Program: MBA Semester: III Subject Name: Management of Multinational Corporations Subject Cod:IB0012 Session: I Unit: 1-4

Program: MBA
Semester: III
Subject name: Management of
Multinational Corporations
Subject Cod:IB0012
Session: I
Unit: 1-4
PRESENTED BY Mr. Biren Chettri Assistant Professor Management Dep't

IB0012 Management of Multinational Corporations
Unit 1 Introduction to Multinational Corporations
Objectives:
• Examine the various types, characteristics and nature of Multinational Corporations
• Discuss the evolution and emergence of MNCs
• Examine the role of Multinational Corporations in economic growth
• Discuss the advantages and disadvantages of MNCs to the host and home countries
• Analyse the growth of MNCs in international markets
Multinational Corporation: Definition and Characteristics

Multinational Corporations (MNCs) are business entities that operate in more than one
country. MNCs are entities that undertake foreign direct investment. They own or control
income generation assets in more than one country, produce goods and services in the host
country and sell in international markets. In other words, MNCs have their home in one
country but operate in many countries under different laws, customs and regulations.
Characteristics of Multinational Corporations
Significance of Multinational Corporations

MNCs nowadays have a revolutionary effect on the global economic system. The rapid
expansion of MNCs has contributed to the growth of the world economy. The growth of
MNCs in international markets has significantly impacted crossborder movement of capital
flows and international trade for many economies. Today, they constitute a powerful force in
the global economy.
Evolutionary Process of Multinational Corporations: A Conceptual Framework

Advantages and Disadvantages of MNCs to the Host Country

The primary objective of multinational corporations is to make profits in international
markets like any other domestic company. According to the ILO report, multinational
companies act as an invaluable dynamic force and instrument for new technology, capital,
employment and economic growth. Moreover, they help the country raise the standard of
living as well as the quality of life for its citizens. However, they can also be detrimental to
our present national and international institutions.
Advantages and Disadvantages of MNCs to the Home Country

Growth of Multinational Corporations in International Markets

The economic integration of world economy has played a vital role in the emergence of
multinational corporations. Economic reforms in the developing economies further
facilitated the expansion of MNCs into the emerging economies.
Summary
Let us recapitulate the important concepts discussed in this unit: • Multinational
Corporations (MNCs) are business entities that operate in more than one country. MNCs are
entities that undertake foreign direct investment. • MNCs have their home in one country
but operate in many countries under different laws, customs and regulations. •
Transnational corporations possess features of multinational, global and international
models. Moreover, their products are globally competitive. They are further differentiated
and customized by local subsidiaries according to the needs of the local people. •
Multinational companies are quite large in size and structure as they carry out their
production and distribution of goods as well as services in many countries. Their ownership
and management are spread across the globe, but the parent company is viewed as the
holding company while the others are called subsidiaries and branches.
Unit 2 Theories of Multinational Corporations
Objectives:
• Explain the theory of location and its various criticisms
• Discuss the theory of internalization and its limitations
• Examine the eclectic paradigm theory and its three significant factors
• Discuss the theory of internationalization and its four stages
• Examine the stages of the international product life cycle theory
Location Theory
The theory of location was first propounded by Alfred Weber in his book Theory of the
Location of Industries in 1909. The theory of location is purely deductive in its approach.
Internalization Theory
The theory of internalization is closely linked with transaction cost economics. It is basically
taken from Coarse’s work (1937) on the efficiency with which transactions between agents
of production are organized. It discusses the concern regarding mode of transfer of
resources in order to reduce effective cost can.
Eclectic Paradigm Theory

The eclectic theory was propounded by John Dunning in his book, Trade, Location of
Economic Activity, and the MNE: A Search for an Eclectic Approach. It is an analytic approach
towards understanding foreign direct investment as well as the organizational issues of
MNCs pertaining to international production. This theory provides a clear understanding of
the various factors that help MNCs progress towards global operations.
Internationalization Theory
The theory of internationalization is also known as the Uppsala model. It explains the main
reasons for companies engaging in global business. According to this theory, these firms
gradually intensify their activities in foreign markets. The theory emphasizes that firms
initially gain experience in domestic markets before moving to foreign markets
International Product Life Cycle Theory

