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INTRODUCTION
Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
y y y
MNC must have substantial direct investment in foreign countries MNC must be engaged in the active management of these overseas assets MNC is also involved in the management integration of operations located in different countries
It is a corporation/business or entity/enterprise that manages production establishments or delivers services in at least two countries.MNCS is an enterprise that manage production or delivers services more than one country can also be referred to as international corporation. The term Multinational is widely used all over the world to denote large companies having vast financial, managerial and marketing resources. MNCs are like holding companies having its head office in one country and business activities spread within the country of origin and other countries.Multinational corporations play an important role in globalization some argue that a new form of MNC is evolving in response to globalization the 'globally integrated enterprise. First MNC was Dutch East India Co (1602), granted monopoly in colonial trade. Today, UN estimates about 62,000 MNCs with 900,000 affiliates.MNCs have existed since 1602, in which year the first MNC, the Dutch East India Company, was established. Germany, Belgium and Finland that have made a strong footing in India too. They are well flourishing and earning their share of maximum profit too. According to ILO report (i.e. International Labour Organisation) The essential nature of the multinational enterprises lies in the fact that its managerial headquarters are located in one country, while the enterprise carries out operations in number of other countries. MNCS will have a demand for many services such as meals, transport, raw materials, maintenance services that will be provided by domestic businesses, indirectly increasing employment. Wages should increase as MNCS will want the best people that the country has to offer.
GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 Wages may be lower on international standards but should be higher than the local standard, as logically the business will pay its workers more in order to motivate them. Often MNCS are criticised for their wage policies but recent research and statistics prove this wrong.
Foreign involvement export via agent or distributor export through sales rep or subsidiary Local packaging or assembly FDI License Time
GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from Japan Philips from Holland etc., are some of the MNCs operating at international levels. Introduction Since 1991, India has experienced a dramatic increase in the presence of Multinational Corporation (MNCs), and with it, a tremendous expansion in the amount of FOREIGN DIRECT INVESTMENT inflows to the Indian economy. This paper will analyse the effect with this change has had on Indian entrepreneur. The overall conclusion reached is that the increased presence of MNCs has had a positive impact on India entrepreneur. However, India entrepreneur has not even come close to reaching its potential, and thus, much more change needs to occur.
Country of Origin:
Coca Cola Dell Hitachi HSBC LG Nestle Samsung Sony Virgin Vodafone Nokia USA USA Japan UK South Korea Switzerland South Korea Japan UK UK Finland
CHARACTERISTICS OF MNCS
Following are the some of the important features/characteristics of MNCs:
1. AREA OF OPERATION: - The MNCs operate in many countries with multiple products on large scale. A MNC may operate both manufacturing and marketing activities in a number of countries. Some MNCs operate in several countries, whereas, others may operate in a few countries. Mostly MNCs from developed countries dominate in the world markets.
2. ORIGIN:-The development of MNCs dates back to several centuries, but their real growth started after the Second World War Majority of the MNCs are from developed countries like U.S.A, Japan, UK, Germany and European countries. In recent years MNCs from countries like Korea, Taiwan, India, China, etc. are operating in the world markets.
3. COMPREHENSIVE TERM: - In general, the term MNC is a Comprehensive term and includes international and transnational corporations. The term global corporation is also included in the list of MNC.
4. PROFIT MOTIVE: - MNCs are profit oriented rather than social oriented. Such
corporations do not take much interest in the social welfare activities of the host country.
5. MANAGEMENT: - The Parent company works like a holding company. The subsidiary companies are to operate under control and guidance of parent company. The subsidiaries functions as per the policies and directions of parent organisation.
6. MANUFACTURE AND MARKETING ACTIVITIES: - MNCs undertake both Manufacturing and Marketing Activities and they are predominantly engaged in hi-tech and consumer goods industries. Majority of the MNCs are engaged in pharmaceutical, petrochemicals, engineering, consumer goods, etc.
