INTRODUCTION

Multinational companies are the organizations or enterprises that manage production or

offer services in more than one country. And India has been the home to a number of
multinational companies. In fact, since the financial liberalization in the country in 1991, the
number of multinational companies in India has increased noticeably. Though majority of the
multinational companies in India are from the U.S., however one can also find companies from
other countries as well.

MULTINATIONAL CORPORATE STRUCTURE

• Horizontally integrated multinational corporations manage production establishments

located in different countries to produce the same or similar products. (example:
McDonald's)

• Vertically integrated multinational corporations manage production establishment in

certain country/countries to produce products that serve as input to its production
establishments in other country/countries. (example: Adidas)

SWOT ANALYSIS OF MNC

Strengths

• Low Cost

• Well Developed Infrastructure

Weakness

• Location is often very distant

• Lack of Transportation facilities

• Relative Inflexibility
Opportunities

• Leverage Government

• Create the necessary infrastructure

• Attract new industries

Threats

• Emergence of Private companies

• Establishment of monopoly

DESTINATION INDIA

The multinational companies in India represent a diversified portfolio of companies from

different countries. Though the American companies - the majority of the MNC in India, account
for about 37% of the turnover of the top 20 firms operating in India, but the scenario has changed
a lot off late. More enterprises from European Union like Britain, France, Netherlands, Italy,
Germany, Belgium and Finland have come to India or have outsourced their works to this
country. Finnish mobile giant Nokia has their second largest base in this country. There are also
MNCs like British Petroleum and Vodafone that represent Britain. India has a huge market for
automobiles and hence a number of automobile giants have stepped in to this country to reap the
market. One can easily find the showrooms of the multinational automobile companies like Fiat,
Piaggio, and Ford Motors in India. French Heavy Engineering major Alstom and Pharma major
Sanofi Aventis have also started their operations in this country. The later one is in fact one of
the earliest entrants in the list of multinational companies in India, which is currently growing at
a very enviable rate. There are also a number of oil companies and infrastructure builders from
Middle East. Electronics giants like Samsung and LG Electronics from South Korea have already
made a substantial impact on the Indian electronics market. Hyundai Motors has also done well
in mid-segment car market in India.

REASONS FOR MULTINATIONAL COMPANIES IN INDIA

There are a number of reasons why the multinational companies are coming down
to India. India has got a huge market. It has also got one of the fastest growing economies
in the world. Besides, the policy of the government towards FDI has also played a major
role in attracting the multinational companies in India.

For quite a long time, India had a restrictive policy in terms of foreign direct
investment. As a result, there was lesser number of companies that showed interest in
investing in Indian market. However, the scenario changed during the financial
liberalization of the country, especially after 1991. Government, nowadays, makes
continuous efforts to attract foreign investments by relaxing many of its policies. As a
result, a number of multinational companies have shown interest in Indian market.

FOLLOWING ARE THE REASONS WHY MULTINATIONAL COMPANIES

CONSIDER INDIA AS A PREFERRED DESTINATION FOR BUSINESS:

• Huge market potential of the country

• FDI attractiveness
• Labor competitiveness
• Macro-economic stability

SUCCESS FACTORS FOR MNCS OPERATING IN INDIA

• Commitment at global level

– Raise the profile of India
– Formulation of bold long term targets
• Empowered local Management
– More cost effective, enhances continuity, leverages understanding of local
environment
• Localized product / market business models : create customized products and
services in response to unique environment in India

– Deliver the right product at the right price with right positioning for India

LIST OF MULTINATIONAL COMPANIES IN INDIA

The list of multinational companies in India is ever-growing as a number of MNCs are
coming down to this country now and then. Following are some of the major multinational
companies operating their businesses in India:

• British Petroleum
• Vodafone
• Ford Motors
• LG
• Samsung
• Hyundai
• Accenture
• Reebok
• Skoda Motors
• ABN Amro Bank

India and U.S. have developed strong business relations with each other over the years. The
United States has got great influence over Indian business. U.S. is the second largest
source of FDI for India. It is also the second largest trade partner of the nation after
EU. Not only that, U.S. is the largest services export destination for India as well. In
 fact, American companies in India form the major part of the foreign companies
operating in this country.

