Professional Documents
Culture Documents
CORPORATIONS
INTRODUCTION
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CHARACTERISTICS
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9.
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14. Production & services are out sourced to countries with low
costtechnical labour
15. Long term view
FEATURES OF MNCS
Following are the main features of MNCs:
We all are quite aware of the bottom line of any business. Every
business has the ultimate goal of making profit. Businesses always
seek to sell more products and services so as to bring in more
revenue and generate profits for its owners.
APPLICABILITY TO BUSINESSES
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Pharmaceutical sector
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ADVANTAGES OF
MNCS
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Taxes and Other Costs Taxes are one of the areas where
every MNC can take advantage. Many countries offer reduced
taxes on exports and imports in order to increase their foreign
exposure and international trade. Also countries impose lower
excise and custom duty which results in high profit margin for
MNCs. Thus taxes are one of the area of making money but it
again depends on the country of operation.
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DISADVANTAGES OF
MNCS
laws may be in place. For example the Bhopal gas disaster in 1984
killed hundreds of people in India. Union Carbide was held
accountable.
They may exert political muscle. The multinational may threaten to
pull out of a country if they don't get deals on workforce (wages) or
overheads (land, rent and rates) and pollution/clean-up deals.
INTRODUCTION IN
INDIA:
With a GDP growth of almost 7 percent ,India is one of the most
promising and fastest-growing economies in the world. But despite
the huge potential of the country, the performance of Multinational
Corporations (MNCs) in India
has been decidedly mixed. Many MNCs which have succeeded re
markablyelsewhere in the world have yet to make a significant
impact in India. The market entry and penetration strategies that
have worked so well for these companies in other countries have
been for less successful in India. Many MNCs have struggled to
understand Indian customers and come up with suitable products
and services. Today, virtually all the big MNCs in the world have
operations in India. These include Unilever, BAT, Colgate Palmolive,
Procter & Gamble, General Electric, General Motors, Ford, Pepsi,
IBM, Intel, Texas Instruments, Microsoft, Oracle and Coca-Cola. India
is now considered by many MNCs to be a strategically important
market.
Historically, the main reason for the entry of MNCs into India was to
jump the tariff wall. High import duties made it difficult if not
impossible to export finished goods from the home country to India.
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On the other hand, once they entered the country and set up
operations, the country's high tariffs guaranteed adequate
protection. In some cases, the need to customize products
necessitated strong local presence. Unilever set up its Indian
subsidiary, Hindustan Lever and gave it full freedom to develop
various products to suit local tastes and usage conditions. This
would obviously not have been possible if Unilever had only been
exporting its products to India. In recent times, other reasons have
made India an attractive destination for MNCs. India has emerged
as a low cost back office, manufacturing and
research base, thanks to its skilled but relatively cheap manpower
. In the computer software industry, many MNCs are establishing
offshore development centers total local manpower. IBM,
Accenture, EDS and Computer Associates have
all been strengthening their presence in the country. Not only
are Indian software workers among the best in the world, when it
comes to technical skills but they are also more comfortable with
English, compared to their counterparts in countries such as China.
Dell and Deloitte have major back office operations in the country.
General Electric (GE) is looking at India as an important R&D base
which can contribute to their global knowledge pool. GE's local
outfit has filed for several patents in the last couple of years. Nokia
has set up three R&D centres that work on next-generation packetswitched mobile technologies and communications solutions. Texas
Instruments is also doing cutting edge R&D work in the country.
While several MNCs have entered India, not all of them are doing
well. This is evident when performances are compared across
industries. However, even within a given industry, some MNCs
seem to be doing better than the others. Consider the automobile
industry. Here, Suzuki and Hyundai are way ahead of formidable
rivals such as General Motors, Honda and Ford. Similarly in the
FMCG sector, even after allowing for its relative late entry, Procter &
Gamble(P&G) remains a marginal player compared to Hindustan
Lever. In some industries, the MNCs have been left high and dry by
the local players. In
the paint industry, the local player, Asian Paints has beaten the M
NCs by a hugemargin. Then, there is also the unique case of an
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MNCS STRUCTURE
1. Horizontally integrated multinational corporations: Horizontally
integrated multinational corporations manage production
establishments located in different countries to produce the same
or similar products. (Example: McDonalds)
2. Vertically integrated multinational corporations: Vertically
integrated multinational corporations manage production
establishment in certain country/countries to produce products that
serve as input to its production establishments in
othercountry/countries. (Example: Adidas)
3. Diversified multinational corporations: diversified multinational
corporations do not manage production establishments located in
different countries that are horizontally
nor vertically nor straight, nor non-straight integrated. (Example:
Hilton Hotels)
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FOREIGN DIRECT
INVESTMENT
A Foreign Direct Investment (FDI) is a controlling ownership in a
business enterprise in one country by an entity based in another
country. Foreign direct investment is distinguished from portfolio
foreign investment, a passive investment in the securities of
another country such as public stocks and bonds, by the element of
"control". According to the Financial Times, "Standard definitions of
control use the internationally agreed 10 percent threshold of
voting shares, but this is a grey area as often a smaller block of
shares will give control in widely held companies. Moreover, control
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TYPES
1. Horizontal FDI arises when a firm duplicates its home countrybased activities at the same value chain stage in a host
country through FDI.