7. QUALITY CONSCIOUSNESS : - MNCs are quality and cost conscious and managed by professionals and experts. They have their own organisation culture and systems. MNCs believe in the concept of total quality management. 8.BRANDING STRATEGIES OF MNCS IN INTERNATIONAL MARKETS:In today s global marketplace, MNCs need to set up effective brandingstrategies in order to be competitive. Depending on the structure of thecompany and the products offered, MNCs can use different strategies. 9. Their main aim is to obtain the HIGHEST POSSIBLE PROFIT 10. They invest LARGE SUMS OF MONEY 11. THEY AID LOCAL COMPANIES &attain their benefits 12. They operate in more than one country at the same time
OBJECTIVE
To expand the business beyond the boundaries of the home country. Minimize cost of production, especially labour cost. Capture lucrative foreign market against international competitors. Avail of competitive advantage internationally. Achieve greater efficiency by producing in local market and then exporting the products. Make best use of technological advantages by setting up production facilities abroad. Establish an international corporate image
MNCS STRUCTURE
1. Horizontally integrated multinational corporations: Horizontally integrated
multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonald's )
2. Increase in the investment level and thus, the income and employment in the host Country.
4. Greater availability of products for local consumers. 5. Increase in exports and decrease in imports.
1.
towards home country. This means that home country people are considered as superior and allocated all key posts. 2.
strong orientation towards host country where few key people are nationals and remaining are from the host country. 3.
concentration in whole world and they make selection for best employees whether they are from host country or home country it does not matter.
COST OF CAPITAL
A firms capital consists of equity (retained earnings and funds obtained by issuing stock) and debt (borrowed funds). The cost of equity reflects an opportunity cost, while the cost of debt is reflected in interest expenses. Firms want a capital structure that will minimize their cost of capital and hence the required rate of return on projects. The cost of capital for MNCs may differ from that for domestic firms because of the following differences.
1. Size of Firm: Because of their size, MNCs are often given preferential treatment by creditors. They can usually achieve smaller per unit flotation costs too.
2. Access to International Capital Markets : MNCs are normally able to obtain funds through international capital markets, where the cost of funds may be lower.
3. International Diversification: MNCs may have more stable cash inflows due to international diversification, such that their probability of bankruptcy may be lower.
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 4. Exposure to Exchange Rate Risk: MNCs may be more exposed to exchange rate fluctuations, such that their cash flows may be more uncertain and their probability of bankruptcy higher.
5. Exposure to Country Risk.: MNCs that have a higher percentage of assets invested in foreign countries are more exposed to country risk.
Example: The coca cola recent annual report stated Our global presence and strong capital position afford us easy access to key financial markets around the world, enabling us to raise funds with a low effective cost. This posture, coupled with the aggressive management of our mix of short-term and long-term debt, results in a lower overall cost of borrowing.
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Following are the reasons why multinational companies consider India as a preferred destination for business:
2. FDI attractiveness
3. Labour competitiveness
4. Macro-economic stability
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HISTORY AND EVALUTION OF MNCS FIRST MNCS IN WORLD: DUTCH EAST INDIA COMPANY
East India Company, Dutch, 16021798, chartered by the States-General of the Netherlands to expand trade and assure close relations between the government and its colonial enterprises in Asia. The company was granted a monopoly on Dutch trade E of the Cape of Good Hope and W of the Strait of Magellan. From its headquarters at Batavia (founded 1619) the company subdued local rulers, drove the British and Portuguese from Indonesia, Malaya, and Ceylon (Sri Lanka), and arrogated to itself the fabulous trade of the Spice Islands. A colony, established (1652) in South Africa at the Cape of Good Hope, remained Dutch until conquered by Great Britain in 1814. The company was dissolved when it became scandalously corrupt and nearly insolvent in the late 18th cent., and its possessions became part of the Dutch colonial empire in East Asia.
The history of the Dutch East India Company, founded in 1602 and declared bankrupt in 1799, spans almost the whole of the seventeenth and eighteenth centuries. For much of this time it was the worlds largest trading company, owning, at the height of its wealth and power, more than half the worlds sea-going shipping with its characteristic ship, the fluyt, also being produced for the merchant marines of other countries, including England. It was known internationally by its distinctive VOC monogram, the initials standing for Verenigde OstindischeCompagnie or simply the United East India Company.
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International Business Machines Corporation abbreviated IBM and nicknamed "Big Blue .It is a Multinational computer technology and IT consulting corporation. Its headquartered inArmonk, New York, United States The company is one of the few information technologyinformation technology and companies with acontinuous history dating back to the 19th century. IBM manufactures and sells computer hardware andsoftware (with a focus on the latter), and offersinfrastructure services, hosting service, and consultingservices in areas ranging from mainframe computers toand technology.
