Multinational Corporations (MNCs) MULTINATIONAL CORPORATION

INTRODUCTION: Multinational Corporations (MNCs) are giant industrial organizations with their Headquarters Located in one country, extending their industrial and marketing operations in several countries through a network of their branches or their Majority Owned Foreign Affiliates (MOFAs). MNCs are also known by other names, like/, transnational corporations, global corporations and international corporations, etc. 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. It can also be referred to as an international corporation. The first modern MNC is generally thought to be the Dutch East India Company, established in 1602. The key element of transnational corporations was present even back then: the Dutch East India Company was operating in a different country than the one where it had its headquarters. Nowadays many corporations have offices, branches or manufacturing plants in different countries than where their original and main headquarter is located. This is the very definition of a transnational corporation. Having multiple operation points that all respond to one headquarter. This often results in very powerful corporations that have budgets that exceed some national GDPs Multinational corporations can have a powerful influence in local economies as well as the world economy play an important role in international relationship globalization presence of such powerful players in the world economy is reason for much controversy.

DEFINITION: There is mo universally accepted definition of the term multinational corporation. Different authorities define the term differently. (1) As ILO Report says, The essential nature of the multinational enterprise lies in the fact that is managerial Headquarters are located in one country ( home country ) while the enterprise carries out operations in a number of other countries as well (host countries). (2) Obviously, what is meant is, A corporation that controls production facilities in more than one country, such facilities having been acquired through the process of foreigndirect investment. Firms that participate in international business however large they may be, solely by exporting or b hunting technology is not Multinational enterprises.

Multinational Corporations (MNCs) (3) The United Nations defines MNCs as, Enterprises which control assets- factories, mines, sales offices and the like in two or more countries.

Some multinationals enter foreign markets by buying stakes in companies of a particular country. For example, Anheuser-Busch companies, Inc. sought to expand into the Mexican beer market by buying a stake in Mexico's leading brewery, Grupo Modelo, SA. The following are some examples of multinational corporations:

American Telephone and Telegraph (U.S.) Bayerische Motoren Werke, AG (BMW) (Germany) Bayer, AG (Germany) Daimler-Benz, AG (Germany) General Motors Corporation (U.S.) Goldstar Company, Ltd. (South Korea) Grand Metropolitan, PLC (UK) Hitachi, Ltd. (Japan) L'Oreal, SA (France) Mitsubishi Corporation (Japan) Nestle, SA (Switzerland) Northern Telecom, Ltd. (Canada) PepsiCo (U.S.) Philips Electronics, NV (Netherlands) Rhone-Poulenc, SA (France) Royal Dutch Petroleum (Netherlands) Siemens, AG (Germany) SmithKline Beecham (UK) Sony Corporation (Japan) Telefonica de Espana (Spain) Toyota Motor Corporation (Japan) Uniliver PCL (Netherlands) Volkswagen, AG (Germany) Volvo, AB (Sweden)

MULTINATIONAL CORPORATIONS: STAFFING Staffing increasingly reflects the global orientation of multinational corporations. Employees, including key executives, are natives of the country where operations are located. Thus, Mexican executives are in charge of Mexican operations. In some cases, top corporate executives are nonnative of the parent company's home country. For example, General Motors Corporation promoted Spaniard (actually Basque) executive Jose Ignacio Lopez de Arriortua to head its supply operations at its Detroit headquarters. Lopez de Arriortua later left for Germany's Volkswagen company. The trend, then, is for employment to be based on merit, not nationality. Boards of directors also may reflect a corporation's international activities. For example, two executives from Mexico's Grupo Modelo, SA, sit on 2

Multinational Corporations (MNCs) Anheuser-Busch's board of directors, and Mexican businessman Carlos Slim Helu is on Southwestern Bell's board of directors. Both Anheuser-Busch and Southwestern Bell have important operations in Mexico. Since multinational corporations are engaged in a variety of activities, there are no generic requirements for entry level positions. Top executives, however, usually have at least a Bachelor of Arts or a Bachelor of Science degree, often in business or a related field. It is not unusual for top U.S. executives to have a graduate degree, usually a Masters of Business Administration. MULTINATIONAL CORPORATIONS: RESEARCH The following are a sample of institutions that study multinational corporations: Center for Human Resources University of Pennsylvania Wharton School Philadelphia, PA 19104 (215) 896-5606 Global Information Services 1605 South Bend Blvd. St. Louis, MO 63117 (314) 647-0081 Center For Transnational Corportations United Nations DC-2 New York, NY 10017

Program on Multinational Corporations and Third World Development University of Notre Dame 106 Hurley Notre Dame, IN 46556 (219) 647-7616

Some of the issues researched at these and other institutions include the economic, political, environmental, and social effects of multinational corporations in Third World countries, development and enforcement of ethical standards for multinational corporations, and how these companies operate within regional trade blocs.

GROWTH OF MNCs The rapidity with the MNCs are growing is indicated by the fact that while according to the world investment report 1997 there were about 45,000 MNCs with 2,80,000 overseas affiliates; according to the world investment report 2001, there were over 63,000 of them with about 8,22,000 overseas affiliates. China was host to about 3.64 lakh of the affiliates (i.e., more than 44% of the total) compared to more than 1400 in India. The developed countries have less than 12% if these affiliates. The possess staggering resources as would be clear from the fact that the sales of 200 top corporations in1982 were equivalent of 24.2 per cent of the worlds GDP and have risen to 28.3 per cent of the world GDP in 1998. This shows that 200 top MNCs now control over a quarter of the worlds economic activity. 3

Multinational Corporations (MNCs)

In fact the combines sales of thee 200 MNCs estimated at &7.1 trillion in 1998 surpass the combined economies of 182 countries. If we subtract the GDP of the big 9 economies -USA, Japan, Germany, France, Italy, UK, Brazil, Canada and china-from the worlds GDP, the GDP of the remaining 182 countries of the world comes to $6.9 trillion in 1998 which is less than the sales of the 200 top MNCs.

An idea of the giant size of these MNCs can also be had from the revelation made in a study conducted by the Washington based institute of policy studies (IPS) that of the 100 largest economies in the world, 51 are corporations; only 49 are countries.

The MNCs are estimated to employ directly, at home and abroad. Around73 billion people representing nearly 10 per cent of paid employment in non-agricultural activities worldwide and close to 20 per cent in the developed countries considered alone/ in addition , the indirect employment effect of the TNC activities ate at least equal toy hew direct effects and probably much larger.

For example, the US footwear company Nike currently employs 9000 people; while Nearly 75,000 people are employed by is independent sub- contractors located in different countries. Based on such information, the total number of jobs associated with TNCs worldwide may have been 150 million at the beginning of the 1990s.