2. Platform FDI Foreign direct investment from a source country
into a destination country for the purpose of exporting to a
third country.
3. Vertical FDI takes place when a firm through FDI moves
upstream or downstream in different value chains i.e., when
firms perform value-adding activities stage by stage in a
vertical fashion in a host country.
METHODS
The foreign direct investor may acquire voting power of an
enterprise in an economy through any of the following methods:
by incorporating a wholly owned subsidiary or company
anywhere.
by acquiring shares in an associated enterprise.
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GOVERNMENT INITIATIVES
Indias cabinet has cleared a proposal which allows 100 per cent FDI
in railway infrastructure, excluding operations. Though the initiative
does not allow foreign firms to operate trains, it allows them to do
other things such as create the network and supply trains for bullet
trains etc. The government has notified easier FDI rules for
construction sector, where 100 per cent overseas investment is
permitted, which will allow overseas investors to exit a project even
before its completion. It also said that 100 per cent FDI will be
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NESTLE
ORIGIN:
Nestl S.A. (French pronunciation: [nsle]; English /nsle/, /
nsl/, /nsli/) is a Swiss transnational food and beverage
company headquartered in Vevey, Vaud, Switzerland. It is the
largest food company in the world measured by revenues,[4]
[5] and ranked #72 on the Fortune Global 500 in 2014.[6]
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CASE STUDIES
NESCAF PLAN helping Indian coffee farmers
Baduvandra Laxhipathi Gowda is among the 176,040 proud Coffee
farmers associated with the NESCAF Plan operational across ten
countries. His farm, Morning Mist is located in Margodu Village, the
Coorg District of Karnataka on the foothills of the Western Ghats
where the NESCAF Plan was launched in 2012. The Western
Ghats, one of the eight hottest hot spots of biodiversity in the world
are home to shade grown eco-friendly coffee plantations. Mr.
Laxmipathi shares his association and experience with NESCAF
Plan, India. My name is Baduvandra Laxhipathi Gowda. Im 40
years old and Ive been in coffee farming for over 20 years. I live
with my wife, Vidhya, and our daughters Punarva, 7 years and
Monal, 3 years old. Ive been involved with the NESCAF Plan since
2012, when Nestl Agronomists came to my farm and explained
how the plan would benefit coffee farming communities. I also
encouraged other farmers to participate in this programme and
brought along 85 farmers for the Nestl Better Farming Practices
training sessions. We are all now a part of the NESCAF Plan.
Sustainable approach to coffee cultivation My farm is about six
hectares and produces around 2,500 kg/ hectare of Robusta coffee
annually. I also get additional income from the 600 pepper vines
that I have cultivated.
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CONCLUSION
Liberalisation has paved the way for the growth of MNCs in
different countries. It should not be that MNCs are not simply
agents of exploitation but they also act as agents of development
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BIBLIOGRAPHY
http://www.investopedia.com/terms/m/multinationalcorporatio
n.asp
http://www.answers.com/Q/What_is_the_role_of_MNC_in_India
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http://theglobaljournals.com/ijsr/file.php?
val=October_2013_1380979753_205f5_154 .pdf
http://www.yourarticlelibrary.com/company/multinationalcorporations-of-india- characteristics-growth-andcriticisms/23462/
Economics of Global Trade and Finance Manan Prakashan
Johnson and Mascarenhas
http://en.wikipedia.org/wiki/Multinational_corporation modified on 7 February 2015
http://business.mapsofindia.com/indiacompany/multinational.html
http://www.nestle.in/aboutus/allaboutnestl%C3%A9
http://www.nestle.in/csv/case-studies
http://www.nestle.in/csv/case
studies/coffee http://www.nestle.in/csv/casestudies/villagewomendairy
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