MNCs, objectives, duties,advantage, disadvantage, Benefits received and Example.

MNCs

A multinational corporation (MNC) or transnational corporation (TNC), also called multinational enterprise (MNE), is a corporation or enterprise that manages production or delivers services in more than one country. We can also be referred to as an international corporation.

OBJECTIVES OF MNCs

1.  To expand the business beyond the boundaries of a home country.

2. Minimize cost of production, especially labor cost.

3. Capture foreign market against international competitors.

4. Make diversification internationally effective so that a steady growth of business could be achieved.

5. Make best use of technological advantages.

6. Counter regulatory measures in the parent country .

Some MNCs

1. ABB (Asea Brown Boveri).
2. ABN-Amro.

3. Adidas ltd.

4. Aditya Birla Group.

5. IBM.

6. ICICI Bank.

7. Infosys Ltd.

8. General Electric Company.
9. General Motors.

10. Google Inc.

11. Parker Hannifin.

12. PepsiCo Inc.

13. Procter & Gamble Co.

14. Proton.

15. Honda Motor Co. Ltd.

16. Sony Corporation

Duties performed by MNCs

1. MNCs have an obligation towards employees, customers, governments, suppliers and communities as well as towards shareholders. This is known as Corporate Social Responsibility (CSR).

2. Most agree that CSR includes a duty to behave honestly, legally and with integrity, not to be corrupt but to deal fairly and obey the host country’s laws, culture and invironment.

ADVANTAGES:

1. MNCs can help to reduce poverty.

2.  They can bring money into a country through employment and investment.

3.  Three quarters of international investment in developing countries is from MNCs and private sources.

4.  They can create jobs and raise labor standards.

5.  They can pass on expertise in their field.
6. They can boost socio economic condition.
7. They can enhance global brotherhood.
8. They can reduce barriers.

DISADVANTAGES:

1. The MNC can be guilty of pollution or human rights abuse .

2.  The finance brought into a country by an MNC may be badly managed by that country’s government.

3. Multinationals create false needs in consumers .
4. MNCs may destroy competition & acquire monopoly powers.

5.  The transfer pricing enables MNCs to avoid taxes

Alternatives adopted by MNCs to operate business in other countries

1. Branches

2. Subsidiary Companies

3.  Joint venture companies

4. Franchise holders

5.  Turnkey Projects

REASONS FOR GROWTH

The reasons are

1. Expansion of market territory

2. Marketing Superiorities

3. Financial Superiorities

4.  Technological Superiorities

5. Product Innovation

MARKETING SUPERIORITY

1. It possesses a more reliable and up-to-date market information system

2. It enjoys market reputation and faceless difficulty in selling it’s product

3. It adopts more effective advertising and sales promotion techniques

Financial Superiority

1. It has huge financial resources to turn adverse situation in favor

2. It maintain high level of fund utilization by generating funds in one country and using them in another

3. It has easier access to external capital markets

BENEFITS RECEIVED FROM MNCs

1. Investment, income and employment

2.  Transfer of technology

3. Increase in export and decrease in import

4. Equalizing cost of factor of production around the world

5. Integration of national economy into the world economy

6. Contribution to research and development
7. Stimulation to domestic enterprise

8. Quality improvement and reduced domestic monopoly

9. Increased standard of living

10. Expert of management in the host country

11. Improve balance of payment position.

Prospects of capital market in Bangladesh

Prospects of capital market in Bangladesh

1. Within few months large profitable government enterprises are going to be listed under directs listing method adding value worth another billion dollars.
2. The telecom giants in Bangladesh are finalizing their offers for IPO in the market.
3. Power and energy sectors demand for capital is 5 to 10 billion dollar within short time to meet the immediate needs of 5000MW power demand.
4. A deep sea port requiring 1 billion dollar is going to start with a policy decision that it will also be listed.
5. The pharmaceutical sector and API enjoying WTO benefits is growing sharply.
6. Textile sector as backward linkage to thriving export oriented garments industries is booming.
7. Export oriented food processing industry needs huge capital and technical capacity to meet the growing standards in global market for marine food, fruits and poultry.
8. It sector with our talented developers, yet to demonstrate the massive potentials of software industry of the country.

9 Signing contract with Dubai-based Info-Tech Company for integrated software Book Building System has been introduced in Bangladesh Capital Market. Book Building System, modern and scientific system of price discovery, will be able to attract the entrepreneurs to get their profitable business ventures listed with the country’s growing securities market.

10. MSA Plus is being up-graded time to time in collaboration with India-based Cambridge Solutions to start internet-based transaction soon. After the completion of up-gradation of this work and commencement of internet-based trading, transaction facilities of securities would reach the doorsteps of investors across the world.

11. DSE is upgrading its automated trading system time to time to meet up the demand of the capital market. As number of transactions increases, DSE took initiatives to tune up its trading Server in December 2009. Present Trading Server has capacity to handle around 6,00,000 trades/day and to support trader IDs up to 5,000. At present Trading activities are being operated by around 3200workstations from more than 1100 locations in 30 districts.