REASONS FOR THE GROWTH OF MNCs The important reasons for the growth of multinationals are as follows: 1. Expansion of market territory: The increase in per capita income alongside the growth of various economies and growth of GDP resulted in the rise of living standards of the people. Due to these factors the market territory of the firms expended. In addition to this, the large operations of the MNCs builds up its international image, this contributed to extend its market territory beyond the physical boundaries of the country in which it is incorporated. 2. Market Superiorities: A number of market superiorities can have observed in MNCs over the domestic companies. They may be: a. Availability of more reliable and up to date data and information: b. They enjoy market reputation: c. They adopt more effective advertising and salad promotion technique and thymus they face less difficulties in marketing the products: 4

Multinational Corporations (MNCs) d. They have efficient warehousing facilities due to lower inventory requirement and also enjoy quick transportation 3. Financial superiorities: An MNC enjoys financial superiorities over domestic companies. They are: a. Huge financial resources at the disposal of the MNCs. they can turn the environment and circumstances in their favor by utilizing these resources: b. They have easy access to external capital markets: c. Because of its international regulation, they can raise funds from international banks and financial institutions easily. 4. Technological superiorities: Expansion or growth of MNCs is dot to the technological backwardness of underdeveloped contraries. Infect MNCs are rich in technology. The rich financial resources of the MNCs enable them to invest on R$ D and develop the advanced technology. There are certain reasons due to which the developing countries regard the transfer of technology from the MNCs. These reasons are: a. Lack of industrialization and insufficient resources: b. Local manpower , capital, etc. cannot be optimally utilized by the developing countries on their own: c. Developing countries are unable to import raw materials, capital equipment, technology, etc: on their own due to paucity of resources: d. The developing countries also lack in marketing the products due to competition: e. Lack in exploiting mineral and nature of its own.

5. Product innovation: Advanced R$D departments enable MNCs to develop new products and superior designs of their products. Developing and underdeveloped countries suffer from limitation in this regard. Therefore, they invite MNCs to their countries.

FEATURES OF MULTINATIONAL CORPORATIONS: Main feature of MNCs are as follows: 1. Giant size: MNCs are of giant size. Their assets, sales and profits run into multi-core. For instance, the biggest multinational corporation, ITT of US has 708 branchless in 67 countries which are spread over.6 continents. Another multinational corporation of USA, namely general motors which has assets worth more than 9,000 core dollars. According to one estimate made by experts of UNO, total sale proceeds of 350 multinational corporation was $2,500 million and they 5

Multinational Corporations (MNCs) provided employment to 2.5 core person. They had their subsidiaries number more than 23,000. Their contribution to GNP of capitalist countries was about 40 per cent. Their sale proceeds were more than the GNP of many countries. 2. International operations: Activities of MNCs are sprees over many countries. Their parent corporation is located in one country and their subsidiaries are scattered in many countries of the world. Parent company may have 51 per cent to 100 per cent shares in the subsidiaries. Parent Corporation has full control over subsidiaries. 3. Transfer of resources: Parent Corporation easily transfers its resources, technique, managerial ability, raw materials and finished products to subsidiaries companies. 4. Varies activities: MNCs perform varies functions. One of their functions is concerned with services. These corporations transfer capital and techniques. Regarding knowledge of sales of goods, foreign trade, packing, etc. they provide research and development services. Other activities are related to production of petroleum, etc. in order to make available these services and products, they function both as production and buyers. Historically, MNCs had initially development activities related to the production of minerals and raw materials. Along with it they also invested their capital in plantation and agricultural activities for purposes of export. These days, MNCs are mainly engaged in the development of industries, of their total investment 28 per cent in industries, 40 per cent in petroleum and 9 per cent in minerals. 5. Oligopolistic Market: MNCs produce those goods which have small number of producers or sellers. In other words where oligopolistic marketer condition prevail. Consequently these conditions have control over the prices of the products. By fixing high prices they earn mode profits and prevent the entry of mew firms in the market. 6. Spontaneous evolution: Generally, there is spontaneous evolution of multinational corporations. There is no need of any pre-planning. Many forms gradually assume international character. Several factures contribute to the development of MNCs, e.g., difference in wage rate in different countries, favorable trade conditioned etc. 7. Multinational ownership: Citizens of many countries have their share in the capital of multinational corporations. Their shares are bought and sold at international level. 8. Multinational management: MNCs are managed at international level. Their managing board is composed of nationals of several countries. 6

Multinational Corporations (MNCs) ORGANISATION DESIGN AND STRUCTURE OF MNCs: Organization is the social and economic voids in which a number of persons perform different suites in order to attain common goals. Organizations also help individuals in attuning those personal objectives which they cannot achieve alone. Organization is only means to an end. Organization design is the process in which roles and relationships are analyzed to achieve specific collectively. It leads to the definition and description of more or less formal structure.

STEPS INVOLVE IN DESIGNING STRUCTURE: The following steps are involved in designing the organizational structure: 1. Analysis of present and future circumstances and environmental factors, 2. Planning and implementation of policies: The process of defining aims, objective, activities and structure of and enterprise is called as organizational analysis. It includes the analysis of following aspects: a. External environment economic, political and legal, etc. b. Objectives specific aims or targets to be achieved. c. Overall aims and purpose of the enterprise survival, growth, profit maximization, wealth maximization, etc. d. Action ships assessment of work being done and what needs to be done. e. Relationships from the viewpoint of communications, i.e., top middle and lower level. f. Organization structure- includes grouping of activities span of management levels etc. g. Job structure- job design job analysis job description job specification etc. h. Organization climate working atmosphere of the enterprise. Ti includes team work and cooperation commitment communications creativity conflict resolution participation and trust. i. Management style includes laissez faire, democratic and autocratic. j. Human resource availability of human resources based on skill knowledge etc. k. Decisions to be taken across horizontal and vertical dimensions.

1. Vertical or tall organizations: Vertical organization structure increases the length of the organizations hierarchy chain. In this type of organization structure the authority and responsibility more from top to bottom in straight lime./ accountability flows from the lowest level to the highest level. The centralities of authority are found in this structure.

Multinational Corporations (MNCs)

2. Horizontal or flat organizations: When the breath of the organizations structure increases then it refers to horizontal or flat organization. Here the breadth of the number of hierarchy reduces and thus the authority is comparatively more decentralized. It is suitable for small firms. Managers with broad span of control must grant more authority to his subordinates.

APPROACHES TO ORGANISATION STRUCTURE OF MNCs: There are fiber approaches to structure the organization. They are: (1) Product organization structure: When in a business enterprise many times if things are manufactured then departmentation is done on the basis of product instead of function. Because there is a constant feat that the production of some things and their marketing will consume much time while some other things will get only a little attention. Consequently some products will be sold in greater number while others will find little market. To avoid such a situation all the functions of the enterprise are divided on the basis of product and distributed among different department. The head of the department looks after all the functions concerned with that product that is purchase, sales, advertisement, production, finance, etc all these functions are performed separately by different departments. MERITS: It is possible to give equal importance to every product. Information about the profit and loss from every product is available. Because for every new product a separate department can be opened it is easy to expand the concern. All departments are independent units and therefore the weakness of one department does not affect the other. This system makes possible the complete development of the managers. The managers get full opportunity to display their ability of competence. The competition between all the product departments and their managers bring profitable results for the concern.