IBM was rated the No. 1 company amongst all IT companies in India on 'Employee Satisfaction with Training' in Dataquest Top Employer Survey 2003 - An indication of how Training is an integral part of life at IBM. Besides equipping our employees with newer sets of skills every day, IBM's Training & Learning programs reflect our core belief that our workforce is primed continually to face challenges every day. Join us and find out how far you can go with IBM
At IBM it is important to strike an optimum balance between work and play. So, while you work among other extremely bright and talented individuals like yourself who share the same desire and passion for what they do, you will also have a life along the way! IBM is committed to creating a supportive work environment that allows the employee control over how, where and when his/her work gets done. IBMers benefit from policies and programs supporting work/life balance, including flexi-timing, working from home and mobility options.
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: INFOSYS
These corporations originated early in the 20th century and expanded after World War II.A Multinational Corporation developed new products in its native country and manufactured them abroad.Almost all the earliest and largest multinational firms were either American, Japanese, or West European During the last three decades, many smaller corporations have also become multinational.Such enterprises maintain that they create employment, create wealth, and improve technology in countries. Multinational business operation is not a new concept. The British east India company, Hudsons bay corporation and Royal Africa companies are example of MNCs. The post second world war period has however, witnessed a changing hand in colonialism and there emerged a new thrusts for industrial and technological development as well as rise of the USA as the largest industrial power. . The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock It was also arguably the worlds first mega corporation possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. The first modern multinational corporation is generally thought to be the East India Company. Many corporations have offices, branches or manufacturing plants in different countries from where their original and main headquarters is located.
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ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. As the Company's ownership progressively Indianised, the name of the Company was changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agribusiness, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house. ITC is a board-managed professional company, committed to creating enduring value for the shareholder and for the nation. It has a rich organisational culture rooted in its core values of respect for people and belief in empowerment. Its philosophy of all-round value creation is backed by strong corporate governance policies and systems The Companys beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks.
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Export stage
y y y
Initial inquiries => firms rely on export agents Expansion of export sales Further expansion foreign sales branch or assembly operations (to save transport cost)
2.
Licensing
Licensing is usually first experience (because it is easy) e.g.: Kentucky Fried Chicken in the U.K.
y y y
It does not require any capital expenditure It is not risky Payment = a fixed % of sales
Problem: the mother firm cannot exercise any managerial control over the licensee (it is independent) The licensee may transfer industrial secrets to another independent firm, thereby creating a rival.
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Direct Investment
It requires the decision of top management because it is a critical step.
y y y y
It is risky (lack of information) (US -> Canada) Plants are established in several countries Licensing is switched from independent producers to its subsidiaries. Export continues
3. Multinational
Stage
The company becomes a multinational enterprise when it begins to plan, organize and coordinate production, marketing, R& D, financing, and staffing. For each of these operations, the firm must find the best location.
Rule of Thumb
A company whose foreign sales are 25% or more of total sales. This ratio is high for small countries, but low for large countries, e.g. Nestle (98%: Dutch), Phillips (94%: Swiss).
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y y y y
Indias large market potential India presents a remarkable business opportunity by virtue of its sheer size and growth Labour competiveness FDI attractiveness
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GOVERNMENT SUPPORT:
Both revenue and capital expenditure on R&D are 100% deductible from taxable income under the Income Tax Act. A weighted tax deduction of 125% is allowed for sponsored research in approved national laboratories and institutions of higher technical education.
A weighted tax deduction of 150% is allowed on R&D expenditure by companies in government-approved in- house R&D centres in selected industries. A company whose principal objective is research and development is exempt from income tax for ten years from its inception.Accelerated depreciation is allowed for investment in plant and machinery made on the basis of indigenous technology.
Customs and excise duty exemptions for capital equipments and consumables required for R&D.
Excise duty exemption for three years on goods designed and developed by a wholly owned Indian company and patented in any two countries out of: India, the United States, Japan and any country of the European Union.
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Industrial Licensing: Licensinglimited to only5 sectors (security, public health & safety considerations)
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 Measured by foreign assets, the distribution of the largest companies looks very much the same. Most of the top 100 companies with largest foreign assets are from the United States, Japan, the United Kingdom, France and Germany. In this list, Japanese companies are not as prominent. In 1995, the list of the top 100 transnational corporations (TNCs), measured by foreign assets, included two companies from developing countries for the first time. These were Daewoo and Venezuela (Oil Company). Total foreign assets of the top 100 TNCs in 1995 amounted to $1.7 trillion, while total foreign sales were $2 trillion, and total employment 5,800,000. In 1996, the total revenues of the 500 largest companies globally were $11.4 trillion, total profits were $404 billion, total assets were $33.3 trillion, and the total number of employees was 35,517,692. The top ten companies accounted for 11.7% of the total revenues of the top 500, 15% of profits, and 13.6% of employment, according to Fortune Magazine.
