1. INTRODUCTION:

As the name suggests, any company is referred to as a multinational company or corporation (M.

N. C.) when that company manages its operation or production or service delivery from more

than a single country.

Such a company is even known as international company or corporation.

As defined by I. L. O. or the International Labor Organization,

“ M. N. C.” is one, which has its operational headquarters based in one country with several

other operating branches in different other countries. The country where the head quarter is

located is called the home country whereas; the other countries with operational branches are

called the host countries. Apart from playing an important role in globalization and international

relations, these multinational companies even have notable influence in a country's economy as

well as the world economy.” Nearly all major multinationals are American, Japanese or Western

European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW. Advocates of

multinationals say they create jobs and wealth and improve technology in countries that are in

need of such development. On the other hand, critics say multinationals can have undue political

influence over governments, can exploit developing nations as well as create job losses in their

own home countries

In other words, we may define MNC as a company, which operates in number of countries and

has production and service facilities outside the country of its origin. They are also called

Transnational Company (TNC) their activities have both good and bad impacts on the economy.

They take decisions on a global context or basis. Their maximum profit objectives take no

accounts of the reactions produced in the countries felling in their orbit. They operate in different

institutional forms some are: Subsidiaries companies wholly owned by MNC in other countries

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Subsidiary company enters into joint venture with a company another company Agreement

among companies of different countries regarding production and discussion of market.

1.1 Feature of MNC:

1. It operates simultaneously in two or more countries

2. These are very large sized companies

3. These companies have centralized control with a head quarter or head office

4. These company have oligopolistic power

5. Sophisticated technology is used in MNC’S

6. The main objective of these companies is to maximize profit by reducing

transportation cost and making use of the comparatively cheaper raw material,

labor, capital and market of other foreign countries.

7. Large number of customer

8. Large number of competitors’

9. Structured way of decision making

10. Huge intellectual capital

1.2 ROLE OF MNC’S:

1) Growth of domestic firms

2) Improvement in standard of living

3) Deveopment of technology

4) Reduction in unemployment

5) Managerial revolution

6) Availability of foreign capital

7) Profit maximisation

8) International network of marketing

9) Diversification policy

10) Concentration in consumer goods

11) Location of central control offices

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12) Existenence of modern and sophisticated technology

13) Business but not social justice

14) Cultural explosion

15) Mncs and process of planned economy development in india

2 ADVANTAGE & DISADVNTAGES:

2.1 MNC's help the host country in the following ways:

1. The investment level, employment level, and income level of the host country

increases due to the operation of MNC's.

2. The industries of host country get latest technology from foreign countries

through MNC's.

3. The host country's business also gets management expertise from MNC's.

4. The domestic traders and market intermediaries of the host country gets increased

business from the operation of MNC's.

5. MNC's break protectionalism, curb local monopolies, create competition among

domestic companies and thus enhance their competitiveness.

6. Domestic industries can make use of R and D outcomes of MNC's.

7. The host country can reduce imports and increase exports due to goods produced

by MNC's in the host country. This helps to improve balance of payment.

8. Level of industrial and economic development increases due to the growth of

MNC's in the host country.

2.2 Advantages of MNC's for the home country

MNC's home country has the following advantages.

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1. MNC's create opportunities for marketing the products produced in the home

country throughout the world.

2. They create employment opportunities to the people of home country both at

home and abroad.

3. It gives a boost to the industrial activities of home country.

4. MNC's help to maintain favorable balance of payment of the home country in the

long run.

5. Home country can also get the benefit of foreign culture brought by MNC's.

2.3 Disadvantages of MNC's for the host country:

1. MNC's may transfer technology which has become outdated in the home country.

2. As MNC's do not operate within the national autonomy, they may pose a threat to the

economic and political sovereignty of host countries.

3. MNC's may kill the domestic industry by monpolising the host country's market.

4. In order to make profit, MNC's may use natural resources of the home country

indiscriminately and cause depletion of the resources.

5. A large sums of money flows to foreign countries in terms of payments towards profits,

dividends and royalty.

2.4 Disadvantages of MNC's for the home country:

1. MNC's transfer the capital from the home country to various host countries causing

unfavorable balance of payment.

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2. MNC's may not create employment opportunities to the people of home country if it adopts

geocentric approach.

3. As investments in foreign countries is more profitable, MNC's may neglect the home countries

industrial and economic development.

Applicability to particular business:

MNC's is suitable in the following cases.

1. Where the Government wants to avail of foreign technology and foreign capital e.g.

MarutiUdyog Limited, Hind lever, Philips, HP, Honeywell etc.

2. Where it is desirable in the national interest to increase employment opportunities in the

country e.g., Hindustan Lever.

3. Where foreign management expertise is needed e.g. Honeywell, Samsung, LG Electronics etc.

4. Where it is desirable to diversify activities into untapped and priority areas like core and

infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.

5. Pharmaceutical industries e.g. Glaxo, Bayer etc

3. DEVELOPMENT AND ACTIVITIES:

Soon after independence foreign capital entered India in the form of direct investments through

MNC's Companies had been formed in advanced countries with the specific purpose of operating

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in India. Such companies started their subsidiaries, branches and affiliates in India . At times

government gave some tax concession to them with in the FERA (Foreign Exchange Regulation

Act) and streamlined the licensing procedures. The purpose was to secure advanced, technical

and industrial knowhow. During the janata rule the policy was outright purchase of technical

knowhow skills and machinery.

