2. CONTENT
• What is an MNC
• Difference between multinational and non-multi-national
• Types of multi-national
on the basis of investment
on the basis of operation
•
Impact of MNC –INDIA
•
Positive/negative effect
•
What INDIA offers
•
Indian companies in fortune 500 list
•
Trend of MNC in INDIA
•
Advantage of MNC in INDIA
•
Key issues in Indian context
•
Example: Asian paints
3. WHAT IS AN MNC?
It is a corporation that:
And/or
4. WHAT IS AN MNC?....continued
According to Franklin Root (1994), an MNC
is a parent company that:
• engages in foreign production through its
affiliates located in several countries,
• exercises direct control over the policies of
its affiliates,
• implements business strategies in
production, marketing, finance and staffing
that transcend national boundaries.
5. • A firm to be an MNC following criteria has to be
fulfilled:
The firm should own or control operations in
multiple countries, typically across the world
It should generate a substantial portion of its
revenue by its operations from foreign countries
Should employ workforce from multiple
countries, including employees at the senior
levels
It should have a strategic management
perspective and a vision of multinational
operations
6. What differs a multinational firm
from a non multi-national firm
• For this one must know what constitutes a nonmultinational firm. The key attributes of a nonmultinational firm are:
1. It produces and market goods and
services in one country
2. It is headquartered in one country
3. It faces low international risk exposure
7. TYPES OF MULTINATIONALS
ON THE BASIS OF INVESTMENT
ASSOCIATES: an enterprise in which a non resident
investors own between 10 and 50%
SUBSIDIARIES: an enterprises in which a non-resident
investor owns more than 50%
BRANCHES: unincorporated enterprises wholly or
jointly owned by a non-resident investor
9. ON THE BASIS OF OPERATIONS
HORIZAONTALLY INTEGRATED MULTINATIONALS ... have manufacturing
operations located in different countries to produce same or similar products.
They have multi-plant firms replacing roughly the same activities in many
locations
VERTICALLY INTEGRATED MULTINATIONALS ... have manufacturing operations
in certain country/countries to manufacture products that serve as inputs to
their production establishments in other country/countries. Such firms fragment
production geographically into stages in multiple countries on the basis of
factor intensities.
DIVERSIFIED INTEGRATED MULTINATIONALS ... have manufacturing operations
located in different countries that are either horizontally or vertically integrated
10. ON THE BASIS OF MANAGEMENT
ORIENTATION
ETHNOCENTRIC FIRMS... The HQ of the parent company, located in the home
country, dominate the strategic decisions and exert high level of control over
the subsidiaries through centralized decision making. eg…MAKSAT, SUKHOI
POLYCENTRIC FIRMS... Such firms have level of market orientation wherein
subsidiaries have autonomy in decision making.eg….ELBIT SYSTEM INDIA
11. REGIOCENTRIC FIRMS... Foreign affiliates consolidates their decision making
and organization on regional basis. Eg…Mc Donald
GEOCENTRIC FIRMS... Such follow a collaborative approach to decision- making
between HQ and subsidiaries. Eg…Phillips
12. ON THE BASIS OF MANAGEMENT
ORIENTATION continued……
ORIENTATION
ETHNOCENTRIC POLYCENTRIC
Mission
Profitability
(viability)
Public
acceptance
(legitimacy)
Top down
Bottom up
Mutually
negotiated
between
region &
subsidiaries
Mutually
negotiated at
all level
Little
communication
to & from HQ
& between
subsidiaries
Both vertical &
lateral
communication
within region
Both vertical
and lateral
communication
within
company
Governance
•Direction of
goal setting
communication Hierarchical
with HQ giving
high volumes
of orders,
commands and
advice
REGIOCENTRIC
GEOCENTRIC
Both profitability and public
acceptance
13. ORIENTATION
ETHNOCENTRIC POLYCENTRIC
REGIOCENTRIC
GEOCENTRIC
•Allocation of
resources
Investment
opportunities
decided at HQ
Self-supporting
subsidiaries, no
crosssubsidiaries
Regions
allocate
resources
under
guidelines from
HQ
Worldwide
projects
allocation
influenced by
local and HQ’s
manager
STRATEGY
Global
integrative
National
responsiveness
Regional
integrative and
national
responsiveness
Global
integrative and
national
responsiveness
STRUCTURE
Hierarchical
product
division
Hierarchical
area division,
with
autonomous
national units
Product &
regional
organizations
tied through a
matrix
A network of
organizations
CULTURE
Home country
Host country
Regional
Global
15. POSITIVE EFFECT OF MNCs
•
•
•
•
•
•
Bring in FDI
Transfer of technology
Promote competition
Promote research and development
Benefit customer
Promote export in the host economies
16. NEGATIVE EFFECT
• Influencing host-country government
decisions
• Transfer of inappropriate technology
• Dumping of obsolete technology
• Cultural imperialism
• Exploitation of host country resources
• Perceived as agents of neo-colonialism
17. •
•
•
•
•
Promotes unhealthy market competition
Promotes hostile mergers and acquisitions
Crowding out domestic entrepreneurship
Limited benefits to host countries
Circumventing host countries’ regulatory
framework
19. What India offers…. to the world
One billion plus population.
