mnc master ppt

Group members..

• Sarthak Suyal- 001• Utpal Jana- 002• Sudeep Bhunya- 003• Shitij Bhola- 004• Astha Pandey- 005• Vineet Nankani- 006

Agenda..

• Introduction to international business.• Factors for international business• Types of international corporations• MNC- multinational corporations• Pros and cons of MNC• Structure of MNC• Market entry strategy• MNC core issues faced• FDI• Taxation Issue• MNC- Indian Perspective

Introduction to international business.

• Global business operations• IB is interdisciplinary concept between

economics, politics, sociology, marketing, management.

• Mainly dominated by various types of corporations.

• All commercial transactions are between parties of two or more countries

Factors for international business

• Global Economy– Resources, markets and competition are

worldwide in scope.• Globalization

– The process of growing interdependence among elements of the global economy.

• Global Sourcing– Firms purchase products and services from around

the world for local use.

Types of international corporations..

• Transnational corporations: because companies transcend or operate across national borders. UN favors this type of corporations.

• MNC: companies operate in multiple countries..eg: HSBC / citi group.

• MNE(multinational enterprise): some international giants are state owned enterprises, rather than corporation. Eg: ONGC

• Global corporations: these are those corporations which operate in more than 100 nations. Eg: NESTLE

MNC- multinational corporations

• Enterprise that operates in more than one country in global economy.

• Play a vital role in international relations and globalization.

• Requires Vast financial resources, managerial resources, marketing resources.

Pros..

• Economic development

• Technology gap

• Industrial growth

• Marketing opportunities

• Work culture

• Research & development

Cons..

• Problem of technology transfer acceptance

• Political interference

• Self interest

• Outflow of money

• Exploitation

• Investment

Structure of MNC

PersonnelProduction Marketing Finance

Chief Executive Officer

DomesticDivision

Paint

DomesticDivision

Tools

InternationalDivision

DomesticDivisionFurniture

DomesticDivision

Hardware

Japan Australia Italy

OfficeOperations

Marketing GovernmentRelations

• Exporting - Local products are sold abroad. Done when either of two motives are there. either surplus or sole motive of export.

• Importing - The process of acquiring products abroad and selling them in domestic markets.

• Licensing - one firm pays a fee for rights to make or sell another

company’s products.

• Franchising - a firm pays a fee for rights to use another company’s name and operating methods.

• Direct investment strategy

• Joint Venture – A firm operates in a foreign country through co-ownership

with local parties.

• Strategic Alliance– each partner hopes to achieve through cooperation things

they couldn’t do alone.

• Foreign Subsidiary – a local operation completely owned by a foreign firm.

Core issues faced..• Protectionism

– A call for tariffs and special treatment to protect domestic firms from foreign competition.

• Corruption– Illegal practices to further one’s business interests.

• Currency Risk – The possible loss of profits because of fluctuating exchange

rates

FDI..

• It is direct investment way of entering into foreign market.

• Comparatively expensive.• MNC’s go for FDI because of transportation cost,

market imperfections, competition, product life cycle, location advantages and to take advantages of markets of developing countries.

• FDI can be by merger or acquisition of an existing firm, by participating in the construction of a new firm, or by expanding existing subsidiaries.

Contd..

• The main decision for FDI is whether it is more profitable to set up production in one form or another with a foreign subsidiary or to increase production at home and expand exports of the good.

• the most significant motivation for FDI is the avoidance of trade restrictions

• Another factor which may encourage FDI is the idea of risk diversification

• FDI policies of a nation becomes major issue for consideration by a MNC.

Taxation issues..

• Need to pay taxes in both the nations..host as well as entering nation.

• Double taxation may increase the cost pattern.• Need to obey tax rules with respect to TDS criteria for

employees, excise duty for production, service tax for services provided, octroi for transportation, fines and penalties for delays of payment.

• Payment of custom duty for exports/imports.• Getting IE code from government. In other words, business visa

for operations.• Clearance from various departments of respective product area

of the operations of the corporation.

MNC Indian Perspective

MNC’s in INDIA..

MNC success dimension in India..

Success for MNCs in India can be defined along 2 dimensions..

• Capturing the Domestic Market Opportunity • Leveraging India’s resource base to derive

additional value for the corporation – R&D / Manufacturing / Sourcing / BPO

Source: Boston Consultancy Group report, 2011.

Many MNCs have managed to achieve success along both lines…

Source: Boston Consultancy Group report, 2011.

Performance of MNCs – An Analysis

• Over the last few decades, most MNCs have shown typical characteristics in their growth plans in India

– Prefers operations to be less assets intensive (basically less capital intensive)

– Preference of profitability over growth

– Most businesses generate high ROCEs

– Extremely cagey to enter “non-Parent” growth areas

Performance of MNCs – Growth Vs Profitability

Growth - 5 year sales CAGR

Pharmaceuticals

Unichem 17% Wy eth 2%

FDC 20% Merck 6%

Glenmark 30%

Paints

Asian Paints 12% Goodlass Nerolac 11%

Berger 13%

FMCG

Marico 8% GSK Consumer 7%

Nestle 9%

Agrochemicals

United Phosphorus 25% Monsanto 29%

Sy ngenta 10%

Profitability - 3 year Average EBITDA margins

Pharmaceuticals

Unichem 17% Wy eth 21%

FDC 23% Merck 24%

Glenmark 20%

Paints

Asian Paints 14% Goodlass Nerolac 12%

Berger 10%

FMCG

Marico 10% GSK 18%

Nestle 19%

Agrochemicals

United Phosphorus 25% Monsanto 24%

Sy ngenta 18%

Source: CMIE report, 2011.

Key Advantages of existence of MNCs in India ….i.e what has India really gained?

• Work culture for employees • Systems • Training and Learning • Technology – especially concept of working with

better technologies • Safety Health and Environmental Learnings • Culture and Ethos • Excellent training grounds for many

entrepreneurs

The Indian MNC’s …the list is subjective and endless….

• Paints – Asian Paints • Auto & Components – Tata Motors, Bharat Forge • Chemicals – Tata Chemicals, United Phosphorus • Metals – Sterlite Industries, TISCO • Packaging – Essel • Pharmaceuticals – Ranbaxy, Wockhardt, Sun, DRL • Oil & Gas – ONGC • Communication – Bharti telecommunication &

Rcom.

Key challenges that “Indian MNC” would face

• Domestic market like India vis a vis International expansion

• Language • Culture • Autonomy to “local” managers – how comfortable are we

? • Styles of doing business • Handling of potential liabilities related to Labour, IPR etc

• And Right time for Right Action.

Questions..