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America was home to 31 of the 50 most profitable firms, and seven of the top ten. The most profitable, however, was Shell (the Netherlands) with profits of $8.9 billion. Shell's profits increased by 28.7% over 1995. In 1996, the top 500 companies did not get bigger, they got richer. Their profits increased by 25.1%, while revenues increased only by 0.5%, assets by 3.5%, and the number of employees by 1.1%.
Only in Western Europe and United States largest companies are top MNCs
Most of the largest American and European companies in terms of revenues are also the largest in terms of foreign assets. The largest American companies, by revenue, are GM, Ford and Exxon. By foreign assets, the largest American companies are Ford, GE, Exxon and GM (data of the United Nations Conference on Trade and Development, UNCTAD). Shell, which is the only European company among the ten largest by revenues, also had the largest foreign assets ($79.7 billion) in 1995 (Fortune Magazine and UNCTAD).Compared to their revenues; large Japanese companies have fairly modest foreign assets. For example, Mitsui had foreign assets of $16.6 billion, Itochu $15.1 billion, Marubeni $13.4 billion, Sumitomo $12.0 billion, and Toyota $36.0 billion in 1995 (UNCTAD).
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1. Reduced CRR and SLR: The Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are gradually reduced during the economic reforms period in India. By Law in India the CRR remains between 3-15% of the Net Demand and Time Liabilities. It is reduced from the earlier high level of 15% plus incremental CRR of 10% to current 4% level. Similarly, the SLR Is also reduced from early 38.5% to current minimum of 25% level. This has left more loanable funds with commercial banks, solving the liquidity problem.
2. Deregulation of Interest Rate: During the economic reforms period, interest rates of commercial banks were deregulated. Banks now enjoy freedom of fixing the lower and upper limit of interest on deposits. Interest rate slabs are reduced from Rs.20 Lakhs to just Rs. 2 Lakhs. Interest rates on the bank loans above Rs.2 lakhs are full decontrolled. These measures have resulted in more freedom to commercial banks in interest rate regime.
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3. Introduction of CRAR:Capital to Risk Weighted Asset Ratio (CRAR) was introduced in 1992. It resulted in an improvement in the capital position of commercial banks, all most all the banks in India has reached the Capital Adequacy Ratio (CAR) above the statutory level of 9%. 4. Improved Profitability and Efficiency:During the reform period, the productivity and efficiency of many commercial banks has improved. It has happened due to the reduced Non-performing loans, increased use of technology, more computerization and some other relevant measures adopted by the government.
With these reforms, Indian banks especially the public sector banks have proved that they are no longer inefficient compared with their foreign counterparts as far as productivity is concerned.
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SERVICE SECTOR:
Service Sector in India today accounts for more than half of India's GDP. According to data for the financial year2006-2007, the share of services, industry and agriculture in Indias GDP is 55.1% 26.4% and 18.5% respectively The sector, growing by 10 per cent annually, contributes 55.2 per cent to the GDP and a quarter of total employment. It also contributes over one-third of country's total exports, besides accounting for a higher share in foreign direct investment (FDI), the Survey noted. As per the advance estimates for 2010-11, the two broad services categories -- trade, hotels, transport and communication and financing, insurance, real estate and business services -have performed well with growth of 11 per cent and 10.6 per cent, respectively. The survey said only community; social and personal services have registered a low growth of 5.7 per cent, thuscontributing to the slight deceleration in the growth of the sector.
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1. Strong growth in foreign demand 2. Liberalisation 3. Sophistication in the information technology 4. Foreign Investment and Deregulation 5. (36% between 1992-2002) 6. Greater private sector participation 7. Increased private consumption of services ( 64 % of Indias GDP-Europe-58%,Japan55%)
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Country
2006-07 (AprilMarch)
2007-08 (AprilMarch
2008-09 (AprilMarch)
Mauritius
28,759 (6,363)
44,483 (11,096) 12,319 (3,073) 4,377 (1,089) 4,690 (1,176) 2,780 (695) 3,336 (815) 3,385 (834) 2,075 (514) 583 (145) 1,039 (258) 98,664 (24,579)
50,794 (11,208) 15,727 (3,454) 8,002 (1,802) 3,840 (864) 3,922 (883) 1,889 (405) 5,983 (1,287) 2,750 (629) 2,098 (467) 1,133 (257 122,919 (27,329)
36,572 (7,550) 6,456 (1,335) 6,359 (1,322) 1,636 (340) 3,224 (670) 4,590 (950) 5,557 (1,155) 2,160 (449) 1,119 (234) 2,591 (537) 85,273 (17,644)
197,845 (44,415) 40,307 (9,146) 34,318 (7,657) 24,541 (5,567) 19,076 (4,260) 4,590 (950) 15,607 (3,428) 11,648 (2,622) 6,601 (1,461) 6,597 (1,457) 478,399 (107,484)
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Singapore
2,662 (578)
Us
3,861 (856)
Uk
8,389 (1,878)
Netherlands
2,905 (644)
Japan
382 (85)
Cyprus
266 (58)
Germany
540 (120)
France
528 (117)
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UAE
1,174 (260)
70,630 (15,726)
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COUNTRY WISE
FDI inflows into BRIC countries, 2005-08 (US$ billions
120
100
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US
United States is India's second largest source of FDI, second largest trade partner after EU and the largest services export destination. There is significant potential for India and the US to further strengthen their economic ties, by effectively leveraging Indias inherent advantages.
