Multi National Corporations Disected

MNCs

An Enterprise, which allocates company resources without regards to national frontiers, but is nationally based in terms of ownership and top management. It comprise of three words multi, national and corporations. These words together means that corporations which have established their offices to increase the interaction either by their own efforts or by collaborations with other companies. Thus Multinational represents highest level of overseas involvement and is characterized by global strategy of investment, production and distribution. MNCs are enterprise which owns or controls production or service facilities outside their home country.

Classification of MNC by behavior

1.Ethnocentric: These are the type of MNCs which have strong orientation towards home country. This means that home country people are considered as superior and allocated all key posts.
2.Polycentric: Just opposite to Ethnocentric polycentric type of MNCs has strong orientation towards host country where few key people are nationals and remaining are from the host country.
3.Regiocentric and Geocentric: These MNCs have their concentration in whole world and they make selection for best employees whether they are from host country or home country it does not matter.

Characteristics of MNCs

1.Single Managerial Authority control
2.Worldwide Integration, better profitability
3.Global Perspective
4.Close Coordination in parents & affiliates
5.Worldwide Market

Benefits of MNCs

1.Training of domestic manpower
2.Increase pace of economic development
3.Promote better products at lower costs
4.Employment to labour
5.Increase in production, GDP, exports
6.Increase in Governments revenues

Criticism of MNCs

1.Increase gap between rich & poor countries
2.Misallocate & misuse scarce natural resources
3.Home country loses jobs when MNC overseas
4.Employ transfer pricing
5.Aggravate Unemployment in developing countries
6.Competition from MNCs local Industry

Entry Strategies used by MNCs

1.Exporting
2.Licencing
3.Joint Ventures
4.Manufacturing
5.Contract Management / Turnkey Projects

Arguments in support of MNCs in India

1.Change in Perception
2.Economic Arguments
3.Technology Transfers
4.Foreign Investment vs. Borrowing

Benefits of Indian Liberalization to MNCs

1.Positive steps taken by government
2.Effect of these steps

Direct Benefits to India of the increasing presence of MNCs

Increasing scope of professional Education
Increasing competition among states for FDI
Expanding Indias consuming class
India as a source of Inputs
Infrastructural gains

Criticism of MNCs in India

1.Inappropriate products launched by MNCs
2.Overshadowing Domestic Industry
3.MNCs and child labour
4.Workers Exploitation

MNCs and FUTURE

Leading Global Business intelligence and consultancy firms such as Giga, Forester Research and McKinsey & Co. have cited various reasons for the increase of offshore outsourcing by MNCs to India.