Multinational Corporations (MNCs) The benefits of specialization become available.

DEMERITS It increases expenses because of duplicity of functions in the producer departments. Resources are misused. This system is suitable for the big concerns. There is a difficulty in exercising control at the top hierarchy.

(2) Geographical organization structure: Departmentation is done on the basis of regions or areas when the customers of some business concerns are not confined to local region but are spread over a larger region. The chief reason for such departmentation is intended to keep in minds the tastes and difficulties of the customers which happen to differ from region to region and country to country. If the business of a concern is spread all over the country. The business many be divided into four regions or zones instead of controlling the business from a single place. For example the division can be like china USA UK at the International level. Each zone is in itself a complete business unit and for which a separate zonal manager is appointed. The zonal managers remain in torch with their customers and understand their problems, so they easily solve them. This structure is also used by chain stores; power companies restaurant chains, dairy products, banking companies, insurance companies. Etc. Under each zone departmentation can be done on the basis of either functions or products which have been made clear in the following diagram: Managing director

Headquarter managers, production, marketing, Finance, human resources and R & D

Asia America

Africa

Europe

North America

South

Subsidiary Unit

Manufacturing

Sales

Multinational Corporations (MNCs)

MERITS: Because of the direct contact with the customers their problems can be easily understood and solved. Local competition can be easily faced. Effects regional control is possible. Such an organization has the benefit of local factors like the raw material labor market etc. Information about the local profit and loss position makes more investment possible in the profit yielding region. The competition to show good profits among the regional managers benefits the concern

DEMERITS: Some functions which can be handled more economically at the central level become expensive at the regional level. Polities cannot be implemented effectively because of the distance between the planners and the implementers. More managerial employees are required which increases expenses. Control becomes difficult because of the distance between the head office and the regional offices.

(3) Decentralized Business Unit Structure: Since 1920, the diversified companies have a trend of grouping activities based on product lines. In diversified firm, each activity is treated as aloof a business unit. Following diagram show the decentralized line of business type of organizational structure:

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Multinational Corporations (MNCs) DECENTRALISED ORGANISATION STRUCTURE Managing Director

Headquarter managers: Production, Marketing, Finance, Human Resources and R & D

Chief Manager Business A

Chief Manager Business B

Chief Manager Business C

Product A

Product B

Product C

Product D

Marketing Manager

Finance Manager

Production Manager

Manager Human Resources

Manager R&D

MERITS

Each unit is managed by and independent general manager with authority to formulate and implement strategies. Each unit is an-aloof profit centre. Diversification is generally managed by decentralized decisionmaking.

DEMERITS

Absence of mechanism for coordinating related activities across business unit is the major problem of this type of organization. Working of general manager of each unit independently makes coordination complicated task.

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Multinational Corporations (MNCs) (4) Strategic Business Unit structure: A structure business unit is the grouping of business subsidiaries based on some common important strategic elements. The business can be effectively controlled, if the related businesses are grouped into strategic units. As a single chief executive cannot control a number of decentralized units, therefore, an efficient and senior executive is delegated with the authority and responsibility for its management. MERITS

It reduces the span of control of the corporate headquarters. Better coordination between divisions with similar missions, products, markets and technologies become possible. The optimum utilization of scare resources become possible as it helps in allocating corporate resources to the greatest opportunities. Business units are organized on the basis of strategically relevant method.

DEMERITS Corporate headquarters becomes more distant from the division. Conflicts in strategic business unit arise as each manager wishes to grab greater share of corporate resources. Corporate portfolio analyses become complicated one.

(5) Matrix Organization Structure: Under this method both the methods on the basis of functions and on the basis of products- are used in a combined manner. First of all the activities of a company are divided on the basis of functions and department established, which happen to be the permanent departments of the organization. For example the purchase department, manufacturing department, finance department, research and development department, etc. For example, permanent heads of the department are appointed who have the final authority regarding their departments. After the establishment of these permanent departments the departmentation on the basis of project or product is done the moment the concerns get and order. Both functional and project managers exercise authority over organizational activities in matrix structure. Thus personnel in this structure have two superiors via a project manager and the functional manager at the headquarters level. 12

Multinational Corporations (MNCs)

MERITS The company enjoys the advantages of both project and functional type of organization structure. On each project the number of people appointed happens to be according to the need and remaining persons are put on the routine functions of the concern. In this way economy in costs is affected by making the optimum utilization of human resources. This structure has considerable flexibility. The personal can be transferred from one project to the depending upon the need of the project. Each project manager is in charge of a unit. Therefore he can be developed as a general manager through performing general management functions. Under the matrix organizational structure the expansion of the concern is easily possible because the managers can establish department in respect of each project

DEMERITS The principle of unity of command is violated in such an organization because the personal receive orders both from departmental managers and project managers. The aims and priorities of both the types of managers are different .The project managers desire that whenever they need some services the departmental manager should immediately make them available. On the other hand the departmental managers wish to maintain their time schedule in respect of every work. This causes conflict among them. In cash of failure the project managers blame the functional managers and the functional managers shift the responsibility to the project managers. The members of the project team do not know whether they should consult the project manager or the functional manager. Such an ambiguous situation creates problem of communication. ADVANTAGES AND DISADVANTAGES OF MNCs Multinational corporations have unique and empirical capacity to increase production and distribution. Whatever they make radical charges in the existing productions system of that country. Their superior technologies, professional approach, managerial competence and quality are of paramount importance of the country. According to the ILO Report For some the multinational companies are an invaluable dynamic forces and instrument for wider distribution of capital technology and employment for others 13

Multinational Corporations (MNCs) they are monsters which our present institutions national or international cannot adequately control a law to themselves with no reasonable concept that the public interest or social policy can accept ADVANTAGE OF MNCs TO THE HOST COUNTRY MNCs help the host country in the following ways: 1. The investment level employment level and income level of the host country increases due to the operations of MNC in the country. 2. The ancillary and service industry of the host country increases and thus the level of industrial and economic development increase. 3. Modern technology and managerial services are made available to enterprises established by MNCs. It is through the medium of MNCs that technology has been transferred to other countries. 4. Latest and sophisticated management techniques can also be obtained by the host country form the management practice of MNCs. 5. MNCs make available marketing services especially export related marketing research advertisement spread of marketing information storage facilities transport packing design etc. 6. Countries where in MNCs establish their subsidiaries have more employment opportunities. 7. Domestic industry can make use of the R& D outcome of MNCs. 8. The host country can reduce its imports due to production of those goods by MNCs which otherwise were not available in the country. ADVANTAGES OF MNCs TO THE HOME COUNTRY Home country also gets some advantages from the operations of MNCs. They are: 1. The marketing of goods produced in the home country becomes possible throughout the world through MNCs. 2. Employment opportunities both at home and abroad to the home country people also increase due to large scale operations of the MNCs.