JAPAN:
India is certainly more friendly with Japan. There is a CEPA (comprehensive economic partnership agreement) signed for free trade and there are also plans to celebrate India and Japan's 60 years of partnership.
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As Asian MNCs grow in size, their need for executive talent, and their ability to pay for that talent, will rise proportionately, if not faster than their Western counterparts. Yet, Asias emerging MNCs often can be at a disadvantage when recruiting top talent, despite their increasing need for such talent.
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This is the top 10 as published in July 2011. It is based on the companies' fiscal year ended on or before 31 March 2011
Rank
Company
Country
Feild
United stores
retail
Netherlands
petroleum
Exxon mobile
United states
petroleum
BP
united kingdom
petroleum
Sinopec
china
petroleum
china
petroleum
State grid
china
power
Toyota motors
japan
automobile
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Sales
10% 8% banking and insurance chemicals and petrolium 15% 24% other sector consumer durables and other consumer products industrial equipment and system 28% 15% food products and beverages
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Arguments for MNCs (The positive role:) The MNCs play an important role
in the economic development of underdeveloped countries.
1. Filling Savings Gap: The first important contribution of MNCs is its role in filling the resource gap between targeted or desired investment and domestically mobilized savings. For example, to achieve a 7% growth rate of national output if the required rate of saving is 21% but if the savings that can be domestically mobilised is only 16% then there is a saving gap of 5%. If the country can fill this gap with foreign direct investments from the MNCs, it will be in a better position to achieve its target rate of economic growth.
2.Filling Trade Gap: The second contribution relates to filling the foreign exchange or trade gap. An inflow of foreign capital can reduce or even remove the deficit in the balance of payments if the MNCs can generate a net positive flow of export earnings.
3. Filling Revenue Gap: The third important role of MNCs is filling the gap between targeted governmental tax revenues and locally raised taxes. By taxing MNC profits, LDC governments are able to mobilize public financial resources for development projects.
4. Filling Management/Technological Gap: Fourthly, Multinationals not only provide financial resources but they also supply a package of needed resources including management experience, entrepreneurial abilities, and technological skills. These can be transferred to their local counterparts by means of training programs and the process of learning by doing. Moreover, MNCs bring with them the most sophisticated technological knowledge about production processes while transferring modern machinery and equipment to capital poor LDCs. Such transfers of knowledge, skills, and technology are assumed to be both desirable and productive for the recipient country.
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 5.Other Beneficial Roles: The MNCs also bring several other benefits to the host country. (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.
(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.
Apart from these there are indirect gains through the realization of external economies.
1. Although MNCs provide capital, they may lower domestic savings and investment rates by stifling competition through exclusive production agreements with the host governments. MNCs often fail to reinvest much of their profits and also they may inhibit the expansion of indigenous firms. 2. Although the initial impact of MNC investment is to improve the foreign exchange position of the recipient nation, its long-run impact may reduce foreign exchange earnings on both current and capital accounts. The current account may deteriorate as a result of substantial importation of intermediate and capital goods while the capital account may worsen because of the overseas repatriation of profits, interest, royalties, etc.
3. While MNCs do contribute to public revenue in the form of corporate taxes, their contribution is considerably less than it should be as a result of liberal tax concessions, excessive investment allowances, subsidies and tariff protection provided by the host government.
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4. The management, entrepreneurial skills, technology, and overseas contacts provided by the MNCs may have little impact on developing local skills and resources. In fact, the development of these local skills may be inhibited by the MNCs by stifling the growth of indigenous entrepreneurship as a result of the MNCs dominance of local markets.
