1.

Executive summary
Multinational corporations are business entities that operate in more
than one country. The typical multinational corporation or MNC normally
functions with a headquarters that is based in one country, while other
facilities are based in locations in other countries.
The most important feature of these MNCs is their gigantic size.
Their assets and sales run into billions of dollars and they also make
supernormal profits. According to one definition an MNC is one with a sales
turnover of f 100 million. The MNCs are also super powerful organisations.

2. Introduction
A multinational
corporation (MNC)
or multinational enterprise (MNE) is a corporation that is registered in more
than one country or that has operations in more than one country. It is a large
corporation which both produces and sells goods or services in various
countries. It can also be referred to as an international corporation. They play an
important role in globalization. The first multinational corporation was
the Dutch East India Company, founded March 20, 1602.
Multinational corporations are business entities that operate in more than one
country. The typical multinational corporation or MNC normally functions
with a headquarters that is based in one country, while other facilities are based
in locations in other countries.
The exact model for an MNC may vary slightly. One common model is for the
multinational corporation is the positioning of the executive headquarters in one
nation, while production facilities are located in one or more other countries.
This model often allows the company to take advantage of benefits of
incorporating in a given locality, while also being able to produce goods and
services in areas where the cost of production is lower.
Such a company is even known as international company or corporation. As
defined by I. L. O. or the International Labor Organization, a M. N. C. is one,
which has its operational headquarters based in one country with several other
operating branches in different other countries. The country where the head
quarter is located is called the home country whereas; the other countries with
operational branches are called the host countries. Apart from playing an
important role in globalization and international relations, these multinational
companies even have notable influence in a country's economy as well as the
world economy. The budget of some of the M. N. C.s are so high that at times
they even exceed the G. D. P. (Gross Domestic Product) of a nation.

 Definition:
There is more universally accepted definition of the term multinational
corporation. Different authorities define the term differently,
As ILO Report
The essential nature of the multinational enterprise lies in the fact that is
managerial Headquarters are located in one country ( home country ) while the
enterprise carries out operations in a number of other countries as well (host
countries)
Obviously, what is meant is, A corporation that controls production facilities in
more than one country, such facilities having been acquired through the process
of foreign-direct investment. Firms that participate in international business
however large they may be, solely by exporting or b hunting technology is not
Multinational enterprises.
The United Nations
MNCs as, Enterprises which control assets- factories, mines, sales offices and
the like in two or more countries.

 History:
The genesis of MNCs lies in transnational trading in early days conducted by
the Greek, Phoenician and Mesopotamian merchants. After the fall of the
Roman Empire, trade between nations become difficult.
When Europe and the Middle East steeped in feudalism resulting in wars
between feudal lords and church prohibited trade with Muslim States. Later on,
merchants/traders of Italy established trade who were considered the four
runners of the multinational firms.
The cities of Genoa, Venice, Florence and Pica became the supply depots of
traders. Active transnational operations flourished with the development of
banks and money lending agencies.
Multinationals in the form of trading companies started in the seventeenth and
eighteenth centuries. The Hudson Bay Company, the East India Company, the
French Levant Company were the major transnational companies established in
those days.
During the nineteenth century, huge foreign investment flowed from the
Western Europe to the underdeveloped countries or Asia, Africa and America.
England was the leading exporter of capital, followed by France, the
Netherlands and Germany.
In the early twentieth century British Petroleum, Standard Oil, Ana Conda
Copper and International Nickel were the major MNCs investing mainly in
mining and petroleum industries.
The MNCs have attained their present dominating position in the world
economy through a long process of growth. S.A. Cockeril Steel Works
established in Persia in 1815, followed by several others such as Bayer of
Germany in 1863, Nestle of Switzerland in 1967, Michelin of France in 1853
and Lever Brothers of U.K. in 1890.
There are three phases in the growth of MNCs. The first phase lasted upto the
1st World War. The field was captured mostly by the European Companies such
as Imperial Tobacco, Dunlop, Siemens, Philips, etc. The Growth of MNCs
4

halted during the post-war period between 1930-1950 on account of

recessionary situation prevailing the world over in those days.
During the second phase, covering the decades of fifties and sixties, American
MNCs such as General Motors, Ford Motors and IBM emerged on the world
scene.
The third phase of the growth of MNCs began since 1970s. This new era
belonged to the European, German and Japanese MNCs.
In recent years, MNCs have also emerged from developing countries such as
India, Malaysia, Hong Kong, Singapore, South Korea, Indonesia, etc.
Based U.N. (1993) data, the number of MNCs in 1992 had exceeded 37000 and
their global sales exceeded 5.5 U.S. dollar. American, European and Japanese
companies are the world's largest corporations.

