MNCs

Multinational Corporations or Multinational Companies are corporate organizations that

operate in more than one country other than home country. Multinational Companies
(MNCs) have their central head office in the home country and secondary offices,
facilities, factories, industries, and other such assets in other countries.

These companies operate worldwide and hence also known as global enterprises. The
activities are controlled and operated by the parent company worldwide. Products and
services of MNCs are sold around various countries which require global management.

High turnover and many assets, aggressive marketing are some of the features of

Multinational Companies. LTI, TCS, Tech Mahindra, Deloitte, Capgemini are some of the
examples of MNCs in India.

A multinational corporation is a company incorporated in its home country (country of

origin) but it carries out business operations beyond that country in many other foreign
countries, we call the host countries. Its head office will be in the home country.

Features of a Multinational Company – MNC

1. High Turnover and Many Assets
MNCs operate on a global scale. Which means they have huge assets in almost all
countries in which they operate. Their turnovers can also be incomprehensibly large.
For example, Apple has a market capitalization of 1 trillion dollars. This is bigger than
the entire economy of Saudi Arabia!

2. Control
MNCs have unity of control. So while they have many branches in many countries, the
main control will remain with the head office in its country of origin. The business
operations in the host country have their own management and offices, but the ultimate
control will still remain at the head office.

3. Technological Advantages
As we saw earlier, an MNC has at its disposal huge amounts of wealth
and investments. This allows them to use the best technology available to boost their
products and their company. Most companies also invest huge money in their Research
& Development Department to invent and discover new technological marvels.

4. Management by Professionals
An MNC is run by very competent and capable individuals. They have
suitable managers to take care of their business operations, technology, finances,
expansion etc. And they are also able to attract the top talent to their corporations due
to their resources and their reputations.

5. Aggressive Marketing
MNCs can spend a lot of their money on marketing, advertising, and promotional
activities. They target an international audience, so effective marketing becomes
necessary. Aggressive marketing allows them to capture the market and sell their
products globally.

The entry of MNCs in India was controlled by existing industrial policy statements,
MRTP Act, and FERA. In the pre-reform period the operations of MNCs in India were
restricted.

IMPACT/IMPORTANCE OF MNCs in INDIA

The impact of MNCs on the development of a country is highly uneven. In

some ways the impact of MNCs in India has been positive. They have
brought in new technology and products, so the consumers have wide
choice and awareness of international standards. They have indirectly
made Indian companies more efficient as they brought in competition. 

o Transfer of Technology The most important role that MNCs play in India

and across the globe is the transfer of technology. Transfer of state of the
art technology to developing countries increases the quality and
productivity of the output produced. India has not just received the
technology from the MNCs, but has also been the beneficiary of technical
know-how which has in turn resulted in the skill enhancement of the
workforce. 
o Capital Investment When MNCs come to India, they are responsible for
non-debt creating capital inflows. In the pre-1991 period, the MNCs did not
play much role in the Indian economy. The country relied on external
commercial borrowing for development of sectors of economy. A whopping
balance of payment crisis was created through this unsustainable model.
Post the 1991 economic reforms, MNCs contributed towards creating a
 positive balance of payment. Therefore, when MNCs invest in India it goes
into non-debt creating capital receipts. Morever, they contribute towards
increasing the GDP of India. 
o The Multiplier Effect MNCs contribute towards increasing income and
increasing employment opportunities. The higher wages that, MNCs like
Hindustan Unilever, Goldman Sachs, Toyota, Google etc pay to
management and engineering graduates have contributed in increasing the
per capita income of India. The Maruti-Suzuki and Hero-Honda
collaborations have also contributed towards increasing employment. 
o Increase in Exports MNCs have greatly contributed towards increasing
our exports. As India offers cheap labour and land, it is both economic and
profitable for MNCs to invest in India. When the MNCs export their goods to
other nations, it benefits us directly. 
o Managerial Practices MNCs have also brought best managerial practices
to India. The human resource management, financial controls, operation
and advertising strategies have been emulated by Indian companies to
their advantage. 
o Increase in Competition Entry of MNCs promotes competition in the
economy of the host country. This increase in competition results in
lowering of prices, which is beneficial to the end user e.g. entry of
electronic giants like LG, Sony, Samsung in the Indian market has
promoted competition in the electronic segment and led to a decrease in
prices of electronic items. 
o Infrastructural Investment MNCs have also invested in the field of
infrastructure. This investments have contributed towards our economic
growth and development. Power projects (General Electric),
Telecommunication (Vodafone, Telinor), Delhi-Mumbai Industrial Corridor
(Japan), have been of immense benefit to India for expanding our horizons.

Criticisms against MNCs in India:

The operations of MNCs in India have been opposed on the
following grounds:
(i) They are interested more on mergers and acquisitions and not on fresh projects.

(ii) They have raised very large part of their financial resources from within the country.

(iii) They supply second hand plant and machinery declared obsolete in their country.

(i v) They are mainly profit oriented and have short term focus on quick profits.
National interests and problems are generally ignored.
(v) They use expatriate management and personnel rather than competitive Indian
Management.

(vi) Though they collect most of the capital from within the country, they have
repatriated huge profits to their mother country.

(vii) They make no effort to adopt an appropriate technology suitable to the needs.
Moreover, transfer of technology proves very costly.

(viii) Once an MNC gains foothold in a venture, it tries to increase its holding in order to
become a majority shareholder.

(ix) Further, once financial liberalizations are in place and free movement is allowed,
MNCs can estabilize the economy.

(x) They prefer to participate in the production of mass consumption and non-essential
items.