FOREIGN COMPANIES ENTERING INDIA

A foreign company planning to enter India, is required to meet all requirements of doing
business in India as required by domestic Indian businesses. In addition foreign companies are
required to seek governmental approval before investing in India. Some approvals are automatic,
- RBI Approvals - though application is required for those approvals. Special Permission -FIPB
Approvals - could be obtained to invest over and above the regular percentage allowed.

STEPS FOR FOREIGN INVESTORS DOING BUSINESS WITH INDIA

For a foreign Investor planning to do business in India it is very important to choose a right kind
of business or corporate entity which best suits its purposes and takes care of liability issues and
tax planning issues. Foreign Companies planning to do business in India should pay special
attention to Entry Strategies in India for Foreign Investors and corporate structuring to save taxes
to the best extent allowed by laws and international tax treaties.

It is also mandatory for foreign investors or foreign shareholders, both individuals and corporate
shareholders, to seek Government Approvals for Investing in India In some special cases
Foreign Investment Promotion Board, FIPB Approval for Foreign Investment in India is
required. In other cases Reserve Bank of India, RBI Approvals for Foreign Investment in India is
required. The sectors where RBI Approval for foreign investors is available under automatic
route can be found at FDI in India Sector wise Guide.
STRATEGIES FOR FOREIGN COMPANIES DOING BUSINESS WITH INDIA OR
INVESTMENT ROUTES FOR INVESTING IN INDIA, ENTRY STRATEGIES FOR
FOREIGN INVESTORS

A foreign company planning to set up business operations in India has the following
options:

As an Indian Company

A foreign company can commence operations in India by incorporating a company under the
Companies Act, 1956 through

• Joint Ventures; or
• Wholly Owned Subsidiaries

Foreign equity in such Indian companies can be up to 100% depending on the requirements of
the investor, subject to equity caps in respect of the area of activities under the Foreign Direct
Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be
obtained from Department of Industrial Policy & Promotion, Government of India.

Joint Venture With An Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances with Indian
partners.

Joint Venture may entail the following advantages for a foreign investor:

• Established distribution/ marketing set up of the Indian partner

• Available financial resource of the Indian partners
• Established contacts of the Indian partners which help smoothen the process of setting up
of operations
Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly owned subsidiary in sectors where 100% foreign
direct investment is permitted under the FDI policy.

Incorporation of Company

For registration and incorporation, an application has to be filed with Registrar of Companies
(ROC). Once a company has been duly registered and incorporated as an Indian company, it is
subject to Indian laws and regulations as applicable to other domestic Indian companies.

2) As a Foreign Company

Foreign Companies can set up their operations in India through

• Liaison Office/Representative Office

• Project Office

• Branch Office

Such offices can undertake any permitted activities. Companies have to register themselves with
Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

Liaison office/ Representative office

Liaison office acts as a channel of communication between the principal place of business or
head office and entities in India. Liaison office cannot undertake any commercial activity
directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to
collecting information about possible market opportunities and providing information about the
company and its products to prospective Indian customers. It can promote export/import from/to
India and also facilitate technical/financial collaboration between parent company and companies
in India.
The approval for establishing a liaison office in India is granted by the Reserve Bank of India
(RBI).

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary
project/site offices in India. RBI has now granted general permission to foreign entities to
establish Project Offices subject to specified conditions. Such offices cannot undertake or carry
on any activity other than the activity relating and incidental to execution of the project. Project
Offices may remit outside India the surplus of the project on its completion, general permission
for which has been granted by the RBI.

