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MULTINATIONAL COMPANIES

MEANING

Multinational Corporation - a corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries. Sometimes referred to as a "transnational corporation".

FEATURES


Centralized management:-A MNC has its headquarter in the home country. It expands its business to other countries so it can easily manage companies. World Wide Spread of Business:-The business of the MNC is spread worldwide. Better Quality Product:-A MNC has to compete on world level therfore has to pay special attention on the quality. Formation:- MNC is similar to joint stock company & its formed or registered under company Act of respective country. Huge capital:- MNC are able to raise huge capital by issuing share to general public within in or outside the country

Employed:- MNC is mainly employees higely qualified and professional persons . They are appointed on basis of merit. Multiple operations- MNC caring multiple operation such as manufacturing, marketing, finance, advertisement, marketing and research etc. Better standard of living:- MNC contribute in batter standard of living in two ways (i) By providing employment (ii) by providing quality of product at low cost. Transfer of resources:- MNC helps to transfer the resources such as modern technology, skilled and professionals person, raw material etc from advance country to those country in which they operate there activities.

OPERATION IN HOST COUNTRIES


Franchising: granting license to use its trade marks, patents, brand names  Branches: est. branches  Subsidiaries: forming subsidiaries  Joint Venture: tie-ups with local companies  Turn key projects: contracts with the govenment


ADVANTAGES-HOME COUNTRY
Acquisition of raw material from abroad, which is cheaper in cost. Technology and management expertise accquired from competing in global markets. Export of components and finished goods for assembly or distribution in foreign markets. Inflow of income from overseas profits, royalities and management contracts. Jobs and career opportunities at home and abroad in connection with overseas opportunities.

ADVANTAGES-HOST COUNTRY

Transfer of technology,capital and entrepreneurship. They increase the investment level and thus the income and employment in the host country. Greater availabilty of products for local consumers. Greater access to high quality managerial talentwhich tens to be scarce in host countries. Increase in exports and decrease in imports,thereby improving the balance of payment of host countries. Help in equalizing of cost of factors of production around the world. They provide an efficient means of integrating economics.

DISADVANTAGES

Trade restrictions imposed at the government-level Taxes or tariffs imposed on imports from other countries Limited quantities (quotas) of imports Effective management of a globally dispersed organization Slow down in the growth of employment in home countries. Destroy competition and acquire monopoly.

Technology designed for mnc's is for world wide profit maximization not for the social welfare or development of economy. They could cause fast depletion of some of the non renewable natural resources in the host country. In order to alley the fears of host countries they need to:provide employment
o o o o

train managers provide products and services that raise the standard of living introduce and develop new technical and managerial skills increase productivity

SUITABILITY
Infrastructure Projects in developing countries Sophisticated technology high tech projects Best for automobile industries eg: Japan Investment in Research and Development Production and Distribution of electronic goods Banking and insurance services eg: BPOs

Procter and Gamble Honda Tata Shell Google chrome Aditya Birla

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