The theory of international product life cycle was propounded by Raymond Vernon in 1960.
According to this theory, international markets tend to follow a cyclical pattern6 due to
several factorsover a period of time, explaining the shifting of markets as well as the
location of production.
Summary
Let us recapitulate the important concepts discussed in this unit: • The theory of location
is purely deductive in its approach. There are certain factors that motivate firms to move
towards a particular location for business. These factors are broadly classified into two
main divisions, namely regional factors as well as agglomerative and deglomerative
factors. • Weber emphasizes in his theory that the location of production must be decided
in relation to the place of consumption.
Unit 3 Global Sourcing and Multinational Corporations
Objectives:
• Explain the concept of outsourcing in multinational corporations
• Discuss the concept of inbound and outbound sourcing
• Examine the various reasons for outsourcing by multinational corporations
• Discuss the different forms and benefits of global sourcing
• Examine the changing dimensions of global sourcing
• Recognize the significance of core competencies in the functioning of an organization
Outsourcing in Multinational Corporations

In business terms, outsourcing is the contracting of a business process to a third-party. The
term ‘outsourcing’ became popular in the United States around the twenty-first century.
Outsourcing entails the transferring of employees and assets from one firm to another.
Inbound and Outbound Sourcing

Inbound sourcing is a primary process of logistics, concentrating on purchasing and
arranging the inbound movement of materials, parts, and/or finished inventory from
suppliers to manufacturing or assembly plants, warehouses or retail stores.
Global Sourcing: A Conceptual Framework

Globalization and technological advancements have driven all sectors of the economy
towards dynamic changes and challenged the international division of labour. Several
researchers have different perspectives regarding the concept of outsourcing.
Global Sourcing and Multinational Corporations

Economic growth needs change. Thus, the governance that helps social and economic
structures adjusts to the changing environment, facilitating growth and stable transition
towards new economic structures.
Core Competencies
In the 1980s, top executives were assessed based on their ability to reorganise their
corporations. However, in today’s changing scenario, top executives are judged based on
their ability to identify, cultivate and exploit core competencies that make growth possible.
Summary
Let us recapitulate the important concepts discussed in this unit: • Outsourcing entails the
transferring of employees and assets from one firm to another. It can be defined as the
practice of handing over control of public services to for-profit corporations. • Insourcing
involves bringing processes that are managed by third-party firms in-house. Insourcing can
also be accomplished by vertical integration. A business could offer a contract service to
another business without insourcing that business process
Unit 4 Global Strategies of MNCs
Objectives:
• Describe global strategy and its importance
• Interpret the concept of global value chain
• Evaluate the drivers of global value chain
• Asses the fundamentals of experience and learning curves
Global Strategy and its Importance

Multinational corporations employ a global strategy which is also highly responsive to the
local requirements. Their main emphasis is on efficiency in production. The strategies
adopted by multinational corporations are contradictory to multidomestic strategies.
Global Strategies for MNCs

Four types of multinational corporations have been identified by Bartlett and Ghoshal
(1991). These four types of multinational corporations define which strategic outlook MNCs
follow in managing their subsidiaries and how does an MNC balance the potential
requirements of global integration and global differentiation.
Global Value Chain: A Conceptual Framework

Global value chain is the full range of activities that firms have to undertake in order to
achieve global competitiveness. This entails activities like production, marketing and
distribution that are designed for the final consumer. Value chain activities produce goods or
services worldwide or at a particular location. Many companies are showing a keen interest
towards understanding the concept and activities involved in global value chain.
Drivers of Global Value Chain

Through their outsourcing and off-shoring activities, MNCs are driving the creation of Global
Value Chains throughout the world. GVC operations originate from the changed behaviour
of firms and should be understood as a part of the changed microeconomics of firm
behaviour.
Experience Curve of MNCs and International Expansion