5. MNCs impact on development is very uneven. In many situations MNC activities reinforce dualistic economic structures and widen income inequalities. They tend to promote the interests of some few modern-sector workers only. They also divert resources away from the production of consumer goods by producing luxurious goods demanded by the local elites.
6. MNCs typically produce inappropriate products and stimulate inappropriate consumption patterns through advertising and their monopolistic market power. Production is done with capital-intensive technique which is not useful for labour surplus economies. This would aggravate the unemployment problem in the host country.
7. The behaviour pattern of MNCs reveals that they do not engage in R & D activities in underdeveloped countries. However, these LDCs have to bear the bulk of their costs.
8. MNCs often use their economic power to influence government policies in directions unfavourable to development. The host government has to provide them special economic and political concessions in the form of excessive protection, lower tax, subsidized inputs, cheap provision of factory sites. As a result, the private profits of MNCs may exceed social benefits.
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Mining companies take out resources, distribute profits, leaving no money To clean up mess
powerto get special legislation and treatment that benefits themselves, regulations, short circuiting environmental, health, worker regulations
Sometimes they seek, and get, special tax and tariff treatment; sometimes simply persuading governments not to enforce existing regulations
Sometimes special treatment is above boardnecessary to induce corporation to come; but sometimes based on corruption
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 Investors tend to look for predictable environments where they understand how decisionmaking processes work. Governments therefore are incentivized to build up a track record of rational decision making. The business environment often requires work to remove onerous regulations, reduce corruption and encourage transparency. Governments often also seek to improve their domestic infrastructure to meet the operational needs of investors. Providing fiscal incentives for attracting FDI is a subject of controversy analysts have argued both in favour and against the idea. A general consensus is developing in favour of certain incentives which have been proven historically to grow profits and therefore foreign investments. When policies are effective, significant FDI investments are injected into countries that help the domestic economy to grow. Different countries and regions offer various kinds of fiscal incentives, with a related variance in the level of FDI investments attracted. Governments are increasingly setting up promotional agencies to foster foreign direct investment. These agencies promote FDI-friendly policies, identify prospective sectors and investors, and structure specific deals and incentives for major foreign investors such as multi-national corporations (MNCs). Global trade associations also play a major role in some of these investment activities. These associations are tasked with creating a positive environment for foreign direct investors and ensuring that both investors and recipient countries enjoy a favourable environment. The formation of human capital is vital for the continued growth of FDI inflows. To enable the most beneficial, technology and IP-driven FDI, highly skilled personnel are necessary. Governments must therefore enact policies to provide training and skills upgrading to develop their workforce and meet the employment needs of foreign investors.
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 4. It paves the way for internationalisation of markets with global standards and quality assurance and performance based budgeting. 5. It pools resources productively - money, manpower, technology. 6. It creates more and new infrastructure. 7. For the home country it a good way to take advantage in a favourable foreign investment climate (e.g. low tax regime). 8. For the host country FDI is a good way of improving the BoP position.
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GROWTH IN FDI
FDI equity inflows into India: y Thirteen-fold growth between 2003-04 and 2009-10
FDI inflows into India: y In terms of international practices of calculating FDI (i.e. by taking into account reinvested earnings and other capital), FDI inflows were nearly US $ 37.18 billion during 2009-10
Stable pace of inflows: y FDI inflows have somewhat flattened out over the course of the last three years However, the pace of inflows has been stable This is including during 2009-10, at the height of the global economic slowdown y This is despite a significant fall in global FDI inflows
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 However, in sharp contrast, China received FDI worth$274.6 billion last year, compared to $233 billion in 2009. There is a structural change, Zhan said in regard to the higher FDI flows to China, which is receiving huge investments on services and research and development activities. Many Western companies have shifted their research facilities to China and there is rapid development in the hinterlands of the Communist country as well. The sharp increase in global FDI flows to East and South-East Asian countries and Latin American nations in 2010 marked the first time that developing countries outpaced rich nations in attracting foreign investments. China, Hong Kong and other South-East Asian countries like Indonesia, Malaysia, Singapore and Thailand were the main beneficiaries of the heightened FDI flows in the form of mergers and acquisitions (M&As) and greenfield investment. Part of the reason for the stagnant investment flows the world-over was largely due to the poor performance of the developed economies, especially European countries, which were the worst-hit by the global financial turmoil. The United States, which was the epicentre of the global economic meltdown in 2008, is gradually recovering from the crisis, with FDI flows increasing by 40 per cent last year to $186.1 billion from $129.9 billion in 2009. The quarterly fluctuations during 2010 indicate that the worldwide FDI recovery is still hesitant, said the report. Several risk factors such as the slow global economic recovery, investment protectionism, rising sovereign debt and continued volatility in the currency markets are likely to slow down the pace of foreign direct investment across the globe in 2011, it said.