India is ranked as the 10th largest economy, 3rd largest in terms of
Purchasing Power Parity.
200-250 million middle class.
Gross Domestic Product 6.48 %, (avg. of last 5 years) making it one
of the fastest growing economies in the world.
Opportunities for world exporters with the right products or
services.
Easier access to capital.
21. Trends Of MNCs In INDIA
First MNC in India was the EAST INDIA Company. in
1600
American companies account for around 37%
(approx.)of the turnover of the top 20 firms operating
in India
Oil companies and Infrastructure builders from the
Middle East are also flocking in India to catch the boom
Hewlett-Packard (HP) is the largest multinational
corporation operating in INDIA
22. Increasing flocking of European Union companies to
India.
JCB owned by INDIOPHILE is one of the most
successful multinational corporation in India.
Italian automobile giants like Fiat, Ford Motors,
Piaggio etc expanded their operations in India with R&D
wing attached.
South Korean Electronics giants Samsung and LG
Electronics and small and mid-segment car giant
Hyundai Motors are doing excellent business and using
India as a hub for global delivery.
23. India currently has some 750 captive centres of
foreign multinationals; of these around 350 are engaged
in engineering R&D
24. Key Advantages of existence of MNCs in
India
Work culture of employees.
Training and Learning.
Technology – especially concept of working with
better technologies.
Safety, Health and Environmental Learning.
Excellent training grounds for many
entrepreneurs.
25. What are the key issues in the Indian
context which have hindered MNCs growth?
• “Global parent strategy” dictates India plans
• Limitations of growth due to regulatory / legislation / IPR
issues
• Limited Autonomy for top MNC Managers
• Sometimes bureaucratic setups have delayed decision
making – sharp contrast to most Indian entrepreneur
companies
• Insistence of some companies on having expats
26. • Rigidity and insistence on evaluating India like any other
market
• Not being able to recognize early enough that India is a price
and quality conscious market
• Limitations of following aggressive M&A options
• Many MNCs have got consistently caught in rounds of
“parent consolidation”
• 100% subsidiary conundrum
27. Case study : Asian Paints
• Asian Paints rise from a mid sized domestic focused coatings
company to a $ 1.6 billion multinational with a global presence
across 17 markets. Among the top 10 decorative coatings
companies globally.
– Key strengths are continuous innovations in all spheres of
operations, economies of scale, strong management
team, IT capabilities, stronghold over the distribution
network, width of product portfolio and strong brand equity
– Consistently generated EBITDAs of 14.2% and ROEs of 20%+ higher than most Indian and global peers
– Operates in 17 countries across the world - manufacturing
facilities in each of these countries and is the largest paint
company in 11 of these market
28. COMPANY
COUNTRY
YEAR
STAKE ACQUIRED
DELMEGE
FORSYTH
Sri Lanka
October 1999
76%
PACIFIC PAINTS
Australia
November 2001 100%
$375,000
HAWCOPLAST
India
November 2001 100%
16 crore
SCIB
Egypt
August 2002
60%
25 crore
BERGER
Global
INTERNATIONAL
August 2013
75.82%(+25.72%)
SD 0.25 per
share
TAUBMANS
September
2003
100%
$ 1.4 m
Fiji
COST
3.6 crore
29. Caribbean Region
(Barbados, Jamaica, Trinidad and Tobago)
• the revenue from paint sales has increased by 15% to 197.2
crores from 171.8 crores
• PBIT (profit before interest and tax) for the region is 11.2
crores as compared to ` 7.6 crores during the previous
year(2012)
• Continuing economic slowdown in all the Caribbean
economies, impacted demand conditions
Middle East Region
(Egypt, Oman, Bahrain and UAE)
• the revenue from paint sales has increased by 26% to 726.7
crores from 578.4 crores during the previous year(2012)
• PBIT for the region is 73.9 crores as compared to 61.5 crores
during the previous year(2012)
30. Asia Region
(Bangladesh, Nepal, Sri Lanka and Singapore)
• Revenue from paint sales has increased by 21% to ` 380
crores from ` 314.7 crores during
• the previous year
• The PBIT for the region is ` 35.6 crores as compared to ` 24.6
crores during the previous year(2012)