Characteristics of multinational corporations (MNCs):

The multinational corporations have certain characteristics which may be
discussed below :
(1) Giant Size:
The most important feature of these MNCs is their gigantic size. Their assets
and sales run into billions of dollars and they also make supernormal profits.
According to one definition an MNC is one with a sales turnover of f 100
million. The MNCs are also super powerful organisations. In 1971 out of the top
ninety producers of wealth, as many as 29 were MNCs, and the rest, nations.
Besides the operations, most of these multinationals are spread in a vast number
of countries. For instance, in 1973 out of a total of 1,000 firms identified nearly
45 per cent had affiliates in more than 20 countries.
(2) International Operation :
A Fundamental feature of a multinational corporation is that in such a
corporation, control resides in the hands of a single institution. But its interests
and operations sprawl across national boundaries. The Pepsi Cola Company of
the U.S operates in 114 countries. An MNC operates through a parent
corporation in the home country. It may assume the form or a subsidiary in the
host country. If it is a branch, it acts for the parent corporation without any local
capital or management assistance. If it is a subsidiary, the majority control is
still exercised by the foreign parent company, although it is incorporated in the
host country. The foreign control may range anywhere between the minimum of
51 per cent to the full, 100 per cent. An MNC thus combines ownership with
control. The branches and subsidiaries of MNCs operate under the unified
control of the parent company.
(3) Oligopolistic Structure :
Through the process of merger and takeover, etc., in course of time an MNC
comes to assume awesome power. This coupled with its giant size makes it
oligopolistic in character. So it enjoys a huge amount of profit. This
6

oligopolistic structure has been the cause of a number of evils of the

multinational corporations.
(4) Spontaneous Evolution:
One thing to be observed in the case of the MNCs is that they have usually
grown in a spontaneous and unconscious manner. Very often they developed
through "Creeping incrementalism." Many firms become multinationals by
accident. Sometimes a firm established a subsidiary abroad due to wage
differentials and better opportunity prevailing in the host country.
(5) Collective Transfer of Resources :
An MNC facilitates multilateral transfer of resources Usually this transfer takes
place in the form of a "package" which includes technical know-how,
equipment's and machinery, materials, finished products, managerial services,
and soon, "MNCs are composed of a complex of widely varied modern
technology ranging from production and marketing to management and
financing. B.N. Ganguly has remarked in the case of an MNG "resources are
transferred, but not traded in, according to the traditional norms and practices of
international trade."
(6) American dominance :
Another important feature of the world of multinationals is the American
dominance. In 1971, out of the top 25 MNCs, as many as 18 were of U.S.
origin. In that year the U.S. held 52 per cent of the total stock of direct foreign
private investment. The U.E. has assumed more of the role of a foreign investor
than the traditional exporter of home products.

Significance of multinational corporations (MNCs):

The multinational corporations today have a revolutionary effect on the
international economic system. It is so because the growth of international
transactions of the multinationals has affected the more traditional forms of
capital flows and international trade for many economies. Today they constitute
a powerful force in the world economy.
The value of the products sold by the MNCs in 1971 was more than $ 500
billion which was about one-fifth of the GNP of the entire world, excepting that
of socialist economies. In the host countries, the volume of their production was
about $ 330 billion. The present growth rate of their output in the host countries
is a spectacular 10 per cent per annum which is almost double the growth rate of
the world GNP.
In the field of international trade and international finance, the multinational
firms have come to exercise enormous power. In early seventies the MNCs
accounted for about one-eighth of all international trade- From the nature of
their growth it may be presumed that in the early eighties their share will rise to
one-fourth.
Among the developing countries only India had an annual income twice that of
General Motors, which is the biggest multinational corporation. Otherwise the
annual income of the other less developed countries is much less than that of the
giant MNCs. By their sheer size the MNGs can disrupt the economies of the
less developed countries, and may even threaten their political sovereignty

Advantages and Disadvantages of Multinational Corporations:

Multinational Corporations no doubt, carryout business with the ultimate object
of profit making like any other domestic company. According to ILO report "for
some, the multinational companies are an invaluable dynamic force and
instrument for wider distribution of capital, technology and employment; for
others they are monsters which our present institutions, national or international,
cannot adequately control, a law to themselves with no reasonable concept, the
public interest or social policy can accept. MNC's directly and indirectly help
both the home country and the host country.
Advantages of MNC's for the host country
MNC's help the host country in the following ways
1. The investment level, employment level, and income level of the host country
increases due to the operation of MNC's.
2. The industries of host country get latest technology from foreign countries
through MNC's.
3. The host country's business also gets management expertise from MNC's.
4. The domestic traders and market intermediaries of the host country gets
increased business from the operation of MNC's.
5. MNC's break protectionalism, curb local monopolies, create competition
among domestic companies and thus enhance their competitiveness.
6. Domestic industries can make use of R and D outcomes of MNC's.
7. The host country can reduce imports and increase exports due to goods
produced by MNC's in the host country. This helps to improve balance of
payment.

8. Level of industrial and economic development increases due to the growth of

MNC's in the host country.

Advantages of MNC's for the home country

MNC's home country has the following advantages.
1. MNC's create opportunities for marketing the products produced in the home
country throughout the world.
2. They create employment opportunities to the people of home country both at
home and abroad.
3. It gives a boost to the industrial activities of home country.
4. MNC's help to maintain favourable balance of payment of the home country
in the long run.
5. Home country can also get the benefit of foreign culture brought by MNC's.

10

Disadvantages of MNC's for the host country

1. MNC's may transfer technology which has become outdated in the home
country.
2. As MNC's do not operate within the national autonomy, they may pose a
threat to the economic and political sovereignty of host countries.
3. MNC's may kill the domestic industry by monopolising the host country's
market.
4. In order to make profit, MNC's may use natural resources of the home
country indiscriminately and cause depletion of the resources.
5. A large sums of money flows to foreign countries in terms of payments
towards profits, dividends and royalty.

Disadvantages of MNC's for the home country

1. MNC's transfer the capital from the home country to various host countries
causing unfavourable balance of payment.

11

2. MNC's may not create employment opportunities to the people of home

country if it adopts geocentric approach.
3. as investments in foreign countries is more profitable, MNC's may neglect the
home countries industrial and economic development.

3. Cultural Problems Encountered by Multinational Companies

Multinational companies face a number of different cultural problems as they
move forward in today's global marketplace. Many of those problems are
internal cultural problems, but some may of an external nature also. Given the
nature of the global environment, multinational companies will increasingly
find themselves having to make decisions that are based on cultural problems
created by the global market.
1. Diversity
One of the main cultural challenges faced by multinational companies is the
diversity of cultural perspectives found within the organization. This can cause
problems in terms of management and policy development, because it makes it
difficult for the organization to make company-wide policy decisions without
having to take into consideration the variety of cultural viewpoints represented
within the organization itself. In short, as companies move forward in the global
context, too much diversity may create problems.

12

2. Organizational Culture
Along the same lines as an overabundance of diversity, multinational companies
also face the difficult task of developing a unified organizational culture from
within. Because of the different cultural perspectives represented within the
organization as a whole, company leaders generally face the difficult task of
having to create a workplace culture to which all employees can adhere.
Concepts of teamwork and unity may have different meanings across the
national boundaries, making it far more tricky to develop a unified company
perspective.
3. Human Resources
Companies of a multinational variety will also face problems when it comes to
human resources operations. For instance, when it comes to recruiting, human
resources managers may find themselves having to overcome cultural barriers to
find qualified candidates for positions abroad. In some cases, management
professionals may find themselves facing a lack of qualified talent to fill
important positions that require advanced degrees and training. Finding
employees at home who are qualified or willing to step in and fill such positions
in a context outside of their home country may also prove problematic. Some
employees may simply not want to serve in certain parts of the world.
4. Sales
Another problem that multinational companies may face in a global
environment is the ability to develop products and market those products in a
way that appeals to a wide segment of the world's population. Companies run
the risk of developing products and strategies that run contrary to the cultural
norms of the people to which they are attempting to market the products.
Multinational companies face the challenge of developing and marketing
products that have global appeal.
5. Communication and Cultural Norms
Another significant issue faced by multinational companies is how business is
conducted across international lines. Differences in communication, for
instance, make it essential to understand cultural norms in the countries in
which these companies operate. For instance, John Hooker at Carnegie Melon
University points out that some forms of communication have implied and
understood meanings that only make sense within a culture's context. This form