12. In November 2009, DSE Implemented Web-based Market Data Server (MDS) for providing necessary Market Data to different electronic and print media, Cell Phone Companies, Research Institutes, Brokerage houses etc. DSE signed an agreement with a number of TV channels to provide real time trade data for broadcasting continuously during trading hours. Besides, online Trade Data is also available.

13. Plans are already underway to spread trading activities across the country and to the doorsteps of investors across the world but demand and supply mismatches been halting the process.

14. With the core intention of executing the entire professional works and to build its existing manpower into truly efficient and highly qualified human resources DSE has been continuing its tireless efforts to send its staffs to different organizations and abroad for training.

15. For smooth and time-bound supervision of all the professional jobs Chief Operating Officer and GM (Finance and Accounts) have been recruited. Recruitment at different levels has been being continued in tune with the growing volume of activities to accomplish all the activities.

16.To continue the present trend of securities market growth DSE Board of Directors has been maintaining strong communication with the relevant authorities including Finance Minister, SEC, Bangladesh Bank, National Board of Revenue, Bangladesh Institute of Capital Market and other relevant institutions, organizations, personalities and concerned authorities.

17. A Complaint Cell/Box has been set to listen to investors, relevant stakeholders including listed companies and others and necessary steps are taken to come out  the crisis time to time.

18.  For transparent and smooth settlement of securities and to also reduce time DSEhas been trying to establish an Independent Settlement and Clearing Company.

19. Meetings of different committees are going on regularly and time to time suggestions and instructions of those committees are carried out to enhance the departmental activities.

20. All the divisions and departments have become prompt in carrying out day today activities and also assigned responsibilities in a far better and quicker way than those of past events.

21. DSE Board of Directors visited USA and show-cased Bangladesh capital market to Non-Resident Bangladeshis to draw their investments in the market.

22. DSE has been arranging investors’ awareness program in different cities to make the investors aware of the real market situation. It has also been cooperating with Bangladesh Institute of Capital Market authority so that through this newly established institute, time-bound education and practical training on securities market related issues may be conducted.

23. Plans are also underway to arrange road-shows and investors’ awareness pro-gram abroad to spread securities market related issues among the NRBs.

24. Members of Board of Directors, members of different committees and officers of DSE have been continuously visiting different related organizations and stock exchanges and trying to utilize the experience for the better development of DSE.

25. DSE has been requesting the relevant and concerned authorities of Government and other organizations to simplify the investment procedure of NRBs.

PROBLEMS OF THE STOCK MARKET IN BANGLADESH

 PROBLEMS OF THE STOCK MARKET IN BANGLADESH

1. Enforcement with the compliance of rules and regulations.

2. Ethical orientation, education about capital & securities markets.

3. Difficult steps to identify the problems of book building method and make correction of the system.

4  Inefficient capital market both operational and informational

5  Substantial facilities and infrastructure of the Capital Market in Bangladesh.

6  Potential securities and narrow options for the investors.

7  Continuation of only dealer broker members.

8  Market dominated largely by unsophisticated investors.

9  Diversity in products' availability in the market

10 Proper and adequate disclosures  of financial statements

11 Corporate governance sponsor owners are managing the firm.

12 Irregular declaration for dividend.

13 Infusion of fake shares.

14 Exaggerated projection in prospectuses.

15 The environment of investment is unsuitable.

16 Political unrest

17 Due to controllable & uncontrollable factors.

18 Due to high risk & uncertainty prevailing in the capital of Bangladesh.

19  Industrial sickness of the capital market of Bangladesh.

20 Financial statements of the company are not prepared in time.

21  Unskilled, incompetent and unqualified people.

Bangladesh Capital Market ( stock market)

Bangladesh Capital Market

Bangladesh Capital Market consists of the Dhaka Stock Exchange (DSE) & the Chittagong Stock Exchange which were incorporated in 1954 & 1995 respectively. Both are members of South ASIAN Federation of Exchanges (SAFE), a forum in South Asia to promote the development of securities markets in the region. The Securities & Exchange Commission (SEC) supervises activities of the bourses and its members. Automated trading facilities are available at both bourses since 1998.  

The Central Depository Bangladesh Limited (CDBL) introduced its first electronic book entry in 2004. Market Intermediaries include 238 members of DSE, 135 members of CSE, 28 Full-Fledged Merchant Banks, 6 Asset Management Companies and 5 Custodians6 (Six) Bangladeshi Companies have been added to Dow Jones Safe-100 Index. 100% repatriation of capital, dividend and investment profits. Reinvestment of reparable dividend treated as new investment. No tax on capital gains.  10% of all IPOs are reserved for NRBs. 

World’s Bank Investor Protection Ranking for Bangladesh 19th, Pakistan 25th, India 38^th & Sri Lanka 70th.Bangladesh was considered as one of the Goldman Sachs Next 11 countries for a high potential of becoming the world’s largest economies in the 21st century along with the BRICs (Brazil, Russia, India and China). Easy access to ownership of Infrastructure Development companies, high net worth private banks and companies through Capital Market.