3. MNCs contribute to the favorable balance of payments for the home country in the longrun. 14

Multinational Corporations (MNCs)

4. MNCs also help in activating the industrial activity of the home country. DISADVANTAGES OF MNCs TO THE HOST COUNTRY 1. The main objective of the MNCs is to earn maximum profit. To achieve this objective they invest their capital in underdeveloped countries. The reason being that labor is very cheap in these countries. Moreover these countries provide cheap raw materials and also profitable markets for finished goods to be sold by developed countries. Big chucks of profits earned in underdeveloped countries go to headquarters of MNCs. According to one estimate, 300 MNCs of America received about $ 40 billion as profit from underdeveloped countries. 2. MNCs kill the domestic industry by monopolizing the host countrys market. 3. Development of scare resources is adversely affected by managerial abilities technology and foreign contacts made available by MNCs. Local industry cannot face their competition as such the same remain underdeveloped. 4. MNCs by making capital investment in the host country discourage the domestic rate of saving in investment. Domestic investment is discouraged because it cannot complete with MNCs. 5. Although MNCs prove helpful in improving foreign exchange situation of the underdeveloped countries for the short-period but the y prove harmful in the long-run. 6. Adoption of ethnocentric approach in staffing by the MNCs causes unemployment in the host country. 7. Indiscriminate use of natural resources by MNCs may cause fast depletion of the resources of the host county. 8. MNCs have not adhered to the goal of economic equality in the following way: (i) (ii) (iii) (iv) Regional inequality has aggravated as MNCs set up industries in advanced regions and not in backward regions. Income gap among people also get widened as MNCs pay more salaries and perks to their employees. These corporations further accentuate rural and goods disparity. These corporations give more importance to the production of luxury goods than the production of mass consumption goods.

9. MNCs also influence the decision-making process of the governments of developing countries through their financial and other resources.

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Multinational Corporations (MNCs) 10. MNCs evade their tax liability by adopting transfer pricing methods. According to this method MNCs buy intermediate goods from their subsidiaries abroad at high price and thus reduce their local profits. 11. MNCs also indulge in unethical and corrupt practices for their self-interest. They do not hesitate to offer bride to highly placed officials and politicians of other countries and oblige them to enter into such transactions which serve their interest but are harmful to the interest of the country concerned. 12. The MNCs do not engage in R&D activities relevant to the development countries. Their R&B efforts are relevant to advantages countries. The MNCs transfer the technology development in advanced countries to the developing countries through it is not conducive to their development. DISADVANTAGES OF MNCs TO THE HOME COUNTRY These include: (1) The transfer of capital from the home county to various host countries by MNCs causes unfavorable balance of payment position. (2) Industrial and economic development of the home country in neglected as MNCs invest the capital in more profitable countries. (3) Foreign culture brought by MNCs may prove detrimental to the interest of the home country.

CODE OF CONDUCT FOR MNCs The code of conduct for MNCs drawn up by the Commission on Transnational Corporations set up by USA Economics and social Council required MNCs to: (1) Respect the national sovereignty of host countries and observe their domestic laws regulations and administrative practices. (2) Adhere host nations economic goals development objectives and socio-cultural values. (3) Respect human rights. (4) Not engage in corrupt practices. (5) Apply good practices in relation to payment of taxes abstention from involvement in anti competitive practice consumer and environment protection and the treatment of employees.

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Multinational Corporations (MNCs) (6) Disclose relevant information to host country government. According to the 1976declaratin of the OECD Code of Practice of MNC operations MNCs should contribute positively to economic a social progress within host nations. Its main provisions were that MNCs should: Contribute to host countries science and technology objectives by permitting the rapid diffusion of technology Not behave in manners likely to restrict competition by abusing dominant positions or market power; Provide full information for tax purposes; Consider the host nations balance of payments objectives when taking decisions; Consult with employee representatives regarding major changes in operations avoid unfair discrimination in employment and provide reasonable working conditions: Regularly make public significant information on financial and operational matters. Host countries themselves should possess the absolute right to nationalize foreign-owned assets within their frontiers but must pay proper compensation; The UN general assembly has rejected the plea of developing countries to make these codes legally binding on the behest of developed countries.

MNCs IN INDIA Most of the MNCs in India had originally entered the Indian market during the colonial era. The actual number of MNCs entered in post independence ea was small. The entry was generally made through collaboration with big Indian business houses. For example Bajaj tempo and Telco joined hands with Daimler Benz of West Germany: LML joined hands with Piaggio of Italy and Maruti established joint venture with Suzuki of Japan and Cyanamid CIBA and Ciba-Geigy jointly established new undertakings with alpha house Birlas became the spokesmen of Kaisers and ford. At the end of 1990, there were 469 foreign companies in India. There are many Indian companies with foreign equity participation too. For example Indian outfits of MNCs; like ponds Johnson and Johnson Colgate Palmolive. Hindustan lever etc. there are several MNCs in the pharmaceutical industry like Glaxo, Bayer, Sandoz and Hoechst.

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Multinational Corporations (MNCs) 1. REGULATION OF MNCS IN INDIA Different government agencies in India control MNCs. These agencies include: (i) the department of company affair (ii) The Reserve Bank of India (iii) The Ministry of Industrial Development and (iv) The ministry of finance. Control over MNCs in India is not efficient as these agencies have no coordination among themselves.

The government of India imposed certain regulation to control MNCs. These are: (i) (ii) Permissible period of agreement was reduced from 10 to 5 years. The maximum rate of royalty was imposed in technology imports for those industries which were allowed to import technology. Those industries were moot allowed to import technology where domestic companies are competent. Exports and other marketing restrictions were imposed.

(iii)

(iv)

Some regulations as stated above were imposed. However these regulations are moot adequate and therefore MNCs be properly regulated to safeguard the interest of the country. Following suggestions are given to regulate them. Government interference: Host country government should have its representatives on the management of thee corporations. Interferences of the representatives of the government is must on such matters as influence or are likely to influence the economic development of the country. It should be made clear to the MNCs that if they do not function in the Interest of the country they are likely to be nationalized. Local ownership: Majority or 51 per cent shares of the subsidiaries of MNCs should be held special industries of the host country. Beneficial collaborations: Government should allow collaboration of MNCs for those special industries where such collaboration is essential. Research of an appropriate technology: MNCs many be compelled to spend a part of their profit in the development of appropriate R $ D for the benefit of host country.

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Multinational Corporations (MNCs) Substitution of technology: Only in the initial stages of development the imported technology should be used. Thereafter that technology should be developed indigenously so that the dependence on MNCs could be reduced. Collaboration in heavy and basic industries: Collaboration with MNCs should be allowed only in heavy and basic industries. Collaboration in consumer goods industry should not be allowed as it many hamper the domestic industry. Check on monopolistic tendencies: Oligopolistic or monopolistic tendencies of MNCs should be closely watched to safeguard the interest of consumers as well as of local producers.