Branch Office

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up
Branch Offices in India for the following purposes:

• Export/Import of goods
• Rendering professional or consultancy services
• Carrying out research work, in which the parent company is engaged.
• Promoting technical or financial collaborations between Indian companies and parent or
overseas group company.
• Representing the parent company in India and acting as buying/selling agents in India.
• Rendering services in Information Technology and development of software in India.
• Rendering technical support to the products supplied by the parent/ group companies.
• Foreign Airline/shipping Company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to
subcontract these to an Indian manufacturer. Branch Offices established with the approval of
RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to
RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India
(RBI).
Branch Office on "Stand Alone Basis"

Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone
and no business activity/transaction will be allowed outside the SEZs in India, which include
branches/subsidiaries of its parent office in India. No approval shall be necessary from RBI for a
company to establish a branch/unit in SEZs to undertake manufacturing and service activities
subject to specified conditions.

A foreign company planning to set up business operations in India has the following options:

• investment under automatic route; and

• investment through prior approval of Government.

PROCEDURE UNDER AUTOMATIC ROUTE

FDI in sectors/activities to the extent permitted under automatic route does not require any prior
approval either by the Government or RBI. The investors are only required to notify the Regional
office concerned of RBI within 30 days of receipt of inward remittances and file the required
documents with that office within 30 days of issue of shares to foreign investors.

List of activities or items for which automatic route for foreign investment is not available,
include the following:

• Banking
• NBFC's Activities in Financial Services Sector
• Civil Aviation
• Petroleum Including Exploration/Refinery/Marketing
• Housing & Real Estate Development Sector for Investment from Persons other
than NRIs/OCBs.
• Venture Capital Fund and Venture Capital Company
• Investing Companies in Infrastructure & Service Sector
 • Atomic Energy & Related Projects
• Defense and Strategic Industries
• Agriculture (Including Plantation)
• Print Media
• Broadcasting
• Postal Services

PROCEDURE UNDER GOVERNMENT APPROVAL

FDI in activities not covered under the automatic route, requires prior Government
approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of
composite proposals involving foreign investment/foreign technical collaboration are also
granted on the recommendations of the FIPB. Application for all FDI cases, except Non-
Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs), should be
submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance.
Application for NRI and 100% EOU cases should be presented to SIA in Department of
Industrial Policy & Promotion.

INVESTMENT BY WAY OF SHARE ACQUISITION

A foreign investing company is entitled to acquire the shares of an Indian company

without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines.
If the acquisition of shares directly or indirectly results in the acquisition of a company listed on
the stock exchange, it would require the approval of the Security Exchange Board of India.

NEW INVESTMENT BY AN EXISTING COLLABORATOR IN INDIA

A foreign investor with an existing venture or collaboration (technical and financial) with
an Indian partner in particular field proposes to invest in another area, such type of additional
investment is subject to a prior approval from the FIPB, wherein both the parties are required to
participate to demonstrate that the new venture does not prejudice the old one.
GENERAL PERMISSION OF RBI UNDER FEMA

Indian companies having foreign investment approval through FIPB route do not require
any further clearance from RBI for receiving inward remittance and issue of shares to the foreign
investors. The companies are required to notify the concerned Regional office of the RBI of
receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares
to the foreign investors or NRIs.

PARTICIPATION BY INTERNATIONAL FINANCIAL INSTITUTIONS

Equity participation by international financial institutions such as ADB, IFC, CDC, DEG,
etc., in domestic companies is permitted through automatic route, subject to SEBI/RBI
regulations and sector specific cap on FDI.

WHY ARE AMERICAN COMPANIES IN INDIA?

The biggest reason is the high potential of Indian market and economy. Along with
China, India is the only fast-growing country that can make a difference to majority of the
companies' bottom lines. One can learn from a simple statistics the reason why American
companies are coming down to India. The gross domestic product of U.S. is expected to come
down by 0.8% in 2009. On the other hand it is expected that India will grow at 6.6%.
Besides, established big brands have already impregnated the U.S. and European markets. But,
the Indian market still offers a lot of scopes and spaces for those to grow.
India is also a large depository of skilled yet cheap labor. Hence, it becomes easy for the
American companies to optimize their productions in India.