They took two major decisions:

Coco cola was asked to wind up their operation. Asked IBM to reduce their foreign equity to

40%. They did not agree, so asked to wind up MNC's operate in several sectors like tobacco,

toiletries beverages etc. Industrial Policy of 1991 accepted foreign investment essential for

modernization technology up gradation and industrial development. Several concessions were

given FERA regulations were liberalized and permitted to use their trademarks in the domestic

market. Now it has become a wide spread phenomena with USA the biggest among them.

Recently a large number of Indian brands were taken over by them some important takeovers are

1. Asian Paints ICI (UK)

2. Premier Automobiles transferred two plants to Peugeot (France)

3. Lakeme brand by Lever.

4. Hero Honda by TVS Suzuki etc.

Till 1991, India was more or less a closed Economy. The rate of growth of the economy was

limited. The contribution of the local industries to the country’s GDP was limited that were the

main cause of shortage of funds for various development projects initiated by the government.

In an effort to revive the industries and to bring the country back on the right track, the

government began to open various sectors such as Infrastructure, Automobile, Tourism,

Information Technology, Food and Beverages, etc to the Multinational Corporations. The MNCs

slowly but reluctantly began to pour capital investment, technology and other valuable resources

in the country causing a surge in GDP and upliftment of the economy as a whole. This was the

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post 1991 era where the government began to invite and welcome giant MNCs into the country.

The opportunities for developing economies are significant as well. Through the application of

capital, technology, and a range of skills, multinational companies' overseas investments have

created positive economic value in host countries, across different industries and within different

policy regimes. The single biggest effect evidenced was the improvement in the standards of

living of the country's population, as consumers have directly benefited from lower prices, higher

quality goods, and broader selection. Improved productivity and output in the sector and its

suppliers indirectly contributed to increasing national income. And despite often-cited worries,

the impact on employment was either neutral or positive in two-thirds of the cases.

Investments by multinational companies (MNC) allow developing economies to share in the

considerable benefits of the global economy. Official incentives, trade barriers, and other

regulatory policies, though, can result in inefficiency and waste.

Case studies reveal that in virtually all cases, MNC investment had a positive to very positive

impact on the host country. Rather than leading to the exploitation of lower-wage workers, as

some critics have charged, the investments fostered innovation, productivity, and an improved

living standard. Therefore, government seeking those advantages would be advised to favor

policies of openness, rather than regulation, when it comes to foreign direct investment.

Indian Exports

In 2007, exports stood at US$145 billion and imports were around US$217 billion. Textiles,

jewellery, engineering goods and software are major export commodities while crude oil,

machineries, fertilizers, and chemicals are major imports. India's most important trading partners

are the United States, the European Union, and China.

Gross Domestic Product (GDP)

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India is the world's most-populous democracy and has one of the fastest economic growth rates

in the world (8.9 percent GDP increase in 2007, the second-fastest major economy in the world

after China).

India Inc. is flying high. Not only over the Indian sky. Many Indian firms have slowly and surely

embarked on the global path and lead to the emergence of the Indian multinational companies.

With each passing day, Indian businesses are acquiring companies’ abroad, becoming world-

popular suppliers and are recruiting staff cutting across nationalities. While an Asian Paints is

painting the world red, Tata is rolling out Indicas from Birmingham and Sundram Fasteners nails

home the fact that the Indian company is an entity to be reckoned with.

Some instances

Tata Motors sells its passenger-car Indica in the UK through a marketing alliance with Rover

and has acquired a Daewoo Commercial Vehicles unit giving it access to markets in Korea and

China.

Asian Paints is among the 10 largest decorative paints makers in the world and has

manufacturing facilities across 24 countries.

About 80 percent of revenues for Tata Consultancy Services come from outside India. This

month, it raised Rs 54.2 billion ($1.17 billion) in Asia's second-biggest tech IPO this year and

India's largest IPO ever.

Infosys has 25,634 employees including 600 from 33 nationalities other than Indian. It has 30

marketing offices across the world and 26 global software development centers in the US,

Canada, Australia, the UK and Japan.

4. IMPACT ON INDIAN INDUSTRIAL SECTORS:

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So far, we have analyzed the Indian Economy and the way in which multinational have added

more value and increased the exports, GDP and productivity, resulting in all round development.

Further more, we have the actual analysis of the effect of MNCs on various Indian Industrial

Sectors. Certain important sectors are considered and the actual effects of MNCs i.e. the practical

way in which they are affected are studied viz.

1. Automobiles

2. Aviation

3. Insurance

4. Food and Beverages Industry

5. Telecommunications

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, and Mitsubishi etc. have already opened their account. In other vehicle

segments too, Volvo, Mercedes Benz, Audi etc. have carved out their niche.

On the other hand, manufacturing in India has also come of age. The post liberation economical

scenario has resulted in all the big names such as General Motors, Ford, Toyota, Honda, Suzuki,

Mitsubishi, Mercedes-Benz, Fiat to come up with plants in India. The Indian automotive giants

like Telco, Mahindra, Ashok Leyland, and Bajaj are revamping their production strategies and

launching new models designed and developed indigenously. This has opened up numerous

opportunities or employment in this sector for trained and skilled professionals who are well

versed in the latest manufacturing process.

Sunny Days are here for the Indian automobile Industry as is corroborated by the latest report

made public by Society of automobile Manufacturers. The report speaks of the growth of car

sales by 22.42% in the month of September. The month saw the sales climb as high as to 94,734

units as opposed to 77,384 units in the same month last year. The growth spree seems to have

spilled onto the sale of commercial vehicles as well; the segment experienced a growth rate of

33.54% in the month of September.

