English Script

Introduction
What are MNC’S ?
Multinational Corporations are companies that are in more than one nation and operate on a global
chain. These companies have branches, factories, and workshops in different countries. MNCs are
also known as Global enterprises, international enterprises, or transnational corporations.
They have their headquarters in their respective home countries and branches in foreign countries.
Some examples of MNCs can be food chains like MacDonalds or Tacobell, Coca-cola, international
car brands like Hyundai or Audi, or cosmetics brands like L’Oreal or Dove, fashion industry consists
of Levi’s, jack and jones, and many more.
The objective of MNCs is to make use of cheap human resources in different countries and in
different regions to maintain the price of production and gain profit.

Features of MNCs
● Huge capital resource - Multinational companies are operating on such a large scale that
sometimes their turnover is larger than the GDP of developing countries. They own assets
and sales.
● Centralized Control - All the branches, workshops, or factories are spread all over the world
but are controlled and managed from the headquarters located in the home country. They all
are instructed to follow the guidelines constructed by the headquarters.
● Access to advanced technologies - MNCs make use of all the advanced technologies to help
themselves to produce world-class products. They own huge assets and sales through which
there can make heavy capital investments and also experiment with them.
● Innovation - MNCs have to own very high-tech research labs with sophisticated development
departments so they can sustain the global market and produce products that will increase
their customer base.
● Marketing Strategies - The Marketing department play a vital role in the development and
survival of the organization in the global market. therefore these corporations spend huge
amounts of their funds on marketing to attract more attention from customers.
● Expansion of market territory - Due to all the assets, technological advancement, economic
backup, and excellent marketing, the MNCs can expand their reach in the global market.
● Oligopolistic powers - Oligopoly means power in the hands of a few companies only. Due to
MNCs’ large size and market, they can monopolize their specific market to themselves and
make it hard for new competitors to survive.
Types of MNCs
The number of MNCs has been on the rise as a result of globalization - the trend toward economic
and cultural integration across the world. As a reult we are able to identify different types of
multinational corporations based on the different parameters such as leadership or research etc.
1. Multinational Decentralised Corporation: Decentralised multinational corporations have a
strong presence in their home country. The term 'decentralisation' means there is no
centralised office. This kind of MNC has establishments in two or more countries, whereas
management or administration-related decisions are taken up by the individual units. These
MNCs maintain a prominent presence in their home country. Decentralised multinational
corporations allow for rapid expansion, as new entities can be set up quickly throughout the
nation.

Example - MacDonalds has restaurants all over the world with the home country having the
largest operations. Each store runs their respective menu and make changes to their
marketing strategies themselfs,according to the business environment. Therefore each store
has its own variety of products to offer.

2. Global Centralised Corporation: Such MNCs focus on cost advantages and optimising
resources at cheap rates. These kinds of MNCs outsource their operations to developing
countries.

For example, Apple is a global centralised corporation that outsources the production of
iPhone components to countries like China, Mongolia, Korea, and Taiwan.

3. International Company: International companies utilise the resources of the parent

company to develop new products or features that will help them gain a competitive edge in
local markets. This kind of MNC focuses on the research & development (R&D) of the parent
company.

Example - Each coca cola bench can create there own product design and marketing
strategies according to their respective business environment.

4. Transnational Enterprises: It is a combination of all previous three categories. This

approach of MNC is gaining popularity. Transnational enterprises have a decentralised
organisational structure with branches in several countries. The parent company has little
control over the foreign branches.

Example - Nestle, although the headquarters are responsible for making major decisions,
each subordinate enjoys a high level of independence over its daily operations. Its long
history from a small village operation to a world food manufacturing leader has also
demonstrated Nestle's great capacity to adapt to changing business environments without
losing its core values.

Methodology
The following research is on the analysis of MNC’s or Multi National Corporations in different
countries and how they impact the host country as well as the country in which they have
there plants in. On the basis of the research, conclusion will be given on whether MNC’s are
devils in disguise or not.
The research presented is a mix of secondary and primary data. Major data is collected from
secondary sources such as books, articles or essays. The secondary data mostly consists of
quantitative data.
The primary data consists of qualitative research. The interviews with people working in MNC
or a JV (Joint venture company or corporate) is giving us different perspective and helps us
understand the depth of this topic even better.
This type of research will be able to give an over all overview of the statistical literature as
well as the segregating data present on MNC’s with different reviews from all over the world.

