BB0023 Multinationals & their Roles - 4 Credits

(Book ID: B0102)

Assignment (60 Marks)
Q1

What is a MNC? Discuss the impact of Foreign Direct investments in at

least two sectors of the Indian economy with examples.

Ans- There is no universally accepted definition of the term multinational

corporation. According to an ILO report, The essential nature of the
Multinational Enterprise lies in the fact that its managerial headquarters are
located in one country (referred to for convenience as the home country).
While the enterprise carries out operations in a number of other countries as
well (host countries). It means a corporation that controls production
facilities in more than one country such facilities having been acquired
through the process of foreign direct investment.
Multinational activity falls into the category of foreign direct
investment (FDI). It entails buying or selling firms abroad, or the
establishment of entirely new production facilities abroad. Thus, when we
say the German electronics manufacturer Siemens buys an American
electronics firm or sets up a new electronics plant in the USA it is engaging
in FDI.
2.

The technologies transferred by the MNC to their production units in the

underdeveloped countries ale appropriate for the latters social and
economic development needed. DO you agree or disagree with this
statement. Support your answer with relevant examples.

Answer : -

Technology transfer is the transmission of innovations arising in one

firm or country to others. Innovations might involve new products,

processes or working methods or use of specialized know-how. In all cases
knowledge passes from the innovator to one or more recipients, who thus
avoid the need to conduct independent research or to develop projects or to

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test and evaluate the outcomes of research. International businesses are a
primary vehicle for the transfer of technology between countries.
Technology is a key factor in the economic and social development of
nations, so the importation of new technology is actively encouraged by the
governments of many states.
3. Briefly discuss the advantages and disadvantages of MNCs.
Ans:- There is no universally accepted definition of the term multinational
corporation. According to an ILO report, The essential nature of the
Multinational Enterprise lies in the fact that its managerial headquarters are
located in one country (referred to for convenience as the home country).
While the enterprise carries out operations in a number of other countries as
well (host countries). It means a corporation that controls production
facilities in more than one country such facilities having been acquired
through the process of foreign direct investment.
Multinational activity falls into the category of foreign direct
investment (FDI). It entails buying or selling firms abroad, or the
establishment of entirely new production facilities abroad. Thus, when we
say the German electronics manufacturer Siemens buys an American
electronics firm or sets up a new electronics plant in the USA it is engaging
in FIJI.
According to the IBM World Trade Corporation, the MNC may be
defined as a company that meets five criteria:
a)

It operates in many countries at different levels of economic

development.

b)

Its local subsidiaries are managed by nationals.

c)

It maintains complete industrial organisations, including R and D

and manufacturing facilities in several countries.

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d)

It has a multinational central management

e)

It has multinational stock ownership

In the opinion of James C. Baker, a multinational company is one:

a)

Which has a direct investment base in several countries;

b)

Which generally derives from 20 per cent to 50 per cent or more of

its net profits from foreign operations; and

c)

Whose management makes policy decisions based on the

alternatives available anywhere in the world.

4.

Write a brief note on international HRM strategy.

Ans:- An international or multinational businesss success or failure depends to a

large extent on its ability to select, train, motivate, develop and manage its
human resources and it is axiomatic that no business can attain its mission
without employees who are competent to complete the necessary work.
Specific reasons for having a human resource strategy include the
following:
i) Firms with the most productive workforce possess an international
competitive advantages over rivals.
ii) Expenditures on personner typically represent a very large proportion of
an MNCs total spending.
iii) An MNCs capacity to adopt new technologies, enter fresh markets
and/or undertake different lines of work frequently depend more on the
capabilities of its people than on capital investment.
iv) Computerisation of manufacturing and administrative processes has
greatly influenced the nature of work and the structure of employment
within enterprises. Communication and control systems have altered; there
is Less demand for unskilled employees completing routine duties.
Strategic HR planning is necessary to cope with the resistance to change

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that new technologies might engender and the possible displacement of
labour that might result.
v) Increasing organisational complexity requires a suitable mix of specialist
skills which cannot be obtained overnight.
vi) Extensive employment protection legislation in many countries imposes
constrain Is on how managements may treat their workforce.
5. Discuss the organizational structures for multinational strategies.
Ans : -

When a company first goes international, it seldom changes its basic

organizational structure. Most companies act first as passive exporters.
They simply fill orders using the same structures, procedures and people
used in domestic sales. Even with greater involvement in exporting,
companies often avoid fundamental organizational changes. instead they
use other companies to provide them with international expertise and to run
their export operations. Export management companies and export trading
companies manage exporting for companies without the resources or skills
to run their own export operations.