13

of "high context communication" requires knowledge of the culture and its

understood traditions.
6. Etiquette and Customs
Multinational companies also have to have representatives and leaders who
know how to avoid violating or ignoring cultural practices and customs in
business meetings. For instance, sending a woman to conduct business
negotiations in the Middle East might be offensive to some Middle Eastern
businessmen who typically don't socialize in public with women. In some Asian
cultures, bowing, rather than shaking hands, is a more acceptable form of
greeting. Other etiquette concerns can include eating customs in business
dinners, bringing and giving gifts when appropriate, differences in body
language and dress and even methods of negotiation.

4. Management functions in Multinational Corporation

14

1. Planning in the MNC

Planning involves analyses of international and external environment to find out
the strengths, weaknesses, opportunities and threats. After conducting the
SWOT analysis, the management sets the objectives. It is very difficult to
analyse the external environment. This is because the world markets, are
changing continuously.
Even large MNCs find it difficult to compete in the world markets. Therefore,
they form Global Strategic Partnerships (GSPs) with local companies. Due to
GSPs, planning becomes easier. That is because the managers of the local
branches have full knowledge about the local environment. Some MNCs use
consultants to study the external environment of foreign countries.
2. Organising in the MNC
Organisation is a structure, which helps to achieve corporate objectives.
A MNC can select an organisation structure from the following options:A MNC may appoint one Vice-President for all its foreign branches. He will
control all the foreign branches from the MNC's head office.
A MNC may use geographic structures. It may appoint a head in every single
country or region in which it operates. For e.g. A manager may be appointed as
a Head for the Asian region or for India; another manager may be in-charge of
the European region, etc.
A MNC may also organise the structure on the basis of production lines. For eg.
One manager may be in charge of one product. Another manager may be in
charge of another product, etc.
3. Staffing in MNC
Staffing involves selecting the right man for the right job. It also includes
manpower planning, promotion, transfers, training and development,
compensation,
etc.
Staffing function of an international business is very important, especially while
appointing the top-level managers. The top-level managers must be competent
and committed persons.

A MNC has three options to select managers :-

15

Managers from the home country who are working in the headquarters of the
MNC. These managers know about the MNC's policies and operations.
Managers from the host-country can be selected to manage the operations in
that country. These managers know their countries environment, i.e. culture,
legal, educational, political, etc. This environmental knowledge is very
important for the success of the MNC.
Managers from a third country who have worked in the MNC's parent
headquarters, or experienced managers from some other MNC, can be selected.
4. Leading in the MNC
Leading is the process of influencing the subordinates to perform willingly
towards group objectives. Leading involves motivating and communicating.
Managers must have effective
leadership qualities.
Leading and motivating employees require an understanding of employees and
their cultural environment. For eg., Participative management may work well in
democratic countries, but it may confuse the employees in a country having a
dictator.
Communication is a problem for MNCs because they do business in countries
where different languages are spoken. However, their communication problems
can
be
solved
by
having
local
managers.
5. Controlling in MNC
Controlling involves monitoring actual performance and taking corrective
measures, to
correct
deviations, if
any.
Controlling is a bit difficult in international business due to certain reasons:Revenues, costs, and profits are measured in different currencies.
The ratios between currencies are subject to foreign exchange fluctuations.
Accounting practices and financial reporting differ from country to country.