The only French presence in the Indian automobile market was the Peugeot 309, a boxy sedan

that was manufactured by a joint venture, in which the Indian partner was already losing its hold

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on the passenger car market.

The Peugeot 309 was launched when multinational carmakers were just beginning to corner the

Indian market. The car was too early for its times in terms of the demand in the segment it was

being positioned and it quickly became dated in terms of design. It only had a small fan

following, that is, among those that appreciated good engineering.

Renault, France's second-largest carmaker, formed a 125 million euro ($165 million) venture

with Mahindra & Mahindra Ltd to make Logan sedans in India, tapping into Asia's fourth-largest

car market.

Mahindra, India's biggest maker of sport-utility vehicles and tractors, will own 51% of the

company, with Renault holding the remainder.

Renault, which announced details of the agreement last month, is entering India with the $6,000

Logan it began producing in September at its Dacia (Romania). Overseas carmakers are

assessing the Indian market to expand their presence by introducing new models as rising

incomes increased demand for cars in the world's second-most populous nation.

Mahindra Renault is also collaborating with Japan's Nissan Motor Co. in which the French auto

maker holds 44 per cent stake building a bigger plant near the southern Indian city of Chennai.

The three companies are together investing about US$900 million in that plant, which will be

completed in the second half of 2009 and will have capacity to manufacture 400,000 vehicles,

including the Logan.

Strategy of Mahindra Renault:

India's car market is dominated by small hatchbacks, but rapidly growing middle class incomes

has fueled demand for low-cost sedans. The pricing, which the manufacturer described as

``aggressive'', places Logan in competition with mid-size sedans from South Korean car maker

Hyundai Motor Co., homegrown Tata Motors Ltd. and the country's largest carmaker The Suzuki

Motor Inc. controlled by Maruti Udyog Ltd. The car is now being manufactured by M&M at its

Nasik facility and delivers on its promise of good engineering, great value and low prices. But it

still will have to face up to and get over a number of issues on the way before its Indian innings

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can be counted amongst its successes worldwide. This, despite the killer pricing and feature-rich

package that is being offered with the India-made Logan. Logan coming to India is stripped-

down version of European Logan and will have very basic features only. It has very good space

and comfort is good too. This car is expected to do good in rural areas where Mahindra has better

reach. Size matters for Indians and the Logan offers enough of it in every department except the

choice of engines, which is again very relevant for us given the buyer's fixation with fuel

efficiency.

To compare the Renault Logan with the Toyota Corolla or the Mercedes Benz C-class sedan is

like comparing a hard-boiled lick-lolly with a Godiva specialty truffle. But if you are a sweet

tooth on a tight budget, the lick-lolly will be the automatic choice.

One of the issues that may not work in its favour is the Logan's unexciting, overly simplistic

design. The design was conceived with a purpose — to keep manufacturing and maintenance

costs low — especially in cost-sensitive markets such as India.

Overall, the Logan successfully conceals the fact that it is a product of frugal engineering or cost

cutting, as we would call it in common parlance. But as you go up the price segment in the petrol

sedan category, buyers are more demanding even in the design department. The Logan's pricing

is what makes it even more attractive for those looking to purchase their next car from the

premium hatch or the entry-level sedan segments.

Global automakers have been stepping up efforts to increase their presence in India, where the

economy is growing close to nine per cent annually and demand for cars is strong, thanks to

rising middle class incomes and easier access to loans.

Toyota to bring its hybrid sedan to India

Toyota motors has an answer to growing emission concerns and rising fuel costs in the form of

its hybrid sedan Prius, which it plans to bring to India shortly. The Toyota ‘Prius’ is sold in

nearly 40 countries around the globe, and it is regarded as being the most fuel efficient midsize

car in the United States.

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. The non-voice market (message and data services) for

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mobile operators has also registered tremendous growth in 2004. It had a growth of 139 per cent

year on year in 2004. At present non-voice revenue contributes around 4.7 per cent to the total

mobile services revenue, which is around Rs. 14,560 crore (US$ 3.3 billion). A study released by

Ernst and Young says revenues from the sector could touch US$ 25 billion by 2007.

Profit of MNC in India:

It is too specify that the companies come and settle in India to earn profit. A company enlarges

its jurisdiction of work beyond its native place when they get a wide scope to earn a profit and

such is the case of the MNCs that have flourished here. More over India has wide market for

different and new goods and services due to the ever increasing population and the varying

consumer taste. The government FDI policies have some how benefited them and drawn their

attention too. The restrictive policies that stopped the company's inflow are however withdrawn

and the country has shown much interest to bring in foreign investment here.

Besides the foreign directive policies the labour competitive market, market competition and the

macro-economic stability are some of the key factors that magnetize the foreign MNCs here.

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

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Impact of Multinationals:

At the time of Independence, most of our industries were concerned with consumer goods.

Barring two steel plants, we had hardly any capital goods or intermediate goods industries.

Today the industrial scene is dominated by petroleum refining, chemicals and pharmaceuticals,

light and heavy engineering, steel, man-made fiber manufacture and several other industries.

These industries would not have come into existence but for the technical know- how and skills

obtained from abroad. The gain is not merely in terms of physical output, but in the training of

technicians and developing the skills of modern management.

In an interesting study on "the impact of foreign subsidiaries on India's balance of payments" for

the year 1975-76 covering 133 companies (total 171) operating in India Dr. S.K. Goyal has

drawn out following conclusions:

1. Majority of foreign subsidiaries operating in India either belong to the U.K. (68%) or the

U.S.A. (15%).

