MULTINATIONAL CORPORATIONS

SIMSR, MMM 2011-2014

Definition & Functional Nature of MNCs

Vikas Pandita - 40

What is a MNC?
Any

business corporation which has holdings, management, production and marketing extended over several countries , owns huge resources and extensive potentiality , and encourages a collective transfer of resources among various countries with a view of increasing profitability under a centralized ownership is called a multinational corporation.

Functional nature of MNCs

Functional nature of MNCs means the functions of

Multinational Organizations which they follow and succeed. There may be five different functions of MNCs Planning

Organizing
Staffing Leading and; Controlling

Functions in a MNC
Planning in MNC
Involves Study of International and External environment to

do SWOT analysis. Setting the objectives. To compete in world markets, form GSP (Global Strategic Partnership) with the local players.
Organizing in the MNC
To achieve corporate objectives Can appoint VP for all foreign branches. He will control

these branches from Head Office. A MNC may organize the structure on the basis of production line. E.g; one manager will be incharge of one product.

Functions in a MNC
Staffing in MNC
Select managers from the home country. These mangers will

know the values of the company clearly Select mangers from the host country. They will know the culture of the host country. Select mangers from the third country.
Leading in MNC
Involves motivating and communicating. Managers must have effective leadership qualities.

Functions in a MNC
Controlling in MNC
Involves monitoring actual performance and taking

corrective actions to correct deviations. A bit difficult process because of

Revenue, cost, profits measured in different currencies. Foreign exchange fluctuations.

Importance Of MNCs and their Benefits to home/host countries.

Ajinkya R.Jadhav - 26 ( Source-Business Environment-Shaikh Salim)

Importance of MNCs
1. 2.

Vehicles of technology transfer to developing countries. They work to equalize the cost of factors of production around the world.

3. 4. 5.

Efficient means of integrating national economies. Contribute to R & D due to enormous resources.

Help to increase competition & break down domestic monopolies.

Benefits of MNCs to home country

1. 2. 3.

Expand the business beyond the boundaries of the parent company. Minimize the cost of production, especially the labour cost. Achieve greater efficiency by producing in local markets and exporting the products.

4. 5.

Establish an international corporate image. Make the best use of technological advantages by setting up production facilities abroad.

6.

Contribute towards the national exchequer by way of duties &

taxes.

Benefits of MNCs to host countries

1.

2.
3. 4. 5. 6. 7. 8.

Help to increase the investment level and thus income & employment . Enable host countries to increase their exports & decrease their import requirements. They stimulate domestic enterprises. Help to improve the standard of living in host countries. Contribute towards professionalization of management. Contribute to improve the balance of payment position. Play a vital role in developing the ancillaries in host countries. They pay high dividends to investors in host countries.

Challenges Faced By MNCs (Home and Host)

Nikhil Sawant- 49

Challenges Faced by Home Counties

Challenges of Working Across Cultures.
Ethnocentrism Parochial Attitude.

Attitude towards appointment and Deadlines. Lack of Cohesion. Outward Investment Eg: TATA Motors.

Challenges Faced by Host Countries

Monetary Issues

Ethical Challenges
Distribution Challenges Macro Economic Factors
Political issues Legal Restrictions.

Eg: Daewoo Motors

Problems due to MNCs

Nitin Borhade- 10

Economic problems due to MNCs:1)Profit Maximisation is the main objective and not the development of poor countries. 2)They cause distraction of competition and acquire monopoly powers in the long run. 3) They can have an unfavorable effect on the Balance of Payment of the country through and outflow of large sums of money in the form of dividends, profits, royalties, interests, technical fees and so on. 4) Inflexible about terms & conditions 5) Feeling that Labour is being exploited by MNC 6) Depletion natural Resources

7) Due to tremendous powers MNCs can evade or undermine national economic autonomy and control. 8) More interested in Merger & Acquisitions. 9) The problem of Dumping ( Eg.Chinese low quality products in Indian Markets) 10) They raise very large part of their financial resource from with in country and hence Indian( host) country companies likely to loose economic sovereignty. 11) The Indian companies may also experience some loss of control over its own economy