Literature Review
Companies that establish international subsidiaries need to adapt to
economic, political and other conditions in the respective host countries and
have to overcome geographical and cultural divides to manage their
operations. Management control (MC) helps to align employee decisions
and actions with corporate objective . With increasing internationalization,
companies face the challenge of transferring MC across national borders to
distant subsidiaries. Multinational companies (MNCs) combine diverse
mechanisms like planning, standardized procedures and training to control
their foreign subsidiaries. Various factors, either within or outside the
company, influence the application and effectiveness of control mechanisms
in MNCs.
Mechanisms of control
MNCs employ various control mechanisms to coordinate units worldwide in
order to meet global organizational objectives. Examples - business plan, needs
assessment, budgets, audits, pricing, communications, training, performance reviews, and
employee incentives -- to optimize performance in each of these areas.
Extent of control
The extent of control influences the ability of MNCs to pursue global strategies
. MNCs combine several mechanisms to control the activities of their units and
complement output and process control mechanisms with social controls to
meet coordination requirements. The tightness of control depends on the
degree of internationalization as well as on the necessity of local adaptation

Factors influencing the control mechanisms in MNC’s

A high degree of internationalization is related to tight control with a
strong emphasis on financial and non-financial output controls.
With Increasing geographical dispersion prompts the integration of
non-financial controls and challenges of management information systems,
due to the different locations of experts and operations across different time
zones.
Business environment is also a key factor to determine the sunning of a
company in there respective geography. Corporate culture influences an
MNC’s emphasis on performance measures or on strategy implementation
to control subsidiaries. (Subsidiary is a company that is owned or controlled by a parent
or holding company. Usually, the parent company will own more than 50% of the subsidiary
company. This gives the parent organization the controlling share of the subsidiary.)

Complexity of MNCs is defined by the size of the organization, its product

and geographical diversification. Large MNCs place more emphasis on
financial output controls to evaluate performance than small MNCs, which
also rely on non-financial controls.
 Large and highly diversified MNCs are more likely to implement global
environmental standards and central evaluation of environmental
performance. Small MNCs rather base control activities on financial
planning and on personal control through the owners

Political and legal conditions influence MCSs. Entering transitional

markets such as China may come along with ownership and control
restrictions although a recent study claims that these restrictions have
diminished at least in China. Moreover, applicable laws may change
unexpectedly in emerging countries

● In emerging economies reporting standards may differ from requirements

in industrial countries. MNCs need to ensure a certain standard for reliable
reporting and therefore put some effort into informal relationships and
operational control through supervision

Aruguments

Advantages of MNC
1) Helping in the improvement of standard of living.
With the entry of every MNC in a country, the overall GDP of the country does grow
through their spending, for example with local suppliers and through capital
investment. Competition from MNCs acts as an incentive to domestic firms in the host
 country to improve their competitiveness, perhaps by raising quality and/or
efficiency.
2) Helping in the increasing rate of employment.
If a MNC’s increases their consumer grasp in different countries, it is logical for them to hire
new employees which fit right for the vacant position in the corporation.

● MNCs promote employment opportunities at different levels, from labourers at lower

levels to top level managers responsible for all the major decisions made in the
company.

3) Helping to remove the poverty from our country.

MNCs extend consumer and business choice in the host country, therefore decreasing the
number of unemployed people in the respective country

5) MNC’s help in the improvement of economical condition of our country.

● Profitable MNCs are a source of significant tax revenues for the host economy (for example
on profits earned as well as payroll and sales-related taxes)
●

4) Help in the education system also .

● Provision of significant employment and training to the labour force in the host country
● Transfer of skills and expertise, helping to develop the quality of the host labour force

Trainings are organized to convey skills and knowledge and to ensure that control mechanisms are
applied appropriately in a multinational setting which often goes hand in hand with the introduction of
a management information system. Particularly, when entering a foreign country, trainings assist
managers in building networks and spreading corporate values and strategies throughout the MNC

6) Attract more consumers towards the products .

MNC’s increase their respective consumer base by expanding their business in different
countries of different backgrounds.
7) Improving the better quality of products, goods n services .
8) There is greater efficiency and cheaper goods are made available due to capital intensive
techniques
9) Optimum utilization of available resources.
 10) more tax collected by govt. that can be used for economic development.
11) There is an increase in the competitiveness on the part of the domestic companies so as
to fight competition
This is one of the biggets advantages of MNC’s. Due to increase in the quality and quantity of
competition, all domestic companies have to offer equally good service or product for their
survival in the market. A consumer is always looking for their own profit and will always be
attracted to sales or schemes offered by best companies.
12) CSR activities
Corporate social responsibility (CSR) is a business model in which for-profit
companies seek ways to create social and environmental benefits while pursuing
organizational goals, like revenue growth and maximizing shareholder value.

