ASSIGNMENT OF INTERNATIONAL FINANCIAL MANAGEMENT

B.V.ADITYA ROLL NO. 1225111306 MBA V TRIMESTER FINANCE SECTION B

What is MNC and what is transnational corporation?

MULTINATIONAL CORPORATION: A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation that is registered in more than one country or that has operations in more than one country. 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. It is a large corporation which both produces and sells goods or services in various countries. It can also be referred to as an international corporation. They play an important role in globalization. The first multinational corporation was the Dutch East India Company founded March 20, 1602. EXAMPLE Nearly all major multinationals are American, Japanese or Western European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW. Advocates of multinationals say they create jobs and wealth and improve technology in countries that are in need of such development. On the other hand, critics say multinationals can have undue political influence over governments, can exploit developing nations as well as create job losses in their own home countries.

FINANCIAL FUNCTIONS OF AN MNC To examine global control systems for foreign operations To discuss performance evaluation for foreign operations To consider the significance of national tax systems on international operations To evaluate how where to invest, how to finance, and where to remit funds are all affected by multinational taxation. To examine international transfer pricing. To appraise the role of taxes, tariffs, competition, inflation rates, exchange rates and restrictions on fund transfers. TRANSNATIONAL CORPORATIONS: A Transnational Corporation (TNC) differs from a traditional MNC in that it does not identify itself with one national home. Whilst traditional MNCs are national companies with foreign subsidiaries,TNCs spread out their operations in many countries sustaining high levels of local responsiveness.An example of a TNC is Nestlwho employ senior executives from many countries and try to make decisions from a global perspective rather than from one centralized headquarters. However, the terms TNC and MNC are often used interchangeably. A firm which owns or controls production facilities in more than one country through direct foreign investment. Although multinationals grew most rapidly in the 1960s, the foundations were laid in the inter-war period, notable examples being Ford, Vauxhall and Philips. In the mid1980s transnational accounted for 14% of UK employment and 30% of UK exports. The corresponding figures for France were 24% and 32%.

Transnational are made possible by improved international communication, which provides rapid containerized transshipment and foreign travel, easy communication of information, and international mobility of capital. When one market is saturated, the multinational can rapidly develop others, since foreign investment a cut transport costs, and makes possible a rapid response to local markets. It also eases tariff barriers the UK has been attractive location for many Japanese manufacturers. TNCs are probably the major force affecting worldwide shifts in economic activity, since the largest have a turnover greater than the GNP of many less developed nations. Although a developing nation may benefit from the construction of a plant for a TNC in terms of jobs and markets, it has been argued that the price is a loss of local control.