Models related to experience and learning of multinational companies is based on the idea
that people and firms obtain knowledge by working. Reiteration helps companies and
people gain experience which helps them develop comparatively enduring alterations in
behaviour or learning. As supplementary deals occur in a service, or more products are
produced by a manufacturer, the per-unit cost often decreases at a decreasing rate
Summary
Let us recapitulate the important concepts discussed in this unit: • Global business
strategy is defined as the business strategies adopted by companies, firms or businesses
that function in the global business environment and serve customers throughout the
world. • Multinational corporations employ a global strategy which is highly responsive to
the local requirements. Their main emphasis is on efficiency in production. The strategies
adopted by multinational corporations are contradictory to multi-domestic strategies.
There can be some minor modifications that pertain to the products and services. • Global
marketing takes place when marketing managers put into use global strategies effectively
in order to market their products on an international basis. Many companies have realized
the importance of global marketing and are now looking for opportunities overseas to
enhance its market share and customer base
THANK YOU
Copyright Sikkim Manipal University Distance Education. All Rights Reserved.
All product and company names used or referred to in this work are trademarks or registered trademarks of their respective holders. Use of them in this work does not
imply any affiliation with or endorsement by them.
This work contains a variety of copyrighted material. Some of this is the intellectual property of Sikkim Manipal University Distance Education, some material is owned by
others which is clearly indicated, and other material may be in the public domain. Except for material which is unambiguously and unarguably in the public domain,
permission is not given for any commercial use or sale of this work or any portion or component hereof. No part of this work (except as legally allowed for private use
and study) may be reproduced, adapted, or further disseminated without the express and written permission of Sikkim Manipal University Distance Education or the legal
holder of copyright, as the case may be.
Program: MBA
Semester: III
Subject Cod:IB0012
Session: 2
Unit: 5-10

Unit 5 Organizational Structure of MNCs
Objectives:
• State the types of organizational structures
• Interpret the dynamics of an organizational structure
• Explain matrix organizational structure and network structure
• Identify the emerging trends of organizational structure within an MNC
• Compare centralization and decentralization
• Assess organization structure in the 21st century
Good Organizational Structure

Organizational structure involves arrangement of activities and assignment of personnel to
these activities to achieve the organizational goals in an efficient manner.
Benefits of a Good Organizational Structure While there are many different structures that
organizations can adopt, depending upon the type of organization, including whether it is a
service or a manufacturing organization, a well structured organization has many benefits.
Types of Organizational Structures

In order to operate efficiently, an organization needs to develop a structure that fulfills its
requirements. For many organizations, an organizational structure refers to a hierarchy of
people and their functions
Bureaucratic Structures
In terms of people management, bureaucratic structures maintain strict hierarchies.
Functional Structures
Under functional structures the organization is divided into different segments based on the
management of functions. Functional structures enhance the efficiencies of each functional
group.
Dynamics of Organizational Structure

Organizational structures are not a new phenomenon. They have primarily existed since the
time of hunters and gatherers in tribal organizations to royal and clerical power structures.
They were properly implemented in the industrial structures and are now evident in the
post-industrial structures
Matrix Organizational Structure

Matrix organization is the concept of project structure but much more complex and
comparatively more permanent. It is used primarily for unique custom tasks to achieve new
and sophisticated products or services. It requires that diverse technical expertise be
coordinated at a fast pace and closely.
Disadvantages and Weaknesses of Matrix Organization
Network Structure
Network organizational structure primarily involves subcontracting some or all of its
operating functions to other companies who are required to coordinate their activities in
consultation with the personnel at the headquarters of the network organization
Emerging Trends of Organizational Structure

Organizations have entered a new phase of development which is marked by rapid and
dramatic changes.
Centralization vs. Decentralization

Summary
Let us recapitulate the important concepts discussed in this unit:
• Structure is understood to be a framework around which a group is organization. It is the
foundation which helps the group to function smoothly. Basically, it is a kind of operating
manual which informs members how the organization is put together and how it works.
• Organizational structure involves arrangement of activities and assignment of personnel
to these activities in order to achieve the organizational goals in an efficient manner. It is a
way by which various parts of an organization are tied together in a coordinated manner
and it illustrates the various relationships among various levels of hierarchy within the
organization as well as horizontal relationships among various functions of the
organizational operations.
Unit 6 Coordination and Control
Objectives:
• Interpret the concept of organization control
• Recognize the different types of control
• Discuss the function of establishing a control system in MNCs
• Evaluate the relationship between Headquarters and subsidiaries
• Identify the different administrative control systems used in MNCs
• Assess the function of a synthesized strategy in coordinating subsidiaries in MNCs
Concept of Organization Control