Social Problems due to MNC'S

MNCs more interested in business but not social justice. Standard of living - Splurging Causing of closure of small scale of Business (Eg. Grocery y Shops)

Stress & Tensions in employees

Stress related ill habits (Alcoholism, smoking addiction) Stress related diseases ( Heart Attack, High Cholestrol, Obesity)

Cultural Problems due to MNC'S

Influence of Western Culture Lack of awareness about Indian/ host country Cultures. Western Dressing Trends

Celebration of western festivals in rise at the cost of Indian/host festivals.

Western music against Indian classic music

Changes of food habits from Nutritious to Junk

Case Study
Prashant Humane- 24

2012 Top Fortune Global 500 Companies

(CNN Money July 23, 2012 issue)
Rank 1 2 3 4 5 6 Company Royal Dutch Shell Exxon Mobil Wal-Mart Stores BP Sinopec Group China National Petroleum Revenues (USD Mio) 484,489 452,926 446,950 386,463 375,214 352,338

7
8 9 10

State Grid
Chevron ConocoPhillips Toyota Motor

259,142
245,621 237,272 235,364

2012 Top Fortune Global 500 Companies

Indian Companies
(CNN Money July 23, 2012 issue)
Rank 83 99 225 267 285 314 357 401 Company Indian Oil Reliance Industries Bharat Petroleum Hindustan Petroleum State Bank of India Tata Motors Oil & Natural Gas Tata Steel Revenues (USD Mio) 86,016 76,119 44,582 38,885 36,950 34,575 30,746 27,739

Ranbaxy Laboratories Ltd.

History :
In 1938, Ranbaxy & Co. was started by B.M.Singhs cousins, Ranjit

Singh and Gurbax Singh in Amritsar Punjab. Ranbaxy's name was a fusion of Ranjit and Gurbax's names known as Ranbaxy & Co. When Ranbaxy & Co. defaulted on a loan, B.M.Singh bought the company on August 1, 1952, for Rs 2.5 lakh.
Joint Venture with Foreign Company In 1952, RC became the solo Indian franchaise of Italian pharma company Lepetit SpA (LS). In 1959, RC started a manufacturing joint venture with LS. RC had no experience of running a manufacturing outfit.

Ranbaxy Laboratories Ltd.

Milestones:
- The Largest Pharmaceutical Company in India in terms of sales.
- The first Multinational Pharmaceutical Company in India. - The 50th largest pharmaceutical company in the world. (10th largest Generic pharmaceutical company in the world) - On June 11, 2008, Ranbaxy Laboratories Ltd and Daiichi Sankyo Company Ltd. announced a binding share purchase agreement between Daiichi Sankyo, Ranbaxy and the Singh Family, the largest and controlling shareholders of Ranbaxy.

Ranbaxy Laboratories Ltd.

Year
1938

Milestone
Ranbaxy & Co. was established.

1952
1959 1961 1973 1977 1985 1987

RC was the solo distributer of Lepetit SpA

RC started a joint venture with Leptit SpA A joint venture with Lepetit SpA ended. RL incorporated. RL went Public RLs first joint venture in Nigeria was set up. RL Research Foundation was established. RL became the largest manufacturer of antibiotics.

1988
1990 1992 1995

RLs Toansa Plant got USFDA approval.

RL was granted its first US patent for Doxicyline RL entered into an agreement with Eli Lilly RL started R&D for new drug development.

Ranbaxy Laboratories Ltd.

Year
1997 1999 2003 2005 2008

Milestone
RL crossed a sales turnover of Rs. 10,000 million, with its export reaching an all time high of Rs.5,000 million. RL licensed its once-a-day ciprofloxacin formulations to Bayer in 1999. RL and GSK entered into a global alliance for drug discovery. RL started joint venture with Nihon Chemiphar . RL opened the stat of the art R&D facility . Daiichi Sankyo acquired 34.82% shareholding from the promoters of RL.