Multinational Corporation (MNC)

By.
INTRODUCTION
A multinational corporation
(MNC) or transnational corporation
(TNC), also called multinational
enterprise (MNE), is a corporation or
enterprise that manages production
or delivers services in more than one
country. It can also be referred to as
an international corporation.
• First MNC was Dutch East India Co (1602), granted
monopoly in colonial trade. Today, UN estimates about
62,000 MNCs with 900,000 affiliates.
 ROLE OF MNC

 The economic role of multinational

corporations (MNCs) is simply to channel
physical and financial capital to countries with
capital shortages.
 Wealth is created, which yields new jobs
directly and through “crowding-in” effects.
 New tax revenues arise from MNC generated
income, allowing developing countries to
improve their infrastructures and to
strengthen their human capital.
 MNCs reduce world poverty levels and
provide a positive externality that is consistent
with the United Nations.
 The economic
development
• Filling Savings Gap.
• Filling Trade Gap.
• Filling Revenue Gap.
• Filling Management/Technological Gap.
• Other Beneficial Roles like:-
a) The domestic labour may benefit in the
form of higher real wages.
  b) The consumers benefits by way of lower
prices and better quality products.
 Contd.,
• c) Investments by MNCs will also induce more
domestic investment. For example, ancillary
units can be set up to ‘feed’ the main
industries of the MNCs.
• d) MNCs expenditures on research and
development(R&D), although limited is bound
to benefit the host country.
 IMPACT ON COUNTRIES
• A large amount of tax collected through
MNC’s .
• Foreign currency maintenance and dealing
efficiency increased.
• Increased revenue.
• Economic health improved .
• Employment increased.
• Foreign relation increased.
• Market sentiments improved.
• Demand supply scenario balanced.
• Available resources used effectively
• Generate income for countries and
other domestic companies.
• Import export policies implemented
effectively and export increased so
country benefited in dual mode.
 Patents

• Many multinational corporations hold patents

to prevent competitors from arising.
• e.g.. Adidas holds patents on shoe designs
• Microsoft benefits from software patents.
• The pharmaceutical companies lobby
international agreements to enforce patent
laws on others.
 Need of MNC in
underdeveloped countries…
• Sustaining a high level of Investment.
• Technological gap.
• Exploitation of natural resources.
• Undertaking the initial risk.
• Development of basic economic
infrastructure.
• Foreign exchange gap.
 Reasons For the Growth of
MNC’s
• Expansion of market territory.
• Marketing superiorities.
• Financial Superiorities.
• Technological Superiorities.
• Product Innovations.
 Advantages of MNC’s

• MNC’s have become vehicles of technology to

the developing countries
• Greater employment and career opportunities
are provided by these MNC’s.
• MNC’s make commendable contribution to
inventions and innovations in the host
country.
• Practice of MNC’s bring to the host country,
the latest technique in the field of
management.
• Varity of goods and services produced for
local customers
 Disadvantages of MNC’s
• MNC’s create monopolies in the market
and eliminate local competitors.
• MNC’s may create depletion of resources
due to its continues use by these
overseas companies.
• MNC’s generally carry out their R&D in
their home country and supply to the
host country.
• MNC’s generally import huge raw
materials due to its continuous use by
these overseas companies
Defining success for MNCs in
India
• Capturing the Domestic Market
Opportunity

• Leveraging India’s resource base

to derive additional value for the
corporation R&D /
Manufacturing / Sourcing / BPO .
Example of MNC in india
 Conclusion

A MNC gives many advantages to domestic

companies through purchasing of raw material
and resources. a country benefited in term of
employment and economic health help to reforms
. a new company uses MNC’s network to expand
their business. Industrial growth and GDP Effected
so, MNC’ s become a milestone in developing
and under developed countries.