2. SALIENT FEATURES OF MNCS IN INDIA: The salient features of MNCs in India are as follows: a. Bi-Country: Most of the MNCs functioning in India have their head offices in countries i.e. and U.S.A. out of 171 subsidiary companies 116 had their head offices in U.K. and 25 in U.S.A. b. Trends of MNCs: Numbers of MNCs in India have gone down but the volume of their assets increased considerably. In 1974, the number of MNCs in India was 575 which came down to 350 in 1980. But their assets increased from Rs. 1741 crore to Rs. 2401 crore. During the same period the number of subsidiaries also came down to 125 from 188. c. Sources of capital: Large numbers of subsidiaries operating in India have mobilized their financial resources from within India. d. Industry wise distribution: Of all the MNCs operating in India 30 per cent are engaged in plantation (tea) and mining. Large of their branches are also found in the field of trade banking and services their number is relatively less in case of industries. Share of commerce trade and finance in the total assets of these corporations is 76 per cent. Share of processing industry and transport is 6 per cent each respectively. e. High rate of profitability: The rate of profitability of MNCs in comparison to domestic industry is very high. Profitability of MNCs (private) on an average was 34% whereas that of Indian private companies was 11.5 per cent. Similarly the 19

Multinational Corporations (MNCs) profitability of foreign public limited companies was 24 per cent as again only 11 per cent in case of domestic public limited companies. f. Subsidiaries: A company is called a subsidiary company if at least 50per cent of its paid up capital is held by another company. Presently there are 88 subsidiaries of MNCs. Out of these 83 companies the share of MNC varies 70 to 100 per cent of their share capital.

g. Heavy remittances abroad: According to Dr.K.N.Raj, rate of profitability on MNCs is very high. In a short period they repatriate the amount of initial investment to their head office. Besides they also remit to their parent company; large amounts by way of royalty and technical services. For example Essoan American Petroleum Company had remitted to its head office Rs. 83 crore as a part of profit on investment of Rs. 30 crore in India. h. Limited transfer of improves technology: The MNCs in India have kept their technology a closely guarded secret. Transfer of improved technology by MNCs to India has taken place on a very limited scale. It is the old technologies which mostly continue to prevail in India. i. Indianisation: MNCs have accepted the proposal of Indianisation. According to the provision of foreign exchange management act (FEMA), all foreign companies had to reduce their ownership to 74 per cent or they had to reduce their share in the share capital of Indian branches to 40 per cent. Most of the MNCs have accepted these conditions. Many of them have already taken steps to reduce the amount of foreign capital. Indianisation a myth: according to Prof. Dali s. swami, on account of the following reasons Indianisation is a merely a myth. 1. Rate of profitability of MNCs is so large that despite the reduction of share capital from 100 per cent to 74% there has been no fall in the amount remitted to foreign countries from India. 2. Despite the fall of the share of foreigners in the share capital MNCs will have the right to appoint top executives in their branches and subsidiaries, the corporation even now appoint foreigners on senior posts. 3. Rate of taxes are now in respect of public limited company as against private limited company 20

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ARGUMENTS FOR AND AGAINST MNCS IN INDIA The economists differ in opinion regarding advantages and disadvantage of MNCs for the Indian economy. Some are in favor of MNCs whereas some are against it. Before reaching to any conclusion, it is essential to analyze the beneficial as well as harm full effects of MNCs. I. Beneficial effects The benefits of MNCs as follows: (i) Globalization of the economy: The MNCs provide managerial skill capital computerized technology and other resources of world class. The mixture of these resources with Indian labor and raw material helped increasing the export of Indian companies. (ii) Increase in employment: The MNCs caused increase in employment opportunities through the multiplier effect of investment. (iii)Growth of new industries: MNCs have also contributed in the growth of new industries by providing them managerial skill technical knowhow and working capital.

II.

Harmful effects The following are the major harmful effects of MNCs: (i) Encouraged demonstration effects : The MNCs made heavy expenditure on advertisement and publicity .it result in waste full expenditure whose burden is ultimately to be borne by Indian customers (ii) Completion with small scale industries: MNCs have entered in the production of several such items which were exclusively reserved for small scale industries like potato chips biscuits etc. (iii)Providing prohibited goods: Profit earning is main objective of MNCs. To achieve this objective they do not hesitate to indulge in the production and selling of harm full goods. Many of medicines and consumer durables the production of which has been 21

Multinational Corporations (MNCs) prohibited in the foreign countries are being manufactured and sold in India by MNCs. (iv) Unfair trade practices: The MNCs also used unfair trade practices .for instance to save the corporate tax they over in voice the imports and under invoice the exports. (v) Fluctuation In investment: In the initial stages of their establishment the MNCs have invested their profit in India. But after some time they started to remit their profits to parent company by way of royalty and dividends. (vi) Production of profitable consumer goods: The MNCs are interested only in the profitable consumer goods. They do not prefer to invest in the production of capital goods like machines tools engineering etc.

ENTRY OF MULTINATIONAL CORPORATIONS INTO NEW MARKETS Multinational corporations follow three general procedures when seeking to access new markets: merger with or direct acquisition of existing concerns; sequential market entry; and joint ventures. Merger or direct acquisition of existing companies in a new market is the most straightforward method of new market penetration employed by multinational corporations. Such an entry, known as foreign direct investment, allows multinationals, especially the larger ones, to take full advantage of their size and the economies of scale that this provides. The rash of mergers within the global automotive industries during the late 1990s are illustrative of this method of gaining access to new markets and, significantly, were made in response to increased global competition. Multinational corporations also make use of a procedure known as sequential market entry when seeking to penetrate a new market. Sequential market entry often also includes foreign direct investment, and involves the establishment or acquisition of concerns operating in niche markets related to the parent company's product lines in the new country of operation. Japan's Sony Corporation made use of sequential market entry in the United States, beginning with the establishment of a small television assembly plant in San Diego, California, in 1972. For the next two years, Sony's U.S. operations remained confined to the manufacture of televisions, 22

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the parent company's leading product line. Sony branched out in 1974 with the creation of a magnetic tape plant in Dothan, Alabama, and expanded further by opening an audio equipment plant in Delano, Pennsylvania, in 1977. After a period of consolidation brought on by an unfavorable exchange rate between the yen and dollar, Sony continued to expand and diversify its U.S. operations, adding facilities for the production of computer displays and data storage systems during the 1980s. In the 1990s, Sony further diversified it U.S. facilities and now also produces semiconductors and personal telecommunications products in the United States. Sony's example is a classic case of a multinational using its core product line to defeat indigenous competition and lay the foundation for the sequential expansion of corporate activities into related areas. Finally, multinational corporations often access new markets by creating joint ventures with firms already operating in these markets. This has particularly been the case in countries formerly or presently under communist rule, including those of the former Soviet Union, eastern Europe, and the People's Republic of China. In such joint ventures, the venture partner in the market to be entered retains considerable or even complete autonomy, while realizing the advantages of technology transfer and management and production expertise from the parent concern. The establishment of joint ventures has often proved awkward in the long run for multinational corporations, which are likely to find their venture partners are formidable competitors when a more direct penetration of the new market is attempted. Multinational corporations are thus able to penetrate new markets in a variety of ways, which allow existing concerns in the market to be accessed a varying degree of autonomy and control over operations.