2. Most of the foreign subsidiaries have raised financial resources from within India, and the

transfer of capital from the parent company has been marginal.

3. Nearly all the branches and subsidiaries of foreign companies have accepted the

Indianization scheme and a large number of them have already taken measures to reduce

the degree of foreign shareholding.

4. A number of foreign companies in India are acquiring the character of multi-product and

multi-industry enterprises. For instance, the Imperial (now Indian) Tobacco Company

(ITC) has recently diversified its activities to hotel industry constructing a chain of hotels

all over India.

5. The assumption that the entry of Transnational Corporation (TNCs) would ensure

transfer of sophisticated technology to developing countries has not been found valid in

practice

6. Large amount of tax collection through MNCS

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7. Increased revenue

8. Economic health improved

9. Employment increased

10. Foreign relation increased.

4.1 MNC IMPACT ON SOCIETY AND ECONOMY:

The MNCs are characterized by their huge assets. The principal decisions taken by the

company take into account their global market. The emergence of the MNCs has led to

the monopolization of the markets. Production and investment have become global as a

result of which economic activities pertaining to production; investment and trade are

being conducted by the MNCs through their branches or firms in the different countries.

Inter-firm transactions have led to the concentration of economic power across the

countries. Initially, the development of the MNCs was through 'creeping increment'.

Slowly, but steadily, the MNCs have established their subsidiaries beyond their country

of origin, in developed and underdeveloped countries. The MNCs also aid in the transfer

of resources from the host country to the country of its operations which includes

technical expertise, equipment, managerial and marketing skills, among others.

The MNCs help to initiate development processes in several underdeveloped countries

through the transfer of capital and technology. To establish a proper base in a foreign

country, the MNCs invest in labor, raw materials, advertising and marketing. This helps

the underdeveloped countries to develop their resources. The MNCs help in the

development of human resource generates further employment and also help to transfer

sophisticated western technologies to the underdeveloped countries. The technological

expertise, advanced production skills and use of local labor in the units facilitate transfer

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of technology to those countries. Through Research and Development, the MNCs

develop products which are superior in all respects to those which are indigenously

produced by the host countries. This induces the indigenous industries to brace up for

competition and encourages them to develop superior products. The MNCs, thereby, end

the domestic monopoly of the indigenous industries. The MNCs, apart from the transfer

of technology for production, sometimes provide marketing services for the export of

indigenous products manufactured by the host countries. Exports generate foreign

exchange which helps the host country in developing its economy.

The MNCs have been quite successful in India. In the post-liberalization era, as the

license regime has been more or less abolished the MNCs are thriving in India. They are

present in almost every sector of the Indian economy, especially in the consumer durable

market and automobiles. Automobile manufacturers like General Motors, Ford, Toyota

and Hyundai are making good profits. Korean companies LG and Samsung have become

market leaders in electronic goods. The entire soft drink market of India is being

monopolized by US Multinationals Pepsi and Coke. Though the pesticides controversy

has affected the popularity of Pepsi, Coke and Cadbury's they are still key players in their

segments.

Source: An article "Impact of Multinational Corporations on Society and Economy"

published in "Outlook" magazine in December, 2008 by William Brown

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WEAKNESSES1.location is often very distant2.lack of transportation facilities3.relative inflexibility

OPPURTUNITY1.leverage government2.create the necessary infrastucture3.atract new industry

5 . S W O T

6. TOP MNC’S IN INDIA :

The country has got many M. N. C.s operating here. Following are names of some of the most

famous multinational companies, who have their headquarters of operational branches based in

the nation:

IBM: IBM India Private Limited, a part of IBM has been operating from this country since the

year 1992. This global company is known for invention and integration of software, hardware as

well as services, which assist forward thinking institutions, enterprises and people, who build a

smart planet. The net income of this company post completion of the financial year end of 2010

was $14.8 billion with a net profit margin of 14.9 %. With innovative technology and solutions,

this company is making a constant progress in India. Present in more than 200 cities, this

company is making constant progress in global markets to maintain its leading position.

Microsoft: A subsidiary, named as Microsoft Corporation India Private Limited, of the U. S.

(United States) based Microsoft Corporation, one of the software giants has got their headquarter

in New Delhi. Starting its operation in the country from 1990, this company has got the

following business units:

Microsoft Corporation India (Pvt.) Limited (Marketing Division)

Microsoft Global Services India

Microsoft Global Technical Support Centre

Microsoft India Development Center

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Microsoft IT

Microsoft Research India

The net income of Microsoft Corporation grew from $ 14, 569 million in 2009 to $ 18, 760

million in 2010. Working in close association with all the stakeholders including the Government

of India, the company is committed towards the development of the Indian software as well as I.

T. (Information Technology) industry.

Nokia Corporation: Nokia Corporation was started in the year 1865. Being one of the leading

mobile companies in India, their stylish product range includes the following:

Normal mobile handsets

Smartphone

Touch screen phones

Dual sim phones

Business phone

The net sales of the company increased by 4 % in the last financial year with sales of EUR 42.4

billion as compared to 2009's EUR 41 billion. Over the past few years, this company in India has

been acquiring companies, which have got new and interesting competencies and technologies so

as to enhance their ability of creating the mobile world. Besides new developments to fight

against mineral conflicts, they are even to set up Bridge Centers in the country for supporting re-

employment.

