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.