Control is very important both in organized living as well as ‘living’ organizations. When
things go smoothly as planned, they are considered to be under control. ‘Self-control’ is a
word we are all familiar with and which simply means that we discipline ourselves in such a
manner that we strictly adhere to our plans for our lives and generally do not deviate from
these plans.
Controls Classifications
These classifications may result from the different areas in organizational operations where
controls can be applied.
Characteristics of Effective Controls

Controls at every level focus on inputs, processes and outputs. It is very important to have
effective controls at each of these three stages. Effective control systems tend to have
certain common characteristics.
Types of Control
Control can focus on events before, during, or after a process. For example, a local
automobile dealer can focus on activities before, during, or after sales of new cars.
Establishing a Control System in MNCs

According to Robert J. Mockler, Management control is a systematic effort to set
performance standards with planning objectives, to design information feedback systems, to
compare actual performance with these pre-determined standards, to determine whether
there are any deviations and to measure their significance, and to take any action required
to assure that all corporate resources are being used in the most effective and efficient way
possible in achieving corporate objectives
Control System: Relationship between Head Quarters (HQ) and Subsidiaries

The relationship between HQ and subsidiary refer to a connection between two units,
where one unit is financially and legally dependent on the other. Corporate headquarters is
that part of an organization where strategies are formulated and most of the decision-
making takes place. Subsidiary is the reporting unit controlled by the parent company
Various Administrative Controls

Briefly speaking, control means the total of activities or mechanisms employed to attain
information about behaviours and decisions. It is to use the former to ‘control’ the conduct
of activities so that the ends are in accordance with the plans, objectives and anticipation of
the controller.
Control System and Strategy – Synthesizing Strategy

It is true that the synthesized strategy and control strategies with some intelligent control
methods, could stress on the control outputs. A synthesized strategy would help in the co-
ordination of subsidiaries among the MNCs, which would further lead to a better control
over the business partners. The same can only be synthesized if all the subsidiaries are
willing to accept and implement the control parameters. This could lead to a better efficacy.
Summary
Let us recapitulate the important concepts discussed in this unit: • Though organizational
structure can be understood from different perspectives, it is best viewed from the
perspective of decision-making. The main objective of structure is to perform two
important functions within the organization, i.e., control and coordination.
Unit 7 Operations Management in MNCs
Objectives:
• Identify the factors and determinants of operations management
• Evaluate the factors of customization and cost efficiency
• Interpret the significance of global sourcing
• Assess the relevance of logistics management in MNCs
• Analyse the global supply chain management
• Interpret the transfer of knowledge and technology between host and home country
• Define new product development
Unit 7 Operations Management in MNCs
Operations Management: Definition and Concept

Operations management is an area of management concerned with overseeing, designing
and controlling the process of production and redesigning business operations in the
production of goods and services. It is a systematic approach towards addressing issues in
the transformation process that converts inputs into useful revenue generating outputs.
operation Management: Where to Produce, Factors and Determinants

In operation systems many companies face different issues and service overlaps, which lead
to problems in the company’s automated operations management system
Unit 8 Human Resource Management in MNCs
Objectives:
• Discuss the key concepts in International Human Resource Management
• Examine International Recruitments Strategies within MNCs
Unit 9 International Human Resource Management
Objectives:
• Discuss the importance of compensation management in MNCs
• Explain the key components of international compensation programs
• Describe the procedure for performance appraisal in MNCs
• Explain the procedure for performance appraisal of expatriates in subsidiaries
• Discuss the various human resource strategies in the parent company as well as the
subsidiaries
Unit 10 Financial Management in MNCs

Structure
Objectives:
• Discuss the meaning, types, methods and benefits of foreign direct investment (FDI)
• Explain the various exchange rate systems
• Describe the different exchange rate markets Discuss the three kinds of risk exposures in
MNCs
• Explain the concept and uses of international transfer pricing
• Examine the primary goals and benefits of international investment treaties
• Discuss the various benefits derived from Bilateral Investment Protection Agreements
Program: MBA
Semester: III
Subject Cod:IB0012
Session: 2
Unit: 11-14