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CONCERNS ABOUT MNCS While no one doubts the economic success and pervasiveness of multinational corporations, their motives and actions have been called into question by social welfare, environmental protection, and labor organizations and government agencies worldwide. National and international labor unions have expressed concern that multinational corporations in economically developed countries can avoid labor negotiations by simply moving their jobs to developing countries where labor costs are markedly less. Labor organizations in developing countries face the converse of the same problem, as they are usually obliged to negotiate with the national subsidiary of the multinational corporation in their country, which is usually willing to negotiate contract terms only on the basis of domestic wage standards, which may be well below those in the parent company's country. Offshore outsourcing, or off shoring, is a term used to describe the practice of using cheap foreign labor to manufacture goods or provide services only to sell them back into the domestic marketplace. Today, many Americans are concerned about the issue of whether American multinational companies will continue to export jobs to cheap overseas labor markets. In the fall of 2003, the University of California-Berkeley showed that as many as 14 million American jobs were potentially at risk over the next decade. In 2004, the United States faced a half-trilliondollar trade deficit, with a surplus in services. Opponents of off shoring claim that it takes jobs away from Americans, while also increasing the imbalance of trade. When foreign companies set up operations in America, they usually sell the products manufactured in the U.S. to American consumers. However, when U.S. companies outsource jobs to cheap overseas labor markets, they usually sell the goods they produce to Americans, rather than to the consumers in the country in which they are made. In 2004, the states of Illinois and Tennessee passed legislation aimed at limiting off shoring; in 2005, another 16 states considered bills that would limit state aid and tax breaks to firms that outsource abroad. In sourcing, on the other hand, is a term used to describe the practice of foreign companies employing U.S. workers. Foreign automakers are among the largest insourcers. Many non-U.S. auto manufacturers have built plants in the United States, thus ensuring access to American 24

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consumers. Auto manufacturers such as Toyota now make approximately one third of its profits from U.S. car sales. Social welfare organizations are similarly concerned about the actions of multinationals, which are presumably less interested in social matters in countries in which they maintain subsidiary operations. Environmental protection agencies are equally concerned about the activities of multinationals, which often maintain environmentally hazardous operations in countries with minimal environmental protection statutes. Finally, government agencies fear the growing power of multinationals, which once again can use the threat of removing their operations from a country to secure favorable regulation and legislation. All of these concerns are valid, and abuses have undoubtedly occurred, but many forces are also at work to keep multinational corporations from wielding unlimited power over even their own operations. Increased consumer awareness of environmental and social issues and the impact of commercial activity on social welfare and environmental quality have greatly influenced the actions of all corporations in recent years, and this trend shows every sign of continuing. Multinational corporations are constrained from moving their operations into areas with excessively low labor costs given the relative lack of skilled laborers available for work in such areas. Furthermore, the sensitivity of the modern consumer to the plight of individuals in countries with repressive governments mitigates the removal of multinational business operations to areas where legal protection of workers is minimal. Examples of consumer reaction to unpopular action by multinationals are plentiful, and include the outcry against the use of sweatshop labor by Nike and activism against operations by the Shell Oil Company in Nigeria and PepsiCo in Myanmar (formerly Burma) due to the repressive nature of the governments in those countries. Multinational corporations are also constrained by consumer attitudes in environmental matters. Environmental disasters such as those which occurred in Bhopal, India (the explosion of an unsafe chemical plant operated by Union Carbide, resulting in great loss of life in surrounding areas) and Prince William Sound, Alaska (the rupture of a single-hulled tanker, the Exxon Valdez, causing an environmental catastrophe) led to ceaseless bad publicity for the 25

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corporations involved and continue to serve as a reminder of the long-term cost in consumer approval of ignoring environmental, labor, and safety concerns. Similarly, consumer awareness of global issues lessens the power of multinational corporations in their dealings with government agencies. International conventions of governments are also able to regulate the activities of multinational corporations without fear of economic reprisal, with examples including the 1987 Montreal Protocol limiting global production and use of chlorofluorocarbons and the 1989 Basel Convention regulating the treatment of and trade in chemical wastes. In fact, despite worries over the impact of multinational corporations in environmentally sensitive and economically developing areas, the corporate social performance of multinationals has been surprisingly favorable to date. The activities of multinational corporations encourage technology transfer from the developed to the developing world, and the wages paid to multinational employees in developing countries are generally above the national average. When the actions of multinationals do cause a loss of jobs in a given country, it is often the case that another multinational will move into the resulting vacuum, with little net loss of jobs in the long run. Subsidiaries of multinationals are also likely to adhere to the corporate standard of environmental protection even if this is more stringent than the regulations in place in their country of operation, and so in most cases create less pollution than similar indigenous industries.

WHY ARE MULTINATIONAL COMPANIES IN INDIA? There are a number of reasons why the multinational companies are coming down to India. India has got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies in India. For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a result, there was lesser number of companies that showed interest in investing in Indian market. However, the scenario changed during the financial liberalization of the country, especially after 1991. Government, nowadays, makes continuous efforts to attract foreign investments by relaxing many of its policies. As a result, a number of multinational companies have shown interest in Indian market.

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PROFIT OF MNCS IN INDIA It is too specify that the companies come and settle in India to earn profit. A company enlarges its jurisdiction of work beyond its native place when they get a wide scope to earn a profit and such is the case of the MNCs that have flourished here. More over India has wide market for different and new goods and services due to the ever increasing population and the varying consumer taste. The government FDI policies have somehow benefited them and drawn their attention too. The restrictive policies that stopped the company's inflow are however withdrawn and the country has shown much interest to bring in foreign investment here. Besides the foreign directive policies the labour competitive market, market competition and the macro-economic stability are some of the key factors that magnetize the foreign MNCs here. Following are the reasons why multinational companies consider India as a preferred destination for business: Huge market potential of the country FDI attractiveness Labor competitiveness Macro-economic stability

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 under27

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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

Multinational corporations are more harmful than beneficial to developing countries Multinational corporations are large companies that expand their businesses to other countries through globalization. Many American companies have moved their factories to countries with a less developed economy and political system. The American dream has multiplied multinational corporations so that we are able to take advantage of cheap consumerist products for cheap labor in order to achieve our dreams of having a big house, fancy car, and new technologies that the economic market has to offer. The whole world is interconnected by the global trading system. These corporations have a strong hold on the local media and influence a consumerist ideology on the people through the use of commercialization. The consumerist to presume a higher standard of living the cost must buy goods that are mass produced in other countries through cheap labor. Wal-mart products are mass produced in China, and they are shipped over to the United States to be sold to middle class families. Multinational corporations have a history of taking control or having some power in the political system because they have so much investment in the country. Many of these corporations take advantage of the political system because they have such a strong impact on the economy it would be devastating to the country if a corporation decided to remove its large investment from the countrys economy. The companies can just pay off government officials to protect their company from being shut down. The government is then compelled to accommodate the companies by modify their labor and environmental policies. Powerful business owners are not as heavily punished; they can just use their money or power of their company to avoid jail time for any crimes they committed. Billions of dollars are stolen each year by corporations through tax evasion from developing countries. Many CEOs and other employees of multinational corporations are guilty of crimes such as fraud and tax evasion that are overlooked because they can use their powerful position and money to avoid any serious 28