5. GROWTH OF MNCs
16

The rapidity with the MNCs are growing is indicated by the fact that while
according to the world investment report 1997 there were about 45,000 MNCs with
2,80,000 overseas affiliates; according to the world investment report 2001, there
were over 63,000 of them with about 8,22,000 overseas affiliates. China was
host to about 3.64 lakh of the affiliates (i.e., more than 44% of the total)
compared to more than 1400 in India. The developed countries have less than
12% if these affiliates.
The possess staggering resources as would be clear from the fact that the sales
of 200 top corporations in1982 were equivalent of 24.2 per cent of the worlds
GDP and have risen to 28.3 per cent of the world GDP in 1998. This shows that
200 top MNCs now control over a quarter of the worlds economic activity. In
fact the combines sales of thee 200 MNCs estimated at &7.1 trillion in 1998
surpass the combined economies of 182 countries. If we subtract the GDP of the
big 9 economies -USA, Japan, Germany, France, Italy, UK, Brazil, Canada and
china-from the worlds GDP, the GDP of the remaining 182 countries of the
world comes to $6.9 trillion in 1998 which is less than the sales of the 200 top
MNCs. An idea of the giant size of these MNCs can also be had from the
revelation made in a study conducted by the Washington based institute of
policy studies (IPS) that of the 100 largest economies in the world, 51 are
corporations; only 49 are countries.
The MNCs are estimated to employ directly, at home and abroad. Around73
billion people representing nearly 10 per cent of paid employment in nonagricultural activities worldwide and close to 20 per cent in the developed
countries considered alone/ in addition , the indirect employment effect of the
TNC activities ate at least equal toy hew direct effects and probably much
larger. For example, the US footwear company Nike currently employs 9000
people; while nearly 75,000 people are employed by is independent subcontractors located in different countries. Based on such information, the total
number of jobs associated with TNCs worldwide may have been 150 million at
the beginning of the 1990s.

REASONS FOR THE GROWTH OF MNCs

17

The important reasons for the growth of multinationals are as follows:

Expansion of market territory: The increase in per capita income
alongside the growth of various economies and growth of GDP resulted
in the rise of living standards of the people. Due to these factors the
market territory of the firms expended. In addition to this, the large
operations of the MNCs builds up its international image, which
contributed to extend its market territory beyond the physical boundaries
of the country in which it is incorporated?
Market Superiorities: A number of market superiorities can we observed
in MNCs over the domestic companies. They may be:
Availability of more reliable and up to date data and information:
They enjoy market reputation:
They adopt more effective advertising and salad promotion technique and
thymus they face less difficulties in marketing the products:
They have efficient warehousing facilities due to lower inventory
requirement and also enjoy quick transportation
Financial superiorities: An MNC enjoys financial superiorities over
domestic companies. They are:
Huge financial resources at the disposal of the MNCs. they can turn the
environment and circumstances in their favour by utilizing these
resources:
They have easy access to external capital markets:
Because of its international regulation, they can raise funds from
international banks and financial institutions easily.
Technological superiorities: Expansion or growth of MNCs is dot to the
technological backwardness of underdeveloped contraries. Infect MNCs
are rich in technology. The rich financial resources of the MNCs enable
them to invest on R$ D and develop the advanced technology. There are
certain reasons due to which the developing countries regard the transfer
of technology from the MNCs. These reasons are:
Lack of industrialization and insufficient resources:
Local manpower, capital, etc. cannot be optimally utilized by the
developing countries on their own:
Developing countries are unable to import raw materials, capital
equipment, technology, etc: on their own due to paucity of resources:

6. MNCS IN INDIA

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Various MNCs contribution to Indias industrial development has been a very

mixed blessing. The entries of all hues of MNCs have made the industrial
development scene even more uneven and patchy. However, the scene is
changing faster than ever, and it is just a short time before even this picture
changes
significantly.
There are a number of reasons why the multinational companies are coming
down to India. India has got a huge market. It has also got one of the fastest
growing economies in the world. Besides, the policy of the government towards
FDI has also played a major role in attracting the multinational companies in
India.
For quite a long time, India had a restrictive policy in terms of foreign direct
investment. As a result, there was lesser number of companies that showed
interest in investing in Indian market. However, the scenario changed during the
financial liberalization of the country, especially after 1991. Government,
nowadays, makes continuous efforts to attract foreign investments by relaxing
many of its policies. As a result, a number of multinational companies have
shown interest in Indian market

Salient feature of MNCs in India:

The salient features of MNCs in India are as follows:
19

a. Bi-Country: Most of the MNCs functioning in India have the rheas offices in
two countries i.e. and U.S.A... Out of 171 subsidiary companies 116 had their
head offices in U.K. and 25 in U.S.A.
b. Trends of MNCs: Numbers of MNCs in India have gone down but the
volume of their assets increased considerably. In 1974, the number of MNCs in
India was 575 which came down to 350 in 1980. But their assets increased from
Rs. 1741 crore to Rs. 2401 crore. During the same period the number of
subsidiaries also came down to 125 from 188.
c. Sources of capital: Large numbers of subsidiaries operating in India have
mobilized their financial resources from within India.
d. Industry wise distribution: Of all the MNCs operating in India 30 per cent are
engaged in plantation (tea) and mining. Large of their branches are also found in
the field of trade banking and services their number is relatively less in case of
industries. Share of commerce trade and finance in the total assets of these
corporations is 76 per cent. Share of processing industry and transport is 6 per
cent each respectively.
e. High rate of profitability: The rate of profitability of MNCs in comparison to
domestic industry is very high. Profitability of MNCs (private) on an average
was 34% whereas that of Indian private companies was 11.5 per cent. Similarly
the profitability of foreign public limited companies was 24 per cent as again
only 11 per cent in case of domestic public limited companies.
f. Subsidiaries: a company is called a subsidiary company if atleast 50per cent
of its paid up capital is held by another company. Presently there are 88
subsidiaries of MNCs. Out of these 83 companies the share of MNC varies 70
to 100 per cent of their share capital.
g. Heavy remittances abroad: according to Dr.K.N.Raj, rate of profitability on
MNCs is very high. In a short period they repatriate the amount of initial
investment to their head office. Besides they also remit to their parent company;
large amounts by way of royalty and technical services. For example Essoan
American Petroleum Company had remitted to its head office Rs. 83 crore as a
part of profit on investment of Rs. 30 crore in India.

h. Limited transfer of improves technology: The MNCs in India have kept their
technology a closely guarded secret. Transfer of improved technology by
MNCs to India has taken place on a very limited scale. It is the old technologies
which mostly continue to prevail in India.
20

i. Indianisation: MNCs have accepted the proposal of Indianisation. According

to the provision of foreign exchange management act (FEMA), all foreign
companies had to reduce their ownership to 74 per cent or they had to reduce
their share in the share capital of Indian branches to 40 per cent. Most of the
MNCs have accepted these conditions. Many of them have already taken steps
to reduce the amount of foreign capital.

Advantages

of MNCs :

21

There are certain advantages that the underdeveloped countries like and the
developing countries like India derive from the foreign MNCs that establishes.
They are as
under:
1.
Initiating
a
higher
2.Reducing the technological
gap
3.The
natural
resources
are
4.The
foreign
exchange
5. Boosts up the basic economic structure

level
utilized
gap

of

investment.

in

true
is

sense.
reduced

Disadvantages of MNCs:
1. Supplant domestic savings by destroying competition, remove local
entrepreneur,
unstable
industrial
growth
2. Cause strain to BOP i.e. balance of payment by repetration of profits,
interests,
loyalties,
management
fees.
3.
Local professional cannot access to working strategies of MNCs
4. MNCs by introducing new technology cause technological unemployment.
mncs adopt capital intensive technique so machine takes place of workers.

7. MNCs and Indian Industries

22

Some economists think that MNCs are helpful for Indian industrial sector they
think that Indian companies learn new technique of production and new
management techniques with the arrival of MNCs in the Indian economic scene.
MNCs increase competition in the industrial sector so when Indian companies
compete with global giants they also improve in their working. With the
entrance of MNCs in India demand for skilled persons increased to a great
extent so more and more people are becoming skilful and the problem of skilled
persons is solved for Indian industries also. MNCs also bring foreign capital in
the country, which help to expand the market and Indian industries also take
benefit of it.
There are some economists who have some different opinion according to them
the technology transferred by them is not useful for countries like India because
MNCs use capital intensive technique and developing countries have scarce
capital and labour abundant so the technology they transfer is of little use. The
competition increased by MNCs is also disastrous for domestic industries only
few strong domestic industries have enough strength to face the competition
with global giants. As well as skilled persons are concerned MNCs give higher
salaries to the skilled persons and thus able to explore the services of the most
skilled persons and the Indian industries are still out of the services of these
skilled people. No doubt MNCs bring foreign capital in India but this capital
later becomes the cause of reimbursement of profit to the MNCs parent
countries, which cause capital flight from the country.

23

8. MNCs and agriculture

Indian economy is an agrarian economy; a major part of the population depends

on agriculture directly or indirectly. If we go back to past few decades Indian
agriculture was considered backward but now the time is changing and MNCs
such as Mahyco-Monsanto help in modernizing Indian agriculture. They
provide modern agricultural inputs such as HYV seeds, pesticides, fertilizers
and modern agricultural equipments to the Indian farmers and thus Indian
agriculture has turned itself from subsistence level to making profits. MNCs
also encourage research activities in the field of agriculture in developing
countries like India.
If we see the other part of the picture India with billion plus population, has put
agriculture at the heart of its economy and food security at the centre of its
agriculture policy. In developing countries, MNCs encourage commercial
farming because they need cheap raw material. Farmers also get good amount
for their crop so the result is danger of food security, which the world is facing
these days. A big number of Indian farmers are small and medium farmers who
are not able to use expensive agricultural equipments so the gap is widening
among rich and poor farmers, which is disastrous for the agriculture. Moreover
MNCs are making Indian farmers dependent on HYV seeds provided by them
and thus the biodiversity of Indian varieties are in danger.

