

 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.
 A corporation that has its facilities and other
assets in at least one country other than its home
country. Such companies have offices and/or
factories in different countries and usually have a
centralized head office where they co-ordinate
global management.
 The first modern MNC is generally thought to be
the Dutch East India Company, established in
1602. Very large multinationals have budgets
that exceed some national GDPs. Multinational
corporations can have a powerful influence in
local economies as well as the world economy
 ABB (Asea Brown Boveri)  PepsiCo Inc.

 ABN-Amro
 Procter & Gamble Co.

 Proton
 Adidas ltd.
 Honda Motor Co. Ltd.
 Aditya Birla Group
 Sony Corporation

 IBM  Tata Group

 ICICI Bank  Toyota Motor Corporation

 Infosys Ltd.
 Unilever

 Nike Inc.
 General Electric Company
 Nokia Corporation
 General Motors
 Ford Motor Company
 Google Inc.

 Parker Hannifin
 Enterprise operating in several countries but
managed from one (home) country. Generally, any
firm or group that derives a quarter of its revenue
from operations outside of its home country is
considered a MNC, and may fall into one of the four
categories:
 (1) Multinational, decentralized firm with strong home country
presence (1920-30),

 (2) Global, centralized firm that acquires cost advantage through

centralized production wherever cheaper resources are available
(1970-80),

 (3) International, firm that builds on the parent firm's technology

or R&D (postwar years), or
 Multinational corporations can be divided into three
broad groups according to the configuration of their
production facilities:- Horizontally integrated
multinational corporations manage production
establishments located in different countries to
produce the same or similar products. (example:
McDonalds)- Vertically integrated
multinational corporations manage production
establishment in certain country/countries to
produce products that serve as input to its
production establishments in other
country/countries. (example: Adidas)- Diversified
multinational corporations manage production
 The global liberalization has covered the way for
fast expansion & growth of the MNCs.
 World Investment Reports 2000 & 2003 provide
some indication of the economic dominance of the
multinational corporations.
 Virtually, all countries & economic activities,
rendering it a alarming force in a today’s world
economy.
 According to one comparison of the sales volume of
firms with the GDP of countries, the sales of the top
200 firms accounted for 27.5% of world GDP in
 Of the 50 largest “economies”, 14 were TNCs & 36
were countries.
 In 2006, foreign affiliates/associates accounted for
about 73 million employees, compared to 24
million in 1990.
 Sales of almost $25 trillion were much higher than
world export in 2006, compared to 1990 when both
were roughly equal.
 Stock of outward FDD, increased from $1.7 trillion
to $6.6 trillion over the same period.
th
1. WALL-MART 6. TOYATA MOTORS
STORES ($351m) ($204m)
2. EXXON MOBIL 7. CHEVRON
($347m) ($200m)
3. ROYAL DUTCH 8. DAIMLER
SHELL ($318m) CHRYSLER
($190m)
4. BRITISH 9. CONOCO PHILLIPS
PETROLIUM ($172m)
($274m)
5. GENERAL 10. TOTAL SA
MOTORS ($207m) ($168m)
 Country Number of global
500 companies
United State 170
Japan 70
Britain, France 38
(tied)
China 20
India 6
Country Company Global rank 2006
rank Revenues
1 Indian Oil 135 ($45,216.6
millions)

2 Reliance 269 25,158.9

Industries
3 Bharat 325 21,862.2
Petroleum
4 Hindustan 336 20,935.6
Petroleum
5 Oil & Natural 369 19,237.4
Gas
6 State Bank of 495 15,119.4
India
 Of the world’s top 200 economic players in 2001, 56 were
countries and 144 were corporations.

 Marks & Spencer sources its goods from more than 70

countries.

 In 2000 IBM produced around 60 per cent of its laptops in

Mexico.

 BP (British petroleum) operates in more than 100

countries.

 Hewlett Packard recently slashed supply-chain costs by

US$3.5 billion and is now looking to save a further US$1
billion annually.
 MNCs have an obligation towards employers,
customers, governments, suppliers and
communities as well as towards shareholders.
This is known as Corporate Social Responsibility
(CSR).
 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.
 Some MNCs would say that no more than this
bare minimum can be expected of them. They
ADVANTAGES:

 MNCs can help to reduce poverty.

 They can bring money into a country through employment

and investment.

 Three quarters of international investment in developing

countries is from MNCs and private sources.

 They can create jobs and raise labor standards.

 They can pass on expertise in their field.

 They work to equalize the cost of factors of production

around the world.
DISADVANTAGES:

 The MNC can be guilty of pollution or human rights abuse

(e.g. by sourcing products from factories where child labor is
used or by forbidding its workers to join trade unions).

 The finance brought into a country by an MNC may be badly

managed by that country’s government.

 Multinationals create false needs in consumers and have had

a long history of interference in the policies of sovereign
nation states.

 MNCs may destroy competition & acquire monopoly powers.

 The transfer pricing enables MNCs to avoid taxes by

manipulating prices on intra-company transactions.
 According to Peter Drucker the period of the most
rapid growth of multinational trade was ------- fifties
& sixties.
 During this period, the world trading economy grew
faster – at an annual rate of 15% or so in most
years.
 It is estimated that between 1/4th & 1/3rd of
manufactured goods now moving in world trade are
being shipped from one branch to another branch
of the MNCs.
 The sale of foreign subsidiaries in the host
 There was a very significant increase in the export intensity
(i.e., the percentage of exports to total sales) of the foreign
affiliates of many MNCs.

 The export intensity of foreign affiliates of US MNCs doubled

from 20 to 40% in the case of developed economies.

 It also increased from 6 to 22% in the case of Latin American

affiliates.

 It increased from 23 to 64% for developing Asia.

 But in the case of India, it is very low.

 More than 40% of the total exports of China is done by MNCs

affiliates.
 Comparatively very little investment has taken
place in India due to several reasons, like the
dominant role assigned to the public sector in the
industrial policy & the restrictive Government
policy toward foreign investment. Some
multinationals, Coca Cola & IBM, even left India in
the late 1970s as the Government conditions were
unacceptable to them.
 A common criticism against the MNCs is that they
tend to invest in the low priority & high profit
sectors in the developing countries, ignoring the
national priorities. However, in India the
government policy confined the foreign investment
 Multinationals in several developing countries make
substantial contribution to export earnings. However,
the performance in the case of India has been very
dismal. This is attributed mostly to the government
policy.
 Although export promotion has been pursued since the
Third plan, the highly protected domestic market & the
unrealistic much more attractive than exports.
 However, since the mid 1980s with the economic
liberalization that increased domestic competition & the
steady depreciation of the rupee, exports began to
become attractive & several foreign companies &
companies with foreign participation, as well as Indian
 Since the economic liberalization ushered in 1991,
many multinationals in different lines of business have
entered the Indian market. A number of multinationals
which were in India prior to this have expended their
business.
 The scenario for 'MNC in India' has changed a lot in
recent years, since more and more firms from European
Union like Britain, Italy, France, Germany, Netherlands,
Finland, Belgium etc have outsourced their work to
India.
 Finnish mobile handset manufacturing giant Nokia has
the second largest base in India.
 Oil companies, Infrastructure builders from Middle
East are also flocking in India to catch the boom.
 South Korean electronics giants Samsung and LG
Electronics and small and mid-segment car major
Hyundai Motors are doing excellent business and
using India as a hub for global delivery.
 Japan is also not far behind with host of electronics
and automobiles shops.
 Companies like Singtel of Singapore and Malaysian
giant Salem Group are showing huge interest for
investment.
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