC operations often attain economies of scale, through mass
producing in external markets at substantially cheaper costs, or economies
of scope, through horizontal expansion into new geographic markets. If

successful, these both result in positive effects on the income

statement (either larger revenues or stronger margins), but contain the
innate risk in developing these new opportunities.

Opportunities
As gross domestic product (GDP) growth migrates from mature economies,
such as the US and EU member states, to developing economies, such as
China and India, it becomes highly relevant to capture growth in higher
growth markets. is a particularly strong visual representation of the
advantages a global corporation stands to capture, where the darker green
areas reppresent where the highest GDP growth potential resides. High
growth in the external environment is a strong opportunity for most
incumbents in the market.

GDP Growth Rate by Country

This map highlights (via dark green) where the strongest growth opportunities currently are (as of
2010).

Challenges
However, despite the general opportunities a global market provides, there are
significant challenges MNCs face in penetrating these markets. These
challenges can loosely be defined through four factors:

Public Relations: Public image and branding are critical components of

most businesses. Building this public relations potential in a new geographic
region is an enormous challenge, both in effectively localizing the message and
in the capitalexpenditures necessary to create momentum.

Ethics: Arguably the most substantial of the challenges faced by MNCs,

ethics have historically played a dramatic role in the success or failure of
global players. For example, Nike had its brand image hugely damaged
through utilizing 'sweat shops' and low wage workers in developing countries.
Maintaining the highest ethicalstandards while operating in developing
countries is an important consideration for all MNCs.

Organizational Structure: Another significant hurdle is the ability to

efficiently and effectively incorporate new regions within the value chain and
corporate structure. International expansion requires enormous
capital investments in many cases, along with the development of a

specific strategic business unit (SBU) in order tomanage these accounts

and operations. Finding a way to capture value despite this fixed
organizational investment is an important initiative for global corporations.

Leadership: The final factor worth noting is attaining effective leaders

with the appropriate knowledge base to approach a given geographic
market. There are differences in strategies and approaches in every
geographic location worldwide, and attracting talented managers with high
intercultural competence is a critical step in developing an efficient global
strategy.
Combining these four challenges for global corporations with the inherent
opportunities presented by a global economy, companies are encouraged to
chase the opportunities while carefully controlling the risks to capture the
optimal amount of value. Through effectively maintaining ethics and a strong
public image, companies should create strategic business units with strong
international leadership in order to capture value in a constantly expanding
global market.

Source: Boundless. Definition and Challenges of a Global Corporation. Boundless Finance. Boundless,
21 Jul. 2015. Retrieved 26 Sep. 2015 from https://www.boundless.com/finance/textbooks/boundlessfinance-textbook/financial-management-outside-of-the-u-s-21/types-of-international-business136/definition-and-challenges-of-a-global-corporation-546-5332/vv