THEJOURNEY

The American companies in India started their dream runs during 1990 when they reaped
huge profits. The companies have seen double digit year-on-year growth in various sectors like
Technology, Colas, Agriculture, Automobiles, Equipments, Finance and Banking. According to
the American Chamber of Commerce in India, their membership base has soared up from zero in
1992 to more than 300 till date. However, the major success in terms of investment and growth
came in technology sector. Many of the top IT companies in India are American. In fact, out of
the top 20 IT companies operating in India, 9 are from the U.S. These American companies in
India account for about 37% of the turnover of the top 20 firms operating in India.
However the growth of the American companies in India is not limited to IT or manufacturing
only. India has a vast market of agriculture, which employs almost 70% of the population either
directly or indirectly. 'Monsanto', an agro-chemical giant, is currently working on GM modified
crops and fertilizers. It has also done well in forging sector also. The American retail giant 'Wal-
Mart' has gone into collaboration with Bharti enterprise in the Indian retail sector

LIST OF AMERICAN COMPANIES IN INDIA

There are a number of American companies in India which have been doing business
successfully over the years. Following are some of the popular American companies in India:

• Agilent
• Agro Tech
• American Express
• Amway
• Avaya
• Caltex
• Caterpillar
• CB Richard Ellis
• Cisco
• Citigroup
• Coca Cola
• Cognizant
• Colgate Palmolive
• CSC
• Cummins
• Discovery
• Dupont
• EDS
• Eli Lilly
• Emerson Electric
• EXL
• Federal Express
• Ford
• Franklin Templeton
• GE
• General Motors
• Gillette
• Honeywell India
• BM
• Intel
• Johnson & Johnson
• JPMorgan
• Kellogg India
• Kimberly Clark
• Kodak
• McDonalds
• Metlife India
• Microsoft
• Morgan Stanley
• New York Life
• Ogilvy and Mather
• Oracle
• Pepsico
 • Pfizer
• Pizza Hut
• Sun Microsystems
• Texas
• Tecumseh
• Timex
• Tyco
• UPS India
• Visteon
• Whirlpool
• Xerox Modicorp

US Investments in India

India's rapidly expanding economy along with a booming consumer market and easy availability
of skilled personnel has been instrumental in attracting several American companies to invest in
India. The US is the third largest contributor of foreign direct investment (FDI) in India. The
overall FDI flow into India from the US during April 2000-February 2010, according to the
Department of Industrial Policy and Promotion was US$ 8.21 billion. During 2008-09, FDI
inflow from the US was US$ 1.80 billion. FDI inflow between April to February 2009-10 was
US$ 1.88 billion.

After companies like Microsoft, Intel, IBM, Dell, Citigroup, J P Morgan and Morgan Stanley,
many other US companies are also planning to enter the Indian market with big investments.

• In May 2010, US-based Abbott Laboratories bought Piramal Healthcare's formulation

business for US$ 3.63 billion.
• USA's biggest independent tower firm American Tower Corp (ATC) in February 2010,
agreed to acquire 4,450 towers of Essar Telecom Infrastructure (ETIPL). The purchase
estimates an enterprise value of US$ 431.4 million for ETIPL.
• BorgWarner Inc, a US based auto component and systems manufacturing company with
presence in 18 countries, has established its Indian manufacturing facility at Sipcot
 Industrial Park at Sriperambadur near Chennai. Set up on a 6.3 acre campus at a cost of
US$ 6.6 million, the plant will have an annual capacity of 300,000 assemblies.
• US-based Hospira has bought Orchid Chemicals & Pharmaceuticals' injectables business
for around US$ 400 million