Write a short notes on MNCs and its merits and demerits
Multinational Corporations - MNCs
An enterprise operating in several countries but managed
from one (home) country. Generally, any company or group that derives a
quarter of its revenue from operations outside of its home country is
considered a multinational corporation.
(2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available,
(3) an international company that builds on the parent corporation's technology or R&D, or
(4) a transnational enterprise that combines the previous three approaches.
There are four categories of multinational corporations:
(1) a multinational, decentralized corporation with strong home country presence,(2) a global, centralized corporation that acquires cost advantage through centralized production wherever cheaper resources are available,
(3) an international company that builds on the parent corporation's technology or R&D, or
(4) a transnational enterprise that combines the previous three approaches.
Characteristics of Multinational Companies (MNCs)
1. Large Size:
A multinational company is generally big in size. Some of the
multinational companies own and control assets worth billions of
dollars. Their annual sales turnover is more than the gross national
product of many small countries.
2. Worldwide operations:
A multinational corporation carries on business in more than one
country. Multinational corporations such as Coco cola has branches in as
many as seventy countries around the world.
3. International management:
The management of multinational companies are international in
character. It operates on the basis of best possible alternative
available any where in the world. Its local subsidiaries are managed
generally by the nationals of the host country. For example the
management of Hindustan Lever lies with Indians. The parent company
Unilever is in The United States of America.
4. Mobility of resources:
The operation of multinational company involves the mobility of
capital, technology, entrepreneurship and other factors of production
across the territories.
5. Integrated activities:
6. Several forms:
A multinational company is usually a complete organisation comprising
manufacturing, marketing, research and development and other
facilities.
A multinational company may operate in host countries in several ways
i.e., branches, subsidiaries, franchise, joint ventures. Turn key
projects.
Advantages of MNCs
(a) To take tax benefits in host countries;
(b) To exploit the natural resources of the host country;
(c) To take advantage of Government concessions in host country;
(d) To mitigate the impact of regulations in the home country;
(e) To reduce cost of production by making use of cheap labour and low transportation expenses in the host country.
(f) To gain dominance in foreign markets;
(g) To expand activities vertically.
Advantages of the growing MNCs to India
There are certain advantages that the underdeveloped countries like and the developing countries like India derive from the foreign MNCs that establishes. They are as under:- Initiating a higher level of investment.
- Reducing the technological gap
- The natural resources are utilized in true sense.
- The foreign exchange gap is reduced
- Boosts up the basic economic structure.
Disadvantages of MNCs
Roses does not come without thrones. Disadvantages of having an MNCs in a developing country like India are as under-- Competition to SMSI
- Pollution and Environmental hazards
- Some MNCs come only for tax benefits only
- Exploitation of natural resources
- Lack of employment opportunities
- Diffusion of profits and Forex Imbalance
- Working environment and conditions
- Slows down decision making
- Economical distress
Disadvantages of MNCs
(a) Competition to SMSI
(b) Pollution and Environmental hazards
(c) Some MNCs come only for tax benefits only
(d) Exploitation of natural resources
(e) Lack of employment opportunities
(f) Diffusion of profits and Forex Imbalance
(g) Working environment and conditions
(h) Slows down decision making
(i) Economical distress
Advantages of the growing MNCs to India
There are certain advantages that the underdeveloped countries like and the developing countries like India derive from the foreign MNCs that establishes. They are as under:- Initiating a higher level of investment.
- Reducing the technological gap
- The natural resources are utilized in true sense.
- The foreign exchange gap is reduced
- Boosts up the basic economic structure.
Disadvantages of MNCs
Roses does not come without thrones. Disadvantages of having an MNCs in a developing country like India are as under-- Competition to SMSI
- Pollution and Environmental hazards
- Some MNCs come only for tax benefits only
- Exploitation of natural resources
- Lack of employment opportunities
- Diffusion of profits and Forex Imbalance
- Working environment and conditions
- Slows down decision making
- Economical distress
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