Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY

Faculty of Law

Lucknow

PROJECT ON

Role & Growth of MNC in India

For

COURSE ON ‘Laws related to MNC’

B.Com. LL.B (Hons.) X Semester

Submitted by

SAGAR YADAV

ROLL NO-143070041

Academic Session: 2018-19

Under the Supervision of

Mr. Shail Shakkya Sir

Asst. Prof. & Add. Proctor
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University.

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INTRODUCTION

Generally, any company or group that derives a quarter of its revenue from operations outside
of its home country is considered a multinational corporation.

 MNC must have substantial direct investment in foreign countries

 MNC must be engaged in the active management of these overseas assets

 MNC is also involved in the management integration of operations located in different

countries

It is a corporation/business or entity/enterprise that manages production establishments or

delivers services in at least two countries. MNC’S is an enterprise that manage production or
delivers services more than one country can also be referred to as international corporation.
The term ‘Multinational’ is widely used all over the world to denote large companies having
vast financial, managerial and marketing resources. MNCs are like holding companies having
its head office in one country and business activities spread within the country of origin and
other countries. Multinational corporations play an important role in globalization some
argue that a new form of MNC is evolving in response to globalization the 'globally
integrated enterprise.

First MNC was Dutch East India Co (1602), granted monopoly in colonial trade. Today, UN
estimates about 62,000 MNCs with 900,000 affiliates.MNC’s have existed since 1602, in
which year the first MNC, the Dutch East India Company, was established.

Germany, Belgium and Finland that have made a strong footing in India too. They are well
flourishing and earning their share of maximum profit too.

According to ILO report (i.e. International Labour Organisation) “The essential nature of
the multinational enterprises lies in the fact that its managerial headquarters are located in one
country, while the enterprise carries out operations in number of other countries’.

MNCS will have a demand for many services such as meals, transport, raw materials,
maintenance services that will be provided by domestic businesses, indirectly increasing
employment. Wages should increase as MNC’S will want the best people that the country has
to offer.

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Wages may be lower on international standards but should be higher than the local standard,
as logically the business will pay its workers more in order to motivate them. • Often MNC’S
are criticised for their wage policies but recent research and statistics prove this wrong.

There are four categories of multinational corporations:

(1) A multinational, decentralized corporation with strong home country presence,

(2) A global, centralized corporation that acquires cost advantage through centralized
production wherever cheaper resources are available,

(3) AN international company that builds on the parent corporation's technology or R&D,

(4) A transnational enterprise that combines the previous three approaches. According to UN
data, some 35,000 companies have direct investment in foreign countries, and the largest 100
of them control about 40 per cent of world trade.

The MNC: The Internalization Process

 Foreign involvement
 export via agent or distributor
 export through sales rep or subsidiary
 Local packaging or assembly
 FDI
 License
 Time

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WHAT ISMULTINATIONAL ORGANISATION

An MNC (Multinational Corporation) is a corporation that has its management headquarters

in one country, known as the home country, and operates in several other countries, known
as host countries.

As the name implies, a multinational corporation is a business concern with operations in

more than one country. These operations outside the company's home country may be linked
to the parent by merger, operated as subsidiaries, or have considerable autonomy.
Multinational corporations are sometimes perceived as large, utilitarian enterprises with little
or no regard for the social and economic well-being of the countries in which they operate,
but the reality of their situation is more complicated.

When a company operates in a home nation established its subsidiary inother nation it
becomes an MNC and there starts the process of globalization where in a local company
serves the entire worlds with itsproducts and services.India has experienced a dramatic
increase in the presence of Multinational Corporation having a tremendous expansion in the
amount of foreign direct investment inflows to the Indian economy. Internet tools like
Google, Yahoo, MSN, E-Bay, Skype, and Amazon makeit easier for the MNCs to reach their
potential customers in the country

There are over 40,000 multinational corporations currently operating in the global economy,
in addition to approximately 250,000 overseas affiliates running cross-continental businesses.
In 1995, the top 200 multinational corporations had combined sales of $7.1 trillion, which is
equivalent to 28.3 per cent of the world's gross domestic product. The top multinational
corporations are headquartered in the United States, Western Europe, and Japan; they have
the capacity to shape global trade, production, and financial transactions. Multinational
corporations are viewed by many as favouring their home operations when making difficult
economic decisions, but this tendency is declining as companies are forced to respond to
increasing global competition.

The modern multinational corporation is not necessarily headquartered in a wealthy nation.

Many countries that were recently classified as part of the developing world, including
Brazil, Taiwan, Kuwait, and Venezuela, are now home to large multinational concerns. The
days of corporate colonization seem to be nearing an end.

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 IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from
Japan Philips from Holland etc., are some of the MNCs operating at international levels.

Introduction Since 1991, India has experienced a dramatic increase in the presence of
Multinational Corporation (MNCs), and with it, a tremendous expansion in the amount of
FOREIGN DIRECT INVESTMENT inflows to the Indian economy.

This paper will analyse the effect with this change has had on Indian entrepreneur. The
overall conclusion reached is that the increased presence of MNCs has had a positive impact
on India entrepreneur. However, India entrepreneur has not even come close to reaching its
potential, and thus, much more change needs to occur.