PepsiCo: PepsiCo. Inc. entered the Indian market with the name of PepsiCo India from the year

1989. Within a short time span of 20 years, this company has emerged as one of the fast growing

as well as largest beverage and food manufacturer. As per the annual report of the company in

the last business year, the net revenue of PepsiCo grew by 33 %. By the year 2020, this food

manufacturing company intends to triple their portfolio of enjoyable and wholesome offerings.

The expansion of their Good-For-You portfolio is believed to be assisting the company in

attaining the competitive advantage of the growing packaged nutrition market in the world,

which is presently valued at $ 500 billion.

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Ranbaxy Laboratories Limited: Ranbaxy Laboratories Limited, one of the biggest

pharmaceutical companies in India, started their business in the country from the year 1961. The

company made its public appearance in 1973 though. Headquartered in this nation, this

international, research based, integrated pharmaceutical company is the producer of a huge range

of affordable cum quality medicines that are trusted by both patients and healthcare professionals

all over the world. In the business year 2010, the registered global sales of the company was US

$ 1, 868 Mn. Successful development of business forms the key component of their trading

strategy. Apart from overseas acquisitions, this company is making a continuous endeavor to

enter the new global markets, which have got high potential. For this, they are offering value

adding products as well.

Reebok International Limited: This global brand is a famous name in the field of sports as well

as lifestyle products. Reebok International Limited, a subsidiary of Adidas AG, is based in U. S.

A. (United States of America) started its operation in 1890s. During the last financial year,

Adidas's currency neutralized group sales increased by 9 %. Apart from their alliance with Cross

Fit that is among the largest contemporary fitness movements, in the current year, Reebok's

announcement of its partnership with artist, designer and producer Swizz Beatz reflects its long

term future growth.

Sony: Sony India is a part of the renowned brand name Sony Corporation, which started their

business operation in the year 1946 in Japan. Established in India in November 1994, this

company has captured one of the leading positions in the field of consumer electronics goods. By

the end of the business year 2010 on 31st March, 2011, the company showed a remarkable

increase in the share related to numerous categories. Sony India is planning to invest around

INR. 150 crore for the marketing of the activities related to ATL and BTL. As far as Bravia TVs

are concerned, they are looking forward to hold their market share of 30 %. In between the last

and the current financial year, the number of their outlets in the country increased by 1, 000.

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Tata Consultancy Services: Commonly known as T. C. S., this multinational company is a

famous name in the field of I. T. (Information Technology) services, Business Process

Outsourcing (B. P. O.) as well as business solutions. This company is a subsidiary of the Tata

Group. The first center for software researching was established in the country in 1981 in the city

of Pune. Tata Consultancy earned a growth of 8.9 % during the latest quarter of this financial

year, which ended on 30th September, 2011. This renowned company is presently looking

forward to the 10 big deals that they have received besides the Credit Union Australia's contract

as well as Government of Karnataka's INR. 94 crore deal for a total period of 6 years. In this

current business year, they are about to employ 60, 000 people to meet their business

requirement.

Vodafone: Vodafone Group Plc is an international telecommunication company, which has got

it's headquarter based in London in the United Kingdom (U. K.). Earlier known as Vodafone

Essar and Hutchison Essar, Vodafone India is among the largest operators of mobile networking

in the country. The parent company Hutchison started its business in the year 1992 along with

the Max Group, which was its business partner in India. Much later in 2011, Vodafone Group

Plc decided to buy out mobile operating business of Essar Group, its partner. The turnover of the

Vodafone Group Plc after the completion of the last financial year grew to £ 44, 472 m from £

41, 017 m that was the turnover of the business year 2009.

Tata Motors Limited: The biggest automobile company in India, Tata Motors Limited, is

among the leading commercial vehicles manufacturer in the country. They are one of the top 3

passenger vehicle manufacturers. Established in the year 1945, this company, a part of the

famous Tata Group, has got its manufacturing units located in different parts of the nation. Some

of their well known products of the company are categorized in the following heads:

Commercial Vehicles

Defence Security Vehicles

Homeland Security Vehicles

Passenger Vehicles

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Post completion of the financial year 2010 to 2011, the global sales of the company grew by 24.2

% with sales crossing INR. 1 million

7. CURRENT NEWS RELATED TO MNC’S :

India needs simple tax rules for R&D institutions

1. The government accuses Microsoft of underreporting its income in India. The tax

department says the work done at Microsoft India's R&D centre is much more

intensive than routine software work and, therefore, the relative contribution of

the captive centre to the global profits of the MNC must be charged to tax.

2. The tax department's argument, ostensibly to curb transfer-pricing abuse, is

specious. Transfer pricing rules are meant to prevent MNCs from shifting income

— accrued through value addition in products and services — outside India to

other jurisdictions.

3. Had Microsoft outsourced R&D to a homegrown IT services company, would

its global profits be apportioned to the Indian company that mainly employs

people for R&D and pays them salaries? Comparable costs would be incurred on

the captive R&D, based on arm's-length pricing. So, the tax demand defies logic.

4. The tax department's approach is far removed from finance minister

 P. Chidambaram's promise to have a non-adversarial tax regime. The mindset

must change. Such arbitrary tax demands to raise revenues will kill India's

attractiveness as an R&D hub.

5. The country needs to attract investment in such captives, and that will help

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create an R&D ecosystem in the country. India's software exports were close to

$76 billion in 2012-13 of which nearly a quarter were from the captives.

6.These units need certainty in the tax regime to ensure that India's advantage is

not imperiled by competition from the likes of China. The government should

have simple rules that MNCs can follow in pricing their services while doing

business with their parent or subsidiaries overseas.

A simpler method, or safe harbor, accepted by the tax department to determine the

tax outgo will lower tax disputes.