Unit 11 International Labour Laws
Objectives:
• Discuss the importance of maintaining labour relations in multinational corporations
• Examine the various approaches to labour relations
• Discuss the issues pertaining to global child labour
• Explain the various ILO conventions on child labour
• Describe the concept, principles and models of corporate governance in multinational
corporations
• Explain the corporate governance relationship between parent companies and
subsidiaries
Unit 12 Multinational Trade in New Global Order
Objectives:
• Discuss the trend of globalization of firms
• Describe the process and reasons for globalization of firms
• Examine the various trends of international trade and investment in MNCs
• Examine the FDI policy of India
• Discuss the various routes for FDI investment in India
Program: MBA
Semester: III
Subject Cod:IB0012
Session: 4
Unit: 13-14

Unit 13 MNCs in India
Objectives:
• Discuss the evolution and growth of Indian MNCs
• Examine the impact of MNCs on the India economy
• Discuss the FDI policy in India
• Examine the status of FDI flow in India
• Explain the government policies towards MNCs
• Discuss the investment routes of foreign multinational corporations in India
Evolution and Growth of Indian MNCs

In the changing economic scenario, choosing the path of liberalization, privatization and
globalization became imperative for Indian government, particularly due to the deficit in
the foreign reserves. In 1991, the Late Shri P.V. Narsimha Rao, the then Prime minister of
India, opened the Indian market for foreign multinationals. This has led to making the
country one of the most attractive destinations for setting up MNCs.
Impact of MNCs on the India Economy

There are both positive as well as negative impacts of MNCs on the Indian economy.
Globalization helps in creating new markets and wealth. At the same time, it is responsible
for extensive suffering, disorder and unrest.
The Status of FDI Flow in India

The service sector was the major area of attraction for MNCs initially, but the
manufacturing sector later saw a significant rise in the inflow of FDI
Government Policies towards MNCs

It is the intent and objective of the Indian government to attract and promote foreign direct
investment (FDI) in order to supplement domestic capital, technology and skills for
accelerated economic growth
Objectives:
• Discuss the evolution and growth of Indian MNCs
• Examine the impact of MNCs on the India economy
• Discuss the FDI policy in India
• Examine the status of FDI flow in India
• Explain the government policies towards MNCs
• Discuss the investment routes of foreign multinational corporations in India
Summary
Let us recapitulate the important concepts discussed in this unit: • In the changing
economic scenario, choosing the path of liberalization, privatization and globalization
became imperative for the Indian government, particularly due to the deficit in the foreign
reserves. • Before opening up the doors for MNCs, the system of License Raj prevailed in
the country, benefitting most of the Indian companies. Therefore, Indian companies
feared the tough competition they may have to face with the MNCs, who were not only
financially but technologically very strong as well. • Indian companies have not only
become able to compete successfully with the MNCs but have also been successful in
creating an impressive impact in the global market. Many of the Indian companies have
successfully made a notable presence in different parts of the world in diverse fields like
automobile, IT and mining.
Unit 14 Enterprise Risk Management and Multinational Corporations
Objectives:
• Interpret the significance enterprise risk management
• Identify the different kinds of risks in ERM
Enterprise Risk Management: Concept and Importance

Enterprise risk management (ERM) of a business comprises the methods and processes
used by firms to manage risks. They can then use the opportunities related to
achievement of the various aims of their business. ERM provides a framework for risk
management, which involves the identification of specific events or circumstances that are
pertinent to the organization’s objectives of identifying risks as well as opportunities,
assessing them in terms of likelihood of impact, examining progress and determining a
response strategy.
Process of Implementing ERM in MNCs

As organizations need to manage risks, it is imperative that they identify the goals of an
ERM program. An ERM programme is inclusive of a number of departments or functions
and can therefore be termed as risk functions. The main aim of these risk functions is to
identify and manage the given set of risks that an organization will come across.
Issues/Challenges of ERM in MNCs

