Saroj Kumar Behera

PGDM 2ND YEAR

IIMT BBSR
MULTINATIONAL
CORPORATIONS
(MNCs)
MULTINATIONAL
CORPORATIONS
(MNCs)
MNCs, also known as TNCs are huge
industrial organizations which extend their
industrial and marketing operations through
a network of their branches or their majority
owned foreign affiliates (MOFAs).

There are now 40,000 MNCs with 2,50,000

overseas affiliates throughout the world.
 A multinational company can organize it’s
operations in different countries either of the
following five alternatives
• Branches
• Subsidiary Companies
• Joint venture companies
• Franchise holders
• Turnkey Projects
 REASONS FOR GROWTH
The manifold reasons are
1. Expansion of market territory
2. Marketing Superiorities
3. Financial Superiorities
4. Technological Superiorities
5. Product Innovation
Expansion of market territory

As the operations of a large sized firm

expand and as it’s international image builds
up it seeks more and more extension of it’s
activities beyond the physical boundaries of
the country in which it is incorporated.
 MARKETING SUPERIOROTIES
• It possesses a more reliable and up-to-date
market information system
• It enjoys market reputation and faces less
difficulty in selling it’s product
• It adopts more effective advertising and
sales promotion techniques
 Financial Superiorities
• It has huge financial resources to turn
adverse situation in favor
• It maintain high level of fund utilization by
generating funds in one country and using
them in another
• It has easier access to external capital
markets
 OBJECTIVES OF MNCs
• To expand the business beyond the boundaries of a home
country
• Minimize cost of production, especially labor cost
• Capture lucrative foreign market against international
competitors
• Make diversification internationally effective so that a steady
growth of business could be achieved
• Make best use of technological advantages by setting up
production facilities abroad
• Counter regulatory measures in the parent country
 BENEFITS RECEIVED FROM MNCs
 Investment, income and employment
 Transfer of technology
 Increase in export and decrease in import
 Equalizing cost of factor of production around the world
 Integration of national economy into the world economy
 Contribution to research and development
 Stimulation to domestic enterprise
 Quality improvement and reduced domestic monopoly
 Increased standard of living
 Professionalization of management in the host country
 Improve balance of payment position
 MNCs are profit making organizations which pay high
dividends, motivating resource mobilization among
investors in host country
 OPPOSITION LINES OF ARGUMENT
• It does not stand for social welfare, rather profit maximization
• Misutilisation of power and flexibility
• MNCs can have unfavorable effect on the balance of
payment position of the country through outflow of large
sums of money in the form of dividends, profits, royalties,
interest, technical fees , and so on leading to an increasing
volume of remittance which rose from 72.25 crore in 1969-70
to 813.5 crore in 1989.
• MNCs can cause distraction and cause monopoly powers in
the long run
• A grave threat to sovereignty of the nations
• Direct and indirect interference in the political and other
strategic affairs
• depletion of nonrenewable natural resources