STAGES OF EVOLUTION OF MNC’S :

There are three stages of evolution of a multinational company which are listed and

described as follows:

1. Export stage

¾ Initial inquiries – firm rely on export agents

¾ Expansion of export sales

¾ Further expansions of foreign sales branch or assembly operations (to

Save transport cost)

2. Foreign Production stage

¾ There is a limit to foreign sales (tariffs, non tariff barriers)

¾ Direct foreign investment vs. licensing. Once the firm chooses foreign

Production method of delivering goods to foreign markets, it must

decide whether to establish a foreign production subsidiary or license

the technology to a foreign firm.

22

FINE BALANCE:

A new survey reveals why young professionals choose MNCs 

    While Indian companies are going global, there are still some aspects that they need to address

to become ‘employers of choice.’ For young professionals today, a good place to work is more

than a six-digit salary; it is about a better learning experience, peer-to-peer interaction, and most

importantly a steady growth path. Multi-national corporations (MNCs) focus on all these aspects

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to provide a wholesome work environment. 

    According to a recent survey conducted by Job Buzz, a career research platform

by TimesJobs . com , young Indian professionals prefer to work for MNCs. Out of a total number

of 8,000 respondents, approximately 22% were of the opinion that MNCs offer a better pay

package; around 1,300 said they prefer multi-nationals because of the well-defined career path;

and another 1,000 respondents said it is because of a better work-life balance. Other motivations

for this preference are opportunities to work abroad, organized processes, lesser politics and the

scope to work with smarter people. 

    Looking at the employee perception, as reflected by the survey, in Indian companies, growth

and industry exposure is often limited. MNCs, however, prove to be worthy in terms of

providing adequate training and development 

    programmes; encourage employees 

    to gain international work experience; and also offers handsome pay package and perks. It is

evident from the survey that a large percentage of Indian 

    employees believe that MNCs provide a better work-life balance. SumanRudra, India HR

Head, NCR Corporation is of the opinion that MNCs not only support flexi-work, but often

allow employees to work from home. 

    In our fast-moving life, many professionals face problems in balancing their personal and

professional needs. 

CAREER GROWTH 

A company may be giving its employees all the perks, but are they also offering a positive

growth path for them? JaideepShergill, CEO MSL Group, says, “In an MNC, employees get to

move between functions, roles, and departments within a short span of time. This scope is

missing if a company is based out of only one location. MNCs allow their employees to not only

move within the organization, but also externally, resulting in better career growth.” 

    As Indian professionals get more global exposure, in terms of best practices that are brought

into the country by MNCs of Indian and non-Indian origin, it is a matter of time before other

employers take a note of this trend and start adopting these practices to become ‘great places to

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work.’ 

    Rudra points out that some of the other aspects MNCs provide include a professional work-

environment based on ethics and value system; international career opportunities; international

learning opportunities like training cross-geographic projects and multi-country experience;

strong multicultural work ethos and equal opportunity, among others. (Source: TimesJobs . com

8. MNCs’ RISING INTEREST IN INDIA:

With globalization, trade barriers have come down and business giants haves pilled across the

world. Emerging economies have been their lucrative markets. With flaring global interest in

Indian economy and its huge consumer base, many Multi National Companies (MNCs) have

started foraying there to extract the maximum market share. Some viewed India as a high

potential market, while others wanted to exploit it as a low-cost manufacturing base. In spite of

India’s huge potential, MNCs have shown a mixed performance. Many, who were remarkably

successful elsewhere, have failed or yet to succeed. Indian market poses special challenges due

to its heterogeneity, in terms of economic development, income, religion, cultural mix and tastes.

On top is the heating competition among local players as well as the leading MNCs. Not all

companies have been struggling to understand Indian consumer behavior. Doing business in

India is at a turning point; market entry strategies, for example, that click edonce don’t promise

success always. Success in India will not happen overnight. It requires commitment,

management drive and focus on long-term objectives. Proper business models are needed. They

are not prescribed but need to be derived from the mechanisms that enabled them to develop –

the global management processes (providing the global support and technology) and the local

management processes (driving local autonomy and capability). Critical success factors for

MNCs in India are highlighted in the Exhibit IV. MNCs need to invest heavily on market

research to analyze the local preferences and craft their marketing and branding strategies

accordingly. Among the various MNCs having subsidiaries in India are Colgate, Palmolive,

Procter& Gamble, General Electric, IBM, Intel, Pepsi, Coco Cola, Microsoft, Oracle, Unilever

etc. Almost 70% of MNCs – that have participated in the first CII-AT Kearney MNC Survey

2005 – have evinced a high likelihood of making additional medium- to long-term investment in

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India. Apart from that, three out of every four MNCs have met or exceeded their internal targets

and expectations in India. MNCs in India face a range of challenges. This book examines their

much-needed critical success factors. Through the experiences of some well-known MNCs in

India, the book explores how they keyed in rightly to benefit maximally while others couldn’t.

TABLE.1

 

SOURCE. www.gcr.o

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Economic Liberalization:

Before economic liberalization, India’s dominant economic philosophy was one of self-reliance.