The CSR activities can include all sorts if activity such as donations, tree drive, sponsorship,
environmental operational initiatives etc.

● MNCs can meet the global market’s demand with their presence in multiple countries
● The establishment of MNCs in multiple countries reduces shipping costs
● MNCs increase buyer’s purchasing power by producing goods or providing services
at lower costs
● MNCs contribute to government revenue by paying several taxes
● MNCs favour the economic and technological growth of the countries they are set up
in

Challenges or Threats of MultiNational Companies

1) Increasing the competition between government companies and private companies.

3) Not increasing the standard of living of every class.
6) leads to drainage of wealth to foreign countries.

Resource exploitation
Another disadvantage of MNCs outsourcing is the exploitation of local
resources. These include not only natural but also capital and labour resources.

Multinational brands like Zara and H&M employ multiple workers in developing
countries to produce fast fashion clothes and accessories. While these
companies help provide jobs for people in these economies, they risk the
well-being of these workers by making them work long hours with barely
enough wages. Under public pressure, a lot of efforts have been exerted to
improve garment workers' working conditions, though this is far from removing
the injustice that they endure.

8) Corruption
Corruption refers to the abuse of a position of trust or responsibility (such as that held by
a public official) for purposes of private gain. While virtually all multinational
companies have adopted anticorruption policies, it is not clear how often
these policies are fully implemented and internalized as part of the
corporate culture. When a large corporation decides to enter a foreign
market, it must usually secure a number of licenses, permits,
registrations, or other government approvals. Certain types of business
may be even be impossible or illegal unless the corporation is first able
to obtain a change or adjustment to the nation’s laws or regulations.
Since the power to authorize the foreign corporation’s activities is vested
in the hands of local politicians and officials, and since corporations have
access to large financial resources, it should not be surprising that some
corporate executives resort to financial incentives to influence foreign
officials.
Monopoly power

With the huge market share and turnover, multinational companies can easily
obtain a leading position in the market. While many MNCs commit to healthy
competition, some may abuse their monopoly power to drive smaller firms out
of business or prevent new ones from entering. In some cases, the presence of
multinational companies also poses a challenge for other businesses to operate.

Example -In the search engine market, Google is the leading company with over
90.08% market share. Although there are several other search engines, none of
them can compete with Google's popularity. There is also little chance for
another search engine to enter since it would take years for the new business to
effectively manage the way Google does. While Google doesn't present any
direct threat to online users, its dominant position forces companies to pay
more money for ads to improve their ranking on the search pages.

Independence loss

Multinational companies yield significant market power, which allows them to

manipulate the laws and regulations of the host countries. For example, some
governments of developing countries may refuse to raise the minimum wage for
fear that the higher labour cost will make the multinational company switch to
other cheaper economies.
The Indian production hub Karnataka produces clothes for international brands
such as Puma, Nike, and Zara. More than 400,000 workers are paid below
minimum wage, as the government fears the increase in wages will drive
multinational companies away. Since MNCs aim to minimise production costs
through outsourcing, they will opt for the cheapest option available, regardless
of whether workers in these countries receive sufficient wages or not.

Advanced technology

The technology used by multinational companies may be too advanced for the
host country. Without sufficient training, local staff may find it difficult to operate
the new machine or system. In other cases, new technology may replace local
jobs.

The introduction of app-based car-hailing services such as Uber and Grab has
put many traditional taxi drivers out of jobs. Granted, there are opportunities for
more tech-savvy young drivers to earn more income. Older drivers may struggle
to get used to the new technology and suffer a loss of income as more people
book car services from an app.