In 2008, a global risk management survey was undertaken by Deloitte LLP. According to
this survey different aspects of ERM program implementation were analysed.
Summary
Let us recapitulate the important concepts discussed in this unit: • Enterprise risk
management (ERM) of a business comprises the methods and processes used by firms to
manage risks. They can then use the opportunities related to achievement of the various
aims of their business. • ERM is the risk-based approach of managing an enterprise, which
can integrate concepts of internal control and strategic planning. ERM can also address the
needs of the stakeholders who intend to obtain complete information regarding the risks
inherent in complex organizations. • The process of risk management is cyclic and begins
with the identification of risks. The manager can identify risks and alternate future
scenarios, evaluate the likelihood and severity of those scenarios, identify priority risks
and improve the organization’s capabilities of managing those risks. • The central goal of
an ERM program is to enhance the organization’s capability and coordination and
integrate the output for giving a unified picture of risk. When such systems are
implemented, they enhance the organization’s risk management abilities.
THANK YOU
Copyright Sikkim Manipal University Distance Education. All Rights Reserved.
All product and company names used or referred to in this work are trademarks or registered trademarks of their respective holders. Use of them in this work does not
imply any affiliation with or endorsement by them.
This work contains a variety of copyrighted material. Some of this is the intellectual property of Sikkim Manipal University Distance Education, some material is owned by
others which is clearly indicated, and other material may be in the public domain. Except for material which is unambiguously and unarguably in the public domain,
permission is not given for any commercial use or sale of this work or any portion or component hereof. No part of this work (except as legally allowed for private use
and study) may be reproduced, adapted, or further disseminated without the express and written permission of Sikkim Manipal University Distance Education or the legal
holder of copyright, as the case may be.

Program: MBA Semester: III Subject Name: Management of Multinational Corporations Subject Cod:IB0012 Session: I Unit: 1-4

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Program: MBA Semester: III Subject Name: Management of Multinational Corporations Subject Cod:IB0012 Session: I Unit: 1-4

Uploaded by

Copyright:

Available Formats

Program: MBA

PRESENTED BY Mr. Biren Chettri Assistant Professor Management Dep't

Unit 1 Introduction to Multinational Corporations

Unit 1 Introduction to Multinational Corporations

Multinational Corporation: Definition and Characteristics

Unit 1 Introduction to Multinational Corporations

Characteristics of Multinational Corporations

Significance of Multinational Corporations

Evolutionary Process of Multinational Corporations: A Conceptual Framework

Unit 1 Introduction to Multinational Corporations

Advantages and Disadvantages of MNCs to the Host Country

Advantages and Disadvantages of MNCs to the Home Country

Unit 1 Introduction to Multinational Corporations

Growth of Multinational Corporations in International Markets

Unit 1 Introduction to Multinational Corporations

Unit 2 Theories of Multinational Corporations

Unit 2 Theories of Multinational Corporations

Unit 2 Theories of Multinational Corporations

Eclectic Paradigm Theory

Unit 2 Theories of Multinational Corporations

International Product Life Cycle Theory

Unit 2 Theories of Multinational Corporations

Unit 3 Global Sourcing and Multinational Corporations

Unit 3 Global Sourcing and Multinational Corporations

Outsourcing in Multinational Corporations

Inbound and Outbound Sourcing

Global Sourcing: A Conceptual Framework

Unit 3 Global Sourcing and Multinational Corporations

Global Sourcing and Multinational Corporations

Unit 3 Global Sourcing and Multinational Corporations

Unit 4 Global Strategies of MNCs

Unit 4 Global Strategies of MNCs

Global Strategy and its Importance

Global Strategies for MNCs

Unit 4 Global Strategies of MNCs

Global Value Chain: A Conceptual Framework

Drivers of Global Value Chain

Unit 4 Global Strategies of MNCs

Experience Curve of MNCs and International Expansion

Unit 4 Global Strategies of MNCs

PRESENTED BY Mr. Biren Chettri Assistant Professor Management Dep't

Unit 5 Organizational Structure of MNCs

Unit 5 Organizational Structure of MNCs

Good Organizational Structure

Types of Organizational Structures

Unit 5 Organizational Structure of MNCs

Dynamics of Organizational Structure

Unit 5 Organizational Structure of MNCs

Matrix Organizational Structure

Disadvantages and Weaknesses of Matrix Organization

Unit 5 Organizational Structure of MNCs

Emerging Trends of Organizational Structure

Centralization vs. Decentralization

Unit 5 Organizational Structure of MNCs

Unit 6 Coordination and Control

Unit 6 Coordination and Control

Concept of Organization Control

Characteristics of Effective Controls

Unit 6 Coordination and Control

Establishing a Control System in MNCs

Unit 6 Coordination and Control

Control System: Relationship between Head Quarters (HQ) and Subsidiaries

Various Administrative Controls