The objective was to produce the country’s requirements, to the extent possible, within the

borders of the country. This self-reliance became an end in itself, leading to a very broad

production base, but insufficient attention to efficiency and productivity (Forbes, 1999).The

public sector was seen to be the fountainhead of industrial development and accounted for as

much as two-thirds of the fixed capital investment in the factor y sector. Public ownership was

particularly stressed in those sectors where technology acquisition was expected to involve the

evaluation of a range of non-commercial considerations (Tyabji, 2000). However, with a few

exceptions, the public sector failed to drive the Indian industrial sector on to a higher growth

trajectory and got bogged down by cost and time overruns, high costs, and a lack of

technological dynamism. Though private industrial activity by both Indian firms and

multinational companies went on in parallel, there were tight regulations on inward capital flows,

expansion, diversification and the import of capital goods, intermediates, and technology.

27

TABLE.1

MNCs and Globalization:

28

Globalization has accelerated in recent years, a development that has significant implications for

the regulation and governance of international business, trade and investment. International

business implies no fundamental shift in the underlying principles of trading or business

functions but simply more cross-border transactions. In simpler terms it includes all commercial

transactions – private and governmental – between two or more countries. Private companies

undertake such transaction for profit; governments may or may not do the same in their

transactions. The world has seen a tremendous increase in the global transactions and foreign

trade in recent years. The main reason behind this is that now more and more countries are

getting engaged in trading with each other in order to increase their profit or sales or protecting

them from being eroded by competition. The main objectives which are influencing the

companies to engage in international business are expansion of sales, acquiring resources,

minimizing competitive risk and diversification of sources of sales and supplies (Johnson &

Turner, 2003). Besides these there are other few factors like economic factors, cultural factors,

technological factors, and social factors which have influence to a greater extent. The emergence

and activities of transnational and multinational enterprises had impacted to a huge extent on the

concept of globalization, and multinationals have played an important role. Given their

international reach and mobility, prospective countries, and sometimes regions within countries,

must compete with each other to have MNCs locate their facilities (and subsequent tax revenue,

employment and economic activity) within.

                                                             

Tax competition:

Multinational corporations have played an important role in globalization. Countries and

sometimes sub national regions must compete against one another for the establishment of MNC

facilities, and the subsequent tax revenue, employment, and economic activity. To compete,

countries and regional political districts sometimes offer incentives to MNCs such as tax breaks,

pledges of governmental assistance or improved infrastructure, or lax environmental and labor

standards enforcement. This process of becoming more attractive to foreign investment can be

characterized as a race to the bottom, a push towards greater autonomy for corporate bodies, or

both.

29

However, some scholars for instance the Columbia economist Jagdish Bhagwati, have argued

that multinationals are engaged in a 'race to the top.' While multinationals certainly regard a low

tax burden or low labor costs as an element of comparative advantage, there is no evidence to

suggest that MNCs deliberately avail themselves of lax environmental regulation or poor labour

standards. As Bhagwati has pointed out, MNC profits are tied to operational efficiency, which

includes a high degree of standardization. Thus, MNCs are likely to tailor production processes

in all of their operations in conformity to those jurisdictions where they operate (which will

almost always include one or more of the US, Japan or EU) that has the most rigorous standards.

As for labor costs, while MNCs clearly pay workers in, e.g. Vietnam, much less than they would

in the US (though it is worth noting that higher American productivity—linked to technology—

means that any comparison is tricky, since in America the same company would probably hire

far fewer people and automate whatever process they performed in Vietnam with manual labor),

it is also the case that they tend to pay a premium of between 10% and 100% on local labor rates.

Finally, depending on the nature of the MNC, investment in any country reflects a desire for a

long-term return. Costs associated with establishing plant, training workers, etc., can be very

high; once established in a jurisdiction, therefore, many MNCs are quite vulnerable to predatory

practices such as, e.g., expropriation, sudden contract renegotiation, the arbitrary withdrawal or

compulsory purchase of unnecessary 'licenses,' etc. Thus, both the negotiating power of MNCs

and the supposed 'race to the bottom' may be overstated, while the substantial benefits that

MNCs bring (tax revenues aside) are often understated.

                                            

Market Withdrawal:

Because of their size, multinationals can have a significant impact on government policy,

primarily through the threat of market withdrawal. For example, in an effort to reduce health care

costs, some countries have tried to force pharmaceutical companies to license their patented

drugs to local competitors for a very low fee, thereby artificially lowering the price. When faced

with that threat, multinational pharmaceutical firms have simply withdrawn from the market,

which often leads to limited availability of advanced drugs. In these cases, governments have

been forced to back down from their efforts. Similar corporate and government confrontations

30

have occurred when governments tried to force MNCs to make their intellectual property public

in an effort to gain technology for local entrepreneurs. When companies are faced with the

option of losing a core competitive technological advantage or withdrawing from a national

market, they may choose the latter. This withdrawal often causes governments to change policy.

Countries that have been the most successful in this type of confrontation with multinational

corporations are large countries such as United States and Brazil, which have viable indigenous

market competitors.

                                                           

Patents:

Many multinational corporations hold patents to prevent competitors from arising. For

example, Adidas holds patents on shoe designs, Siemens A.G. holds many patents on equipment

and infrastructure and Microsoft benefits from software patents. The pharmaceutical companies

lobby international agreements to enforce patent laws on others.

                                                   

Disagreements with Corporations:

Activists argue that corporate globalization corresponds to a displacement in the transition from

a highly industrial-based economy to one where trade development is connected with the

financial deregulation on the basis of circulation of capital. An increasing number of diverse

societies have been pushed into a market structure, leading to displacement. As this expansion

has occurred, market-governed regulation has outrun the grasps of the state. The government

cannot control the markets, widening inequalities have developed, and the corporations have

gained strength. Activists have been recently pushing for a sort of globalization that claims to

promote equality.

