#Multinational Company

WE ALL KNOW WHAT ARE MNC's AND SOME OF US WORK FOR THEM TOO...NOW LETS LEARN IT IN DETAILS....

Lists of MNC's....

 

You have learnt that we have two types of companies, on the basis of nationality, one is Indian company and the other is Foreign Company. But have you ever thought, why are foreign companies coming to India or what are they doing in our country? Actually they are coming to India to produce goods and services and/or to sell their products. Similarly Indian companies are also extending their business operations across the boundaries of our country. This is called globalization, which means extension of economic activities across the boundaries of a country in search of worldwide markets. In your day-to-day life you might be using different goods and services of Indian as well as foreign origin. The foreign goods

Are either imported in our country or sometimes these goods are also produced in our country.

Due to globalization the entire world has become one big market. Big companies are coming out of their home countries in search of better markets for their products. In the next section you will find details about these big companies.

Meaning of Multinational Companies

Simply speaking, a multi-national company is one which is registered as a company in one country but carries on business in a number of other countries by setting up factories, branches or subsidiary units. Such a company may produce goods or arrange services in one or more countries and sell these in the same or other countries. You might have heard about many Multinational Companies (MNCs) running business in India, like Philips, Siemens, Hyundai, Coca Cola, Nestle, Sony, McDonald’s, Citi Bank, Good Year, etc.

Features of Multinational Companies

(i) International Operations: Multinational Companies generally have production, marketing and other facilities in several countries.

(ii) Large size: The volume of sales, the profits earned, and also the value of assets held by a multinational companies are generally very large.

(iii) Centralized Control: The branches and subsidiary units of an MNC operating in different countries are controlled from the headquarters of the company in the home country, which lay down broad policies to be pursued.

Advantages of Multinational Companies

The Multinational Companies enjoy several advantages by way of huge earnings due to large-scale production and distribution activities across national borders. Besides, the host countries in which the Multinational Companies operate also derive a number of advantages.

These are-

(i) Investment of Foreign capital: Direct investment of capital by multinational companies helps under-developed countries to speed up their economic development.

(ii) Generation of employment: Expansion of industrial and trading activities by multinational companies leads to creation of employment opportunities and raising the standard of living in host countries.

(iii) Use of advanced technology: With substantial resources multinational companies undertake Research and Development activities which contribute to improved methods and processes of production and thus, increase the quality of products. Gradually, other countries also acquire these technologies.

(iv) Growth of ancillary units: Suppliers of materials and services and ancillary industries often grow in host countries as a result of the operation of multinational companies.

(v) Increase in exports and inflow of foreign exchange: Goods produced in the host countries are sometimes exported by multinational companies. Foreign exchange thus earned contributes to the foreign exchange reserves of host countries.

(vi) Healthy competition: Efficient production of quality goods by multinational companies prompt the domestic producers to improve their performance in order to survive in the market.

Limitations of Multinational Companies

The advantages discussed above are no doubt beneficial to host countries. But there are several limitations of multinational companies, which we should take note of:

i. Least concern for priorities of host countries: Multinational Companies generally invest capital in the most profitable industries and do not take into account the priorities of developing basic industries and services in backward regions of the host country.

ii. Adverse effect on domestic enterprises: Due to large-scale operation and technological skills, multinational companies are often able to dominate the markets in host countries and tend to acquire monopoly power. Thus, many local enterprises are compelled to close down.

iii. Change in tradition: Consumer goods, which are introduced by multinational companies in the host countries, do not generally conform to the local cultural norms. Thus, consumption habits of people as regards food and dress tend to change away from their own cultural heritage.

 

HOPE THAT THIS MIGHT BE USEFUL TO ALL !!!!!!!!!