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The main countries that contributed to the inflow of FDI in India during April 2007 to October 2007 were -
Mauritius ,USA ,UK ,Netherlands ,Singapore ,Japan ,Germany ,France , Switzerland, Cyprus ,
The main sectors which contributed to the bulk of the FDI inflow in India during April 2007 to October 2007 were Services sector - including financial and non-financial sector Computer Software and Hardware Telecommunication - including radio paging, cellular mobile and basic telephony Automobile industry Housing and real estate Power Chemicals - other than fertilizers Metallurgical industries Drug and pharmaceuticals
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The main Indian states that attracted the bulk of the FDI inflow in India during April 2007 to October 2007 were -
Maharashtra, Delhi,Karnataka, Tamil Nadu, Andhra Pradesh, West Bengal, Chandigarh, Goa, Madhya Pradesh, Kerala, Orissa, Rajasthan, Utter Pradesh, Assam, Bihar
The FDI Approvals in 2007 and its effects on the economy of India are as follows -
FDI - India envisage of attracting $10 billion of foreign direct investment (FDI) this year as inflows have nearly doubled to US$ 4.4 billion. FIIs - net investments in equities crossed US$ 7 billion. Industrial Growth exceeded 10% till October 2007. Manufacturing growth rate has exceeded 12 % till October 2007. The mining and quarrying sector has registered a growth of 4% till October 2007. The electricity sector recorded 12% growth till October 2007. Consumer durables and non-durables have also recorded upswings. Telecommunication sector with inflows of US$ 405 million has registered the maximum growth of 950%.
Merchandise exports recorded strong growth. The automotive industry achieved a growth rate of over 20% till October 2007.
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The biotechnology industry registered more than 40% growth till October 2007. Encouraged by the stupendous growth in 2005-06 the IT and ITES industry is targeting US$ 60 billion milestone in exports by 2010.
The US$ 47 billion Indian textile industry is expected to grow to US$ 115 billion by the year 2012.
The US$6.4 billion Indian retail industry is expected to grow over 20% annually to US$ 23 billion by 2010.
The robust pharmaceutical market in India ranks 4th worldwide and is expected to cross business worth Rs 100,000 crores in formulations and bulk drug production by 2010.
Corporate India has recorded its highest rise in salaries at 22% till October 2007. India's Balance of Payments remained comfortable. The Invisibles Account - remained positive and financed 2/3 of the trade deficit.
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For the first time in more than one year, foreign direct investment (FDI) crossed the $3billion mark on a monthly basis. Total FDI inflows amounted to $3,476 million in July, up 55% from $2,247 million a year ago, latest data from the RBI monthly bulletin released on Thursday show. More heartening though is the fact that cumulative inflows from April-July , despite being lower at $10.5 billion compared with $12.3 billion in the year-ago period, are marginally higher than inflows through the portfolio route, which amounted to $10.35 billion over the same period.
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 China, Hong Kong and other South-East Asian countries like Indonesia, Malaysia, Singapore and Thailand were the main beneficiaries of the heightened FDI flows in the form of mergers and acquisitions (M&As) and greenfield investment.
Part of the reason for the stagnant investment flows the world-over was largely due to the poor performance of the developed economies, especially European countries, which were the worst-hit by the global financial turmoil.
The United States, which was the epicentre of the global economic meltdown in 2008, is gradually recovering from the crisis, with FDI flows increasing by 40% last year to USD 186.1 billion from USD 129.9 billion in 2009. "The quarterly fluctuations during 2010 indicate that the worldwide FDI recovery is still hesitant," said the report. Several risk factors suchas the slow global economic recovery, investment protectionism, rising sovereign debt and continued volatility in the currency markets are likely to slow down the pace of foreign direct investment across the globe in 2011, it said.
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GROWTH OF MNC S IN INDIA FROM 2000 TO 2010 secondary investment, it indicates the prospects and promise that India holds for overseas investors, said an economist with a research firm, who declined to be named. Notably, India has also in some way done better than neighbours China and Pakistan, which saw a dip in FDI inflows. In July, China's FDI plunged by 35.7% ($5.36 billion), though in absolute terms, it annually receives much higher FDI than India. The government has scaled down its FDI target for FY10 by $5 billion to $30 billion. This works out to average monthly inflows of around $2.5 billion. The current trend indicates growth in line with target. FDI inflow in India came down as the global recession deepened in the months after the Lehman collapse last year. It hit a low of $1 billion in November 2008. But things started looking up after April this year, when inflows started picking up on improved global liquidity conditions.