                                                         

Counter Argument:

31

The defenders of corporations would argue that governments do legislate in ways that restrict the

actions of corporations and that lawbreaking companies and executives are routinely caught and

punished usually in the form of monetary fines. Factually, most amount to a small proportion on

their gross annual revenue. However, the Tobacco Industries loss as defendants of a multi-state

and Federal legal suit in the 1990's cost those billions of dollars and permanently disrupted their

traditional marketing in the U.S.

In addition, from the perspective of business ethics it might be argued that chief executives are

not inherently more evil than anyone else and so are no more likely to attempt unethical or illegal

activity than the general population. Large multi-national corporations do continue to peck away

at governmental regulations through in-house or contracted lobbyists that work closely with State

and Federal legislators. So as corporate laws continue to lean in their favor, corporate members

have improved portals to drive up company profits.

                             

Alliances:

Anti-corporate activists may often ally themselves with other activists, such as environmental

activists or animal rights activists in their condemnation of the practices of modern organizations

such as the McDonald’s Corporation and forestry company Gunn’s Limited.

In recent years, there have been an increasing number of books and films such as The

Corporation which have to a certain extent supported anti-corporate politics.

                                                      

Art Activism:

32

Political artist Billy Knows posted his "Greed" posters all across America and Europe in 2004

proclaiming Mickey the Rat as the new American icon. Another artist critical of socio political

agendas in business is conceptualist Hans Haacke.                    

New Digital Media:

Media and digital networking have become important features of modern anti-corporate

movements. The speed, flexibility, and ability to reach a massive potential audience has provided

a technological foundation for contemporary network social movement structure. As a result,

communities and interpersonal connections have transformed. The internet supports and

strengthens local ties, but also facilitates new patterns for political activity. Activists have used

this medium to operate between both the online and offline political spectrums.

Email lists, web pages, and open editing software have allowed for changes in organization.

Now, actions are planned, information is shared, documents are produced by multiple people,

and all of this can be done despite differences in distance. This has led to increased growth in

digital collaboration. Activists can presently build ties between diverse topics, open the

distribution of information, decentralize and increase collaboration, and self-direct networks.      

Rise of Anti-Corporate Globalization:

Close to fifty thousand people protested the WTO meetings in Seattle on November 30, 1999.

Labor, economic, and environmental activists succeeded in disrupting and closing the meetings

due to their disapproval of corporate globalization. This event became a symbol as anti-

globalization networks emerged and became strengthened. The experiences from the protests

were distributed throughout the internet via emails and websites. Anti-corporate globalization

movements have also expanded through the organization of mass mobilizations, including the

anti-WTO protests, which were remarkably successful. In the United States, these movements

reemerged after less attention was given to the war in Iraq, resulting in an increase in mass

mobilizations.                      

The Aid of Technology:

33

Globally oriented and planned protests have benefited from the cheap, quick, efficient means of

e-mail. This has also led to the creation of a global connection between alternative transnational

counter publics. Web sites created for mobilizations may not be designed to exist or be used

permanently, but their use allows for easy access to resources and contact lists. Face-to-face

coordination was also found to be complemented through internet use and has not replaced this

aspect. The use of the telephone remains vital, particularly during conflicts that required

interactive communication.

                                            

Technology & Cultural Politics:

For anti-corporate globalization movements, flexible local and global networks make up the

most important forms of organization. Activists have preferred this flexible coordination between

groups within a small formation. This includes intervallic meetings, commissions discussing

concrete tasks, and project areas. Participation that is open is seen as more productive than

representation. In some organizations, there are even no formal members. Instead, any person is

allowed to participate as long as they agree with the networks basic beliefs, which includes a

personal removal from capitalism and systems seen as similar to it.

The use of networking through technology is unevenly distributed amongst the organizations and

movements. The groups with more available funds are able to incorporate newer technologies

into the existing communication techniques. Smaller organizations with fewer resources,

therefore, look for more innovative methods in order to take advantage of the low cost. Though

the anti-corporate globalization movements may be viewed as unified, there exists numerous

movements. Their goals may overlap with one another, but each differs on their targeted issues,

political subjectivity, ideologies, culture, and organizational structure.

9. TRANSFORMATIVE IMPACT OF MNCS :

34

R&D, for its fruit to be used both nationally and internationally. For long “India has often been

regarded as a third-world country that’s tumbles along by copying western products, aided by lax

patent policies. Today, however, the situation looks different: A few sectors like pharmaceuticals

and automobiles are leading the charge in the R&D field”, says the Economic Times Intelligence

Group.

Examples of technologies coming to India from every source of global excellence tell their own

story. They include the automation sector (with over arching applications in every sphere of

business activity), energy, agriculture, environment, health and, of course, the emerging areas of

information technology based businesses.

Fig.1

Source : outlook survey

35

10. CONCLUSION:

When we consider an overall picture of the MNCS, the beneficial role is much limited in the

limited stages of development they are helpful in area of needed technology and global

marketing.

They care only to the need of upper middle and affluent classes. It create a new culture of colas,

Jams, ice-creams and processed goods. Another threat to Indian economy is the manipulation on

the capital market to suit their goals. They are increasing the shareholding in Indian companies

Swallowing them. They transfer attractive and profitable business to this newly started

Subsidiary so a large number of Indian share holders get cheated.

Summing up over dependence on MNC may be harmful in terms of economic dependence

and political interference. Capital flow of MNC's may be permitted but not at the cost of national

Interest.

REFRENCES:

36

www.investopedia.com

www.wikipedia.com

www.economic times.com

www.times of india.com

www.indiatoday.com

Outlook magazine

37