Multinational Corporations (MNCs) punishment. Multinational corporations cheat developing countries from so much money that could have helped improve the lives of many citizens by investing it in the healthcare and education system. Instead the citizens of the developing countries have to pay money out of their own pockets to compensate for the greediness of the CEOs of these large corporate empires. Multinational corporations privatize resources such as water and oil, and they sell it back to the people for a highly taxes amount.These invading companies exploit developing countries by keeping the high poverty level at a stance by paying laborers very little. The normal factory worker will probably never get a chance at moving up the social ladder and becoming a manager.

Many people in developing countries never get a chance to receive a proper education because they are forced to go to work in these factories at an early age so that they could use their wages to help support their family. In many countries the child labor laws are not very strict. Corporations exploit these weak child labor policies. Child labor means that companies can pay these younger employees even less than the bare minimum that they pay adults. Corporations are also able to take advantage of the labor laws in other countries. They are not forced to pay people overtime or give them vacation hours. These corporations dont offer any medical benefits or paid for taking time off if a person gets hurt on the job and is unable to work. In developing countries some people these factories provide living accommodations such as dormitories, and the people have follow curfews and others rules enforced by the dean. Most people are forced to work 10 hours a day and about 60 hours a week.

The environmental impact that these large corporations have is a big negative downside to the people living in developing countries. The development of industries creates large amounts of pollution that the local people are faced to deal with. Large oil corporations such as Shell and Enron have had major oil pipes burst that have ruined the land and water of the people living in the area. The oil spills have traveled through the waters, and many animals and people have died because of lack of clean water. Many people have suffered from diseases because of the lack of clean water. The corporations only had to pay a small price for the damages that their company caused. The people living in the area are forced to suffer living with the damages to their ecosystem.

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TOP MNCS IN INDIA The country has got many M. N. C.s operating here. Following are names of some of the most famous multinational companies, who have their headquarters of operational branches based in the nation:

IBM: IBM India Private Limited, a part of IBM has been operating from this country since the year 1992. This global company is known for invention and integration of software, hardware as well as services, which assist forward thinking institutions, enterprises and people, who build a smart planet. The net income of this company post completion of the financial year end of 2010 was $14.8 billion with a net profit margin of 14.9 %. With innovative technology and solutions, this company is making a constant progress in India. Present in more than 200 cities, this company is making constant progress in global markets to maintain its leading position.

Microsoft: A subsidiary, named as Microsoft Corporation India Private Limited, of the U. S. (United States) based Microsoft Corporation, one of the software giants has got their headquarter in New Delhi. Starting its operation in the country from 1990, this company has got the following business units:

Microsoft Corporation India (Pvt.) Limited (Marketing Division) Microsoft Global Services India Microsoft Global Technical Support Centre Microsoft India Development Center Microsoft IT Microsoft Research India

The net income of Microsoft Corporation grew from $ 14, 569 million in 2009 to $ 18, 760 million in 2010. Working in close association with all the stakeholders including the Government

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of India, the company is committed towards the development of the Indian software as well as I. T. (Information Technology) industry.

Nokia Corporation: Nokia Corporation was started in the year 1865. Being one of the leading mobile companies in India, their stylish product range includes the following: Normal mobile handsets Smartphones Touch screen phones Dual sim phones Business phone

The net sales of the company increased by 4 % in the last financial year with sales of EUR 42.4 billion as compared to 2009's EUR 41 billion. Over the past few years, this company in India has been acquiring companies, which have got new and interesting competencies and technologies so as to enhance their ability of creating the mobile world. Besides new developments to fight against mineral conflicts, they are even to set up Bridge Centers in the country for supporting reemployment. Their first onsite for the installation of renewable power generation are already in place.

PepsiCo: PepsiCo. Inc. entered the Indian market with the name of PepsiCo India from the year 1989. Within a short time span of 20 years, this company has emerged as one of the fast growing as well as largest beverage and food manufacturer. As per the annual report of the company in the last business year, the net revenue of PepsiCo grew by 33 %. By the year 2020, this food manufacturing company intends to triple their portfolio of enjoyable and wholesome offerings. The expansion of their Good-For-You portfolio is believed to be assisting the company in attaining the competitive advantage of the growing packaged nutrition market in the world, which is presently valued at $ 500 billion.

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Ranbaxy Laboratories Limited: Ranbaxy Laboratories Limited, one of the biggest pharmaceutical companies in India, started their business in the country from the year 1961. The company made its public appearance in 1973 though. Headquartered in this nation, this international, research based, integrated pharmaceutical company is the producer of a huge range of affordable cum quality medicines that are trusted by both patients and healthcare professionals all over the world. In the business year 2010, the registered global sales of the company was US $ 1, 868 Mn. Successful development of business forms the key component of their trading strategy. Apart from overseas acquisitions, this company is making a continuous endeavor to enter the new global markets, which have got high potential. For this, they are offering value adding products as well.

Reebok International Limited: This global brand is a famous name in the field of sports as well as lifestyle products. Reebok International Limited, a subsidiary of Adidas AG, is based in U. S. A. (United States of America) started its operation in 1890s. During the last financial year, Adidas's currency neutralized group sales increased by 9 %. Apart from their alliance with CrossFit that is among the largest contemporary fitness movements, in the current year, Reebok's announcement of its partnership with artist, designer and producer Swizz Beatz reflects its long term future growth.

Sony: Sony India is a part of the renowned brand name Sony Corporation, which started their business operation in the year 1946 in Japan. Established in India in November 1994, this company has captured one of the leading positions in the field of consumer electronics goods. By the end of the business year 2010 on 31st March, 2011, the company showed a remarkable increase in the share related to numerous categories. Sony India is planning to invest around INR. 150 crore for the marketing of the activities related to ATL and BTL. As far as Bravia TVs are concerned, they are looking forward to hold their market share of 30 %. In between the last and the current financial year, the number of their outlets in the country increased by 1, 000.

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Tata Consultancy Services: Commonly known as T. C. S., this multinational company is a famous name in the field of I. T. (Information Technology) services, Business Process Outsourcing (B. P. O.) as well as business solutions. This company is a subsidiary of the Tata Group. The first center for software researching was established in the country in 1981 in the city of Pune. Tata Consultancy earned a growth of 8.9 % during the latest quarter of this financial year, which ended on 30th September, 2011. This renowned company is presently looking forward to the 10 big deals that they have received besides the Credit Union Australia's contract as well as Government of Karnataka's INR. 94 crore deal for a total period of 6 years. In this current business year, they are about to employ 60, 000 people to meet their business requirement.