Case Study
Amul is one of the biggest dairy prodiuct company in india. We will be
examining its development during COVID-19 and how unlike all other
company, this company acted differently and not only minimised its losses but
increased its revenue to 698 crores.
Anand Milk Union Limited is an Indian dairy state government cooperative society, based in Anand,
Gujarat. Formed in 1946, it is a cooperative brand managed by Gujarat Cooperative Milk Marketing
Federation Ltd. (GCMMF), which today is controlled jointly by 36 lakh milk producers in Gujarat and
the apex body of 13 district milk unions, spread across 13,000 villages of Gujarat.[4] Amul spurred
India's White Revolution, which made the country the world's largest producer of milk and milk
products. Amul has alos entered international makret over the years such as USA, UAE, Mauritius,
Australia, China and many more. Aditionally Amul named Ireland Men's cricket team sponsor for T20
World Cup 2022.
On 24th of March 2020, our Prime Minister announced a nationwide lockdown because of pandemic.
The lockdown costed the Indian economy more than 10 lakh crores. Many billion-dollar industries
came into a dilemma. One such industry was the dairy industry. The impact was so heavy that it
costed the milk producers of India more than 112.3 crores of rupees every day.
On the other hand, Amul with its great management and analyses of business environment was able
to produce 33 new prodecuts in the amkrket and procured an additional 35 lakh litres of milk every
single day and payed 800 crores to the rural milk producers of India by optimising its supply chain to
fit the current world’s demands.
Like every other company in there respective sector, Amul’s sales also declined by 10-12%. Most of
the dairy companies decreased there milk procurement, decreased there logistics and production
leading to a lot of milk farmers, truck drivers lossing their livelihood because less procurement
means less transportation of milk and less operations of factories.

But unlike all the other companies, Amul started to get ready for the surge in demand. The
companies management of quickly able to realise that during these times, all the restaurants and
hotels will be closing down therefore less milk will be needed but because people will be staying at
there homes the milk will still be needed. So unlike all the other companies, which decreased there
production, Amul had its supply chain running at full chain capacity.
● Milk consumption at homes increased 6 times
● Not only that but there was a change in the majority of consumer behaviour as all the people
staying at home started become health consious.
● Thereofere people shifted from loose milk to packeted milk
● The demond of cheese increased by 80%
● Demand of cottage cheese increased by 40%
● Demand for condensed milk increased by 100%
● Amul was running at 115% capacity. Even so the supply could not keep up with the demand
and so Amul had to outsource some of its operations.
● Amul was predicted the stopping of road transporatiuon of milk via trucks and then quickly
shifted to railways to transport milk products throughout the country.

The backbone of these hefty supply chain production, transportation and all the other operations was
the IBM strategic partnership with Amul in 2009. Here Amul invested approcx 80 crores to transform
the IT platform of the the company. IBM developed a digital system to trake every small detail that is
bring carried out in hte supply chain in Amul. With help of this programm, Amul was able to manage
the load capacity of different plants and redirect some of its operations to places with less load. This
way there were making optimal utilisation of the supply chain.
Example - the icecream and frozen food section was nealy shut down. Therefore the storage and
workers or trucks were lying at idle capacity from the end of frozen food. With the help of IBM’s
programm, they diverted all the sources from the frozen food vertical to milk and dairy products
vertical.
Due this system, Amul was even able provide incentives to ground staff. Amul even made extra
arrangements for cattle feed for farmers which made the supply chain of Amul extremely efficient
and effective.
Amul used third party e-commerece sites like Danzo, swiggy, flipkart, bigbasket or zomato to sell
milk products. With the help of these tieups Amul sold milk products worth more than 3 crores in the
month of May 2020 in 200 cities. The end to end utilisation of there supply chan and incentivisng of
lobour forces which is naoither pillar for Amul’s success.

Teh last pillar was its marketing, where Amul increased its advertisements volumes by 316%
compared to 2019. Their ads were so aggressive that they were viewed 10 times more than the IPL
itself. Amul changed its advertising strategies during Doordarshan’s epic Ramayana and
Mahabharata during the lockdown by running their old ads to resonate with the nostalgic moods of
the audience to create an even better impact on the audience’s mind. They introduced immunity
boosting products to increase the customers interest in their products.

So, using digital transformation, third party collaboration, incentivizing of

labor, and through strategic marketing initiatives. Anand Milk Union
Limited, i.e., AMUL established a benchmark for crisis management for
dairy companies from all across the world to follow.

Conclusion
Multinational companies make up a large part of the business scenery, and their
popularity will only grow with the trend towards globalisation. While MNCs bring
many benefits to the host country such as job creation and tax contribution,
there are also threats to the state's independence and local resources.
Maximising the positive outcomes that multinational companies offer, while
limiting their negative consequences, is a major challenge for many economies
today.
Overall if we were to draw up a conclusion on whether MNC’s are devils on
disguise or not, my personal opinion would be that they are not devils in
disguise.
As mentioned in my report, the total number of advantages of a MNC’s
overwhelm the number of disadvantages of a MNC. Majority of the challenges
faced due to MNC are based on their respective countries economic
development or technological advancement or market size.