24

9. MNCs from social and moral viewpoint

MNCs are not fair in their working in the developing countries. Many MNCs
are not paying their tax liability, they prefer to establish in that country where
tax laws are not strict similarly they prefer to establish in that country where
environmental laws are also not much strict and these are mainly developing
countries. They even send their toxic waste in these countries by taking
advantage of loose environmental laws even the quality of their products vary
with country to country we can take the example of coca cola which is of
superior quality in USA and is of inferior in India. MNCs also responsible for
misallocation of resources in the developing countries. They provide mainly
luxurious products because there is more profit in it. Thus demand for these
products increase due to demonstration effect and this leads to misallocation of
resources towards luxurious goods but the need of developing countries is to
produce more and more necessary goods because most of the people belong to
poor or middle class.
Another aspect, which judges MNCs morally, is political interference. Generally
it is the practice of MNCs to gain the economic power in developing countries
and then get political power by giving help to the politicians at the time of
elections and then manipulate industrial policies in their favour they also
interfere in the important political matters of these countries which can cause a
big danger to the sovereignty of developing countries.

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10. 10 Best MNCs

1. Microsoft:
Microsoft Corporation, an American multinational corporation is headquartered
in Redmond, Washington, United States that develops, manufactures, licenses,
and supports a wide range of products and services mostly associated with
computing through its various product divisions.
2. NetApp:
NetApp previously known as Network Appliance is a proprietary computer
storage and data management company headquartered in Sunnyvale, California.
3. Google:
Google, an American multinational Internet and software corporation
specialized in Internet search, cloud computing, and advertising technologies is
headquarters in United States. It develops numerous Internet-based services and
products, and makes profit primarily from advertising through its Ad Words
program.
4. FedEx Express:
FedEx Express is a cargo airline based in Memphis, Tennessee, United States. It
is considered the world's largest airline in terms of freight tons flown and the
world's fourth largest in terms of fleet size

5.Cisco:
Cisco Systems is, an American multinational corporation headquartered in San
Jose, California, United States, designs, manufactures, and sells networking
equipment
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6. Marriott:
Marriott Corporation, a hospitality company was founded originally by J.
Willard Marriott and Frank Kimball as Hot Shoppes
7. McDonald's:
McDonald's Corporation today is the world's largest chain of hamburger fast
food restaurants, serving around 68 million customers daily in 119 countri
8. Kimberly-Clark:
Kimberly-Clark Corporation is an American corporation that manufactures
mostly paper-based consumer products.
9. SC Johnson:
S.C. Johnson was earlier previously known as S. C. Johnson Wax is a privately
held, global manufacturer of household cleaning supplies and other consumer
chemicals based in Racine, Wisconsin
10.Diageo:
Diageo is a global alcoholic beverages company headquartered in London,
United Kingdom. It is the world's largest producer of spirits and a major
producer of beer and wine.

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11. Conclusion

After discussing various aspects of MNCs in developing country like

India the big question before us is whether MNCs play positive or
negative role in developing countries?
Generally the governments of developing countries dont keep control on
the working of MNCs, which is major fault on their side.
MNCs can be helpful for developing countries only when they are kept
under control.
We should not give incentives to the MNCs only because they are coming
from some powerful advanced countries.
So MNCs should face same rules and regulations as the domestic
industries of the developing countries are facing.

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12. Bibliography
Books:
1. Introduction To International Economics Author: Dominick
Salvatore Publisher: John Wiley& Sons, 2011
2. Economics Of Global Trade And Finance, Johnson Mascarenhas
3. Mithani&Jhingan, International Economics, S.Chand& Co.
Newsletters and Articles:
1. The Hindu
2. Economic Times
3. Business Line
4. Times Of India
Websites:
1. http://www.weikipedia.com.
2.http://discuss.itacumens.com/index.php?topic=21961.0

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