Vodafone: Vodafone Group Plc is an international telecommunication company, which has got it's headquarter based in London in the United Kingdom (U. K.). Earlier known as Vodafone Essar and Hutchison Essar, Vodafone India is among the largest operators of mobile networking in the country. The parent company Hutchison started its business in the year 1992 along with the Max Group, which was its business partner in India. Much later in 2011, Vodafone Group Plc decided to buy out mobile operating business of Essar Group, its partner. The turnover of the Vodafone Group Plc after the completion of the last financial year grew to 44, 472 m from 41, 017 m that was the turnover of the business year 2009.

Tata Motors Limited: The biggest automobile company in India, Tata Motors Limited, is among the leading commercial vehicles manufacturer in the country. They are one of the top 3 passenger vehicle manufacturers. Established in the year 1945, this company, a part of the famous Tata Group, has got its manufacturing units located in different parts of the nation. Some of their well known products of the company are categorized in the following heads: Commercial Vehicles Defence Security Vehicles Homeland Security Vehicles Passenger Vehicles 33

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Post completion of the financial year 2010 to 2011, the global sales of the company grew by 24.2 % with sales crossing INR. 1 million. CHALLENGES FOR INDIAN MNCS The global economic slowdown: drying up investment funds India is hit by the global recession. This is primarily visible in an increase in lay-offs in the export sector where orders have shrunk. Another important change is the difficulty of finding external financing, on which Indian multinational firms have become increasingly dependent. Tata is reported to be looking for ways of sustaining its recent acquisitions and Reliance Industries is said to be looking for takers for some of its overseas investments. The Indian IT industry is also hit hard, with almost half its export revenues coming from the US market and in particular the financial markets, which is the epicentre of the recession. The economic slowdown may however not be such a catastrophe for India as for many other countries. First, the banking system of India seems to be in reasonably good shape, and due to a semi-insulated rupee, a strong internal market and the fall in oil prices, the Indian economy is predicted to grow at about six percent during 2009. While it is a downward revision from the earlier projected nine percent it is, of course, very good compared to many European economies. Second, a global recession can also increase the pressure on cost across the world, which would provide a business opportunity for Indian firms. Increasing competition India has become a very important destination for most global firms, and in particular in ICT. While this is good for the economy and for overall economic efficiency, it means that the earlier fairly safe home market of Indian firms now is contested. IBM, Accenture and EDS together have 100 000 employees in India. This means that they are one third as big as the big five Indian firms. As the Indian market develops it will become more competitive and less of a captive market for Indian firms.

THE FUTURE FOR MULTINATIONAL CORPORATIONS Current trends in the international marketplace favor the continued development of multinational corporations. Countries worldwide are privatizing government-run industries, and the development of regional trading partnerships such as the North American Free Trade Agreement (a 1993 agreement between Canada, Mexico, and United States) and the European Union have the overall effect of removing barriers to international trade. Privatization efforts result in the 34

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availability of existing infrastructure for use by multinationals seeking to enter a new market, while removal of international trade barriers is obviously a boon to multinational operations. Perhaps the greatest potential threat posed by multinational corporations would be their continued success in a still underdeveloped world market. As the productive capacity of multinationals increases, the buying power of people in much of the world remains relatively unchanged, which could lead to the production of a worldwide glut of goods and services. Such a glut, which has occurred periodically throughout the history of industrialized economies, can in turn lead to wage and price deflation, contraction of corporate activities, and a rapid slowdown in all phases of economic life. Such a possibility is purely hypothetical, however, and for the foreseeable future the operations of multinational corporations worldwide are likely to continue to expand.

CURRENT ISSUES--MULTINATIONAL CORPORATIONS Multinational corporations face many of the same issues as domestic companies. These include maximizing profits, meeting customer demands, and adapting to technological change. In addition, multinational corporations must stay current with trends and events in the various countries where they operate. Politcal reforms in South Africa, economic liberalization in China, and social trends in Europe are examples of matters that are important to corporations operating in these countries. Accountability is also an issue multinational corporations face. Because they are so large (their annual revenues often exceed the Gross Domestic Product of some developing countries), multinational corporations can, and sometimes have, exerted questionable political and economic power in some countries. As a result, critics view multinational corporations suspiciously and sometimes seek to have host countries impose restrictions on them . International Business Issues Simultaneous efforts to promote free trade and protect domestic industry from foreign competition is one of the most pressing issues in international business today. As noted earlier, this dispute almost derailed the GATT Uruguy Round negotiations. Intellectual property rights is another important issue. International business is hindered when companies fear that their patents, trademarks, and industrial secrets will be violated abroad. Countries which fail to protect these rights may be shunned, and consequently may suffer from lack of foreign investment and access to cutting edge technology. Environmental protection efforts are another international business issue. In the business context, this issue centers, in part, on the extent natural resources in less developed countries should be exploited for the benefit of developed countries. For example, should Philippine forests be destroyed to satify the Japanese demand for lumber.

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Multinational Corporations (MNCs) INFORMATION NEEDS Based on this discussion of international business and multinational corporations, it is obvious that those engaged in these activites have broad and diverse information needs. These needs include: -- political, economic and social analysis -- market conditions in different countries and regions -- demographic trends No single source can fulfill all these information needs. Therefore, the information professional working in the international business environment must be familiar with current information sources outlined in the accompanying PATHFINDER. He or she must also keep informed about daily world events. The best way to do this is to read, or at least scan, the Wall Street Journal, the New York Times or Washington Post, and the local newspaper daily and the Economist weekly. Television and radio news programs, especially the Nightly Business Report, Wall Street Week, and Washington Week in Review are excellent supplements.

CONCLUSION Indian multinational firms are and will become an ever more important feature of the global economic landscape. Indian multinational firms are a heterogeneous group with a fairly recent global presence. International business is business conducted across national boundaries. It is concerned with political, economic, social, and cultural conditions in a variety of countries. As technology improves international communication and transportation links, international business and international corporate activities will expand. Information professionals must understand and keep abreast of these developments. Now more than ever, no country is an island unto itself. Thus it may be concluded the MNCs have both merits as well as demerits. Special precautions should be undertaken to avoid demerits. In the word of M.P.Todaro, the critics of multination see this giant corporation not as needed agents of economic change but more as vehicles of anti-development. Multinational Corporation reinforces dualistic economic structures and accelerates domestic inequalities in to wrong product and inappropriate technologies.

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BIBLIOGRAPHY

www2.econ.iastate.edu/classes/econ355/choi/mul.html

www.stwr.org/multinational-corporations/

www.britannica.com/EBchecked/.../multinational-corporation-mnc

www.publicserviceeurope.com/.../multinational-corporations-replacing business.mapsofindia.com India-company articles.economictimes.indiatimes.com ... Indian Companies

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