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Cumulative RANK SECTOR inflows(august 1991- march2010) amount in Rs.crore(US $ IN MILLION) 1 SERVICES SECTOR (financial 101,019 (22,687) & non-financial) 2 3 Computer software & hardware TELECOMMUNICATIONS (radio paging, cellular mobile, basic telephone services) 4 5 Housing & real estate Construction activities (including roads& highways) 6 7 8 9 10 Power Automobile industry Metallurgical industries Petroleum & natural gas Chemicals(other than fertilizers) Total FDI inflow 2,32,014 20,006 (4,428) 19,566 (4,322) 12,990 (3,032) 11,261 (2,612) 10,567 (2,343) 34,348 (7,701) 30,557 (6,945) 42,259 (9,529) 39,179 (8,600)
22(%)
9(%) 8(%)
7(%) 7(%)
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1 2 3 4 5 6 7 8 9
In 2006-07 the total FDI inflow in India was US $ 22,826 million while the outflow of FDI from India was US $ -15046 million resulting in total FDI of US $ 7693 million. Thesame trend continued and the total FDI substantially increased to US $ 15401 million inthe year 2007-08 due to an increase in the inflow of US $ 34236 million. During theglobal slowdown period the FDI showed a positive trend in 2008-09 with an increase of FDI to US $ 17496 million.
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particulars
(i)In India Equity Reinvested earning Other capital ii)abroad Equity Reinvested earning
125 108 0
166 166 0
Other capital
1366
-1366
3330
-3330
2844
-2844
India has emerged as the second most attractive destination for FDI after China and aheadof the US, Russia and Brazil. India has experienced a marked rise in FDI inflows in thelast few years. Not surprisingly Indias growth strategy has depended predominantly ondomestic enterprises and domestic demand as opposed to FDI and export demand.1 For instance, Indias FDI as a share of GDP in 2007 represented only about 1.7 percentcompared to 2.8 percent in China and even below Pakistan, and its share of gross fixedinvestment is 5.2 percent compared to 7.0 in China and 16.7 per cent in Pakistan
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Panasonic, which wants to become India's largest electronics company by 2018, has already charted a career plan for the identified talent, which will be carried out over a fixed timeframe.
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CONCLUSION
They serve the customers and the institution best and therefore chemistry between country and foreign MNCS has fruitful results .FDI attractiveness, labour competitiveness. Huge market potential of the country. Policies such as FDI, Industrial licencing, taxation, exchange control has helped MNCS to grow .there is a growth of MNCS in India because of huge market and fast growing economies in world has played important role. Due these MNCS competition increase and more employment opportunities are available & there will be reduction in reasonal disparities To conclude, we would opine that MNCS having a wide ambit is enviable to us, as to the fact that, there exists lots of job opportunity paves a path for the increase in national income. And also to create a better society, with better standard of living,and it increases labour productivity , decrease in unemployment, and also increases the net national income of the country. This will help the government and this will lead to increase in the export and imports in the country. Gives advantages to Domestic Companies throughpurchasing of raw material &resources. New company having network to expand their business. The present scenario is a highly transformed one. Multinational giants are vying with one other to launch their models. Big names of the vehicle industry like the Korean giant, Hyundai, general motors, Mitsubishi etc. Have already opened their account. In other vehicle segments too, Volvo, Mercedes Benz, and Audi etc. Have carved out their niche. One of the fastest growing sectors in the country, telecommunications has been growing at a feverish pace in the past few years. The speed of growth can be judged by the fact that in 2004, ten years after private telephony was introduced in India, the mobile subscriber base had crossed the number of fixed line connections.
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WEBLIOGRAPHY
www.enotes.com Business http://www.itcportal.com businessmanagement.wordpress.com/ www.vpmthane.org/. http://business.mapsofindia.com United Nations Conference on Trade and Development (UNCTAD Accenture/Confederation of Indian Industry Survey CMIE TIMES OF INDIA in.answers.yahoo.com THE ECONOMICS TIMES http://www.vpmthane.org http://EzineArticles.com/5817471 http://en.wikipedia.org http://timesofindia.indiatimes.com http://www.accenture.com http://www.smetimes.in http://www.managementparadise.com
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