Country of Origin:

Coca Cola – USA

Dell – USA

Hitachi – Japan

HSBC – UK

LG – South Korea

Nestle – Switzerland

Samsung – South Korea

Sony – Japan

Virgin – UK

Vodafone – UK

Nokia - Finland

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CHARACTERISTICS OF MNC’S

Following are the some of the important features/characteristics of MNCs:

1. AREA OF OPERATION: - The MNCs operate in many countries with multiple

products on large scale. A MNC may operate both manufacturing and marketing activities in
a number of countries. Some MNCs operate in several countries, whereas, others may operate
in a few countries. Mostly MNCs from developed countries dominate in the world markets.

2. ORIGIN:-The development of MNCs dates back to several centuries, but their real
growth started after the Second World War Majority of the MNCs are from developed
countries like U.S.A, Japan, UK, Germany and European countries. In recent years MNCs
from countries like Korea, Taiwan, India, China, etc. are operating in the world markets.

3. COMPREHENSIVE TERM: - In general, the term ‘MNC’ is a Comprehensive

term and includes international and transnational corporations. The term global corporation is
also included in the list of ‘MNC’.

4. PROFIT MOTIVE: - MNCs are profit oriented rather than social oriented. Such
corporations do not take much interest in the social welfare activities of the host country.

5. MANAGEMENT: - The Parent company works like a holding company. The

subsidiary companies are to operate under control and guidance of parent company. The
subsidiaries functions as per the policies and directions of parent organisation.

6. MANUFACTURE AND MARKETING ACTIVITIES: - MNCs undertake

both Manufacturing and Marketing Activities and they are predominantly engaged in hi-tech
and consumer goods industries. Majority of the MNCs are engaged in pharmaceutical,
petrochemicals, engineering, consumer goods, etc.

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7. QUALITY CONSCIOUSNESS: - MNCs are quality and cost conscious and
managed by professionals and experts. They have their own organisation culture and systems.
MNCs believe in the concept of total quality management.

ADVANTAGES OF MNCS TO THE HOME COUNTRY.

1. Acquisition of raw materials from abroad.

2. Technology and management expertise acquired from competing in global markets.
3. Export of components and finished goods for assembly or distribution in foreign markets.
4. Inflow of income from overseas profits, royalties and management contracts.

TYPES OF MULTINATIONAL CORPORATIONS:

1. ETHNOCENTRIC: These are the type of MNCs which have strong orientation
towards home country. This means that home country people are considered as superior and
allocated all key posts.

2. POLYCENTRIC: Just opposite to Ethnocentric polycentric type of MNCs has

strong orientation towards host country where few key people are nationals and remaining are
from the host country.

3. REGIOCENTRIC AND GEOCENTRIC: These MNCs have their

concentration in whole world and they make selection for best employees whether they are
from host country or home country it does not matter.

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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:

1. Huge market potential of the country

2. FDI attractiveness

3. Labour competitiveness

4. Macro-economic stability

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WHY MNC’S 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.

Role of Multinational Corporations

Multinational corporations (MNCs) are huge industrial organizations having a wide network
of branches and subsidiaries spread over a number of countries. The two main characteristics
of MNCs are their large size and the fact that their worldwide activities are centrally
controlled by the parent companies. Such a company may enter into joint venture with a
company in another country. There may be agreement among companies of different
countries in respect of division of production, market, etc. These companies are to be found
in almost all the advanced countries, with the USA perhaps the biggest amongst them. Their
operations extend beyond their own countries, and cover not only the advanced countries but
also the LDCs.
Many MNCs have annual sales volume in excess of the entire GNPs of the developing
countries in which they operate. MNCs have great impact on the development process of the
Underdeveloped countries.
MNC's plays an important role in boosting up Indian Economy. In support of this we can say,
MNC's bring foreign investors to India and hence helps in globalization of Indian Market.

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 CONCLUSION

They serve the customers and the institution best and therefore chemistry between country
and foreign MNCS has fruitful results .FDI attractiveness, labour competitiveness. Huge
market potential of the country. Policies such as FDI, Industrial licencing, taxation, exchange
control has helped MNCS to grow .there is a growth of MNCS in India because of huge
market and fast growing economies in world has played important role.

Due these MNC’S competition increase and more employment opportunities are available &
there will be reduction in reasonal disparities

To conclude, we would opine that MNC’S having a wide ambit is enviable to us, as to the
fact that, there exists lots of job opportunity paves a path for the increase in national income.

And also to create a better society, with better standard of living,and it increases labour
productivity , decrease in unemployment, and also increases the net national income of the
country. This will help the government and this will lead to increase in the export and
imports in the country.

Gives advantages to Domestic Companies through purchasing of raw material &resources.

New company having network to expand their business.

The present scenario is a highly transformed one. Multinational giants are vying with one
other to launch their models. Big names of the vehicle industry like the Korean giant,
Hyundai, general motors, Mitsubishi etc. Have already opened their account. In other vehicle
segments too, Volvo, Mercedes Benz, and Audi etc. Have carved out their niche.

One of the fastest growing sectors in the country, telecommunications has been growing at a
feverish pace in the past few years. The speed of growth can be judged by the fact that in
2004, ten years after private telephony was introduced in India, the mobile subscriber base
had crossed the number of fixed line connections.

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