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INTRODUCTION

Multinationals (MNCs) are firms with home base in one country, and with
operations that exist in many countries. Shareholders usually own these companies,
however, some are government owned. There are companies in the world that
manufacture more goods, than a country combined. Consider this indication of the
multinational shift in manufacturing:
1901 the U.S. had 47 firms with overseas manufacturing subsidiaries
1950 the number of companies operating overseas had grown to 988
1959 the number climbed to 1,891
1967 there were 3,646 U.S. companies operating overseas
1991 over 10,000 American companies had manufacturing subsidiaries abroad
MNC perspective - a U.S. Ford executive once stated: It is our goal to be in
every single country there is. We at Ford Motor Company look at a world map without
any boundaries.
The present forces of industrial dispersion are opposite of earlier trends towards
agglomeration, and represents a later phase in the sequence of industrial development.
Multinationals offer advantages to non-industrial countries, as well as posing certain
problems. It is the result of the advantages, that many governments adopt favourable
attitudes towards multinationals. Companies with international subsidiaries are known for
introducing new technologies and providing employment. With them, may come new
ideas, new methods of organization and contracts. For developing nations, the arrival of
a multinational may also mean training in management skills, and trade skills, such as
welding and fitting. It is also felt that MNCs promote international trade and contribute to
the integration of industrially developing nations into the mainstream of the world
community.

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Multinationals can pose certain problems for developing nations, which

collectively became known as Global South in 1992. By removing local resources to the
factories of developed nations, they can deprive the host of additional jobs and incomes
involved in processing the raw materials. Also, the MNCs may inhibit the development of
other domestic industries by competing for scarce industrial inputs, other than labour, and
by competing with domestic industries for a share of a limited market. MNC interests
may often differ with the host country. For instance, an MNC wants to close a factory
down, while the host country wants to keep it in operation to aid a local economy. With
problems like these over the years, it has created an element of uncertainty in the plans of
host countries. This uncertainty arises essentially out of concerns about sovereignty,
which ultimately raises the question of who has final authority.
Over the years, there have been many countries that have sought out
multinationals to establish operations in countries. This has typically led to the relaxation
of regulations, working standards, environmental safeguards, community development
initiatives, and human rights violations to draw in corporate entities. The purpose of
having an MNC in a developing nation is for government officials to gain a quick
infusion into state coffers, most of which has traditionally benefited the wealthiest in
society.
Definitions:
Multinational Corporation A business organization that functions on a global basis,
which is not subject to or loyal to any particular government or state.
Subsidiary a company that is more than half owned or controlled by another company.

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Mission & Vision of Top MNCs:

1. Coca Cola Vision and Mission:
Vision:
Our vision serves as the framework for our Roadmap and guides every aspect of
our business by describing what we need to accomplish in order to continue
achieving sustainable, quality growth.
Mission:
Our Roadmap starts with our mission, which is enduring. It declares our purpose as a
company and serves as the standard against which we weigh our actions and decisions.
To refresh the world...
To inspire moments of optimism and happiness...
To create value and make a difference.
2. Pepsi Vision and Mission:
Vision:
"PepsiCo's responsibility is to continually improve all aspects of the world in which we
operate - environment, social, economic - creating a better tomorrow than today."
Mission:
Our mission is to be the world's premier consumer products company focused on
convenient foods and beverages. We seek to produce financial rewards to investors as
we provide opportunities for growth and enrichment to our employees, our business
partners and the communities in which we operate. And in everything we do, we strive
for honesty, fairness and integrity
3. Tech Mahindra IT Services and Telecom:
Vision:
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To be the leading global software solutions provider to the Telecom industry.

Mission:
To be the global leader in Outsourcing Services to the Telecom industry, building
on our technologies, competencies and customer interests, and creating value for our
shareholders and customers.
4. Vision & Mission of TOYOTA:
Vision:
"IMCs Vision is to be the most respected and successful enterprise, delighting customers
with a wide range of products and solutions in the automobile industry with the
best people and the best technology".
Mission:
Mission of Toyota is to provide safe & sound journey. Toyota is developing various new
technologies from the perspective of energy saving and diversifying energy sources.
Environment has been first and most important issue in priorities of Toyota and working
toward creating a prosperous society and clean world.

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IMPORTANCE & OBJECTIVES

A multinational company is one that operates in more than one country, and
typically operates in a number of major global markets. The three main developed trading
areas of the world are North America, The European Union, and South-East Asia (and
Australasia). Examples of multinationals are Coca-Cola, Cadbury Schweppes,
McDonalds, Kellogg's, Cummins, and many more. An important characteristic of these
organisations is that they have well established corporate brands that are widely
recognised - for example, Coca-Cola is the second best known expression in the world
after OK.
Many of these multinationals produce global brands with similar marketing mixes
across the world - e.g. with the same or similar advertising, distribution and retailing
techniques and promotions. Most UK business could choose to be globally minded from
the earliest days of the industrial revolution, today there is no choice. Business must be
internationally minded or die. The market is global, there is virtually no other.
Reasons pushing businesses to develop a multinational presence are:
1. Size of market. Although there are only about 60 million people to sell to, there are
literally billions in the global market.
2. Foreign companies are increasingly selling their own products in the market. Many of
these companies are very big - like the US retailer Wal-Mart, which took over ASDA in
2000. If businesses lose some of their market they have to make up these losses by selling
abroad.

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3. In the world today billions of consumers are for the first time earning enough money to
buy modern consumer goods like Coca-Cola and Mars bars. We are seeing the rise of
global consumers, who have similar tastes and lifestyles whatever country they live in.

Joint venture: A multinational sometimes forms a joint venture with a local company, for
example in China or Eastern Europe. The advantage is that costs are shared and the
partner in the joint venture has local knowledge and contacts.

Objective of the Study

To study products analysis provided MNCs in India.

To study of Positive or Negative roles of the MNcs in India.

To understand the Growth strategy, reasons, GDP, FDI, structures and impacts of
the developing economies.

To know about various Multinational Companies in India.

To study about effects and worlds largest MNCs in the world.

Objective of the MNCs:

To expand the business beyond the boundaries of th hom country.

Minimize cost of Production, especially labour cost.
Capture lucrative foreign market against International competitors.
Avail of competitive advantages internationally.
Achieve greater efficiency by producing in local market and the exporting the

products.
Make best use of technological advantages by setting up production facilities
abroad.
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Establish an international corporate image.

RESEARCH METHODOLOGY
Research is an art of scientific investigation. In other words research is a scientific and
systematic search for pertinent information on a specific topic. The logic behind taking
research methodology into consideration is that one can have knowledge regarding the
method and procedure adopted for achievements of objective of the project. With the
adoption of this others can also evaluate the results too.
So keeping in view the nature of requirement of the study to collect all the relevant
information regarding the comparison of public sector banks and the private sector banks
direct personal interview method with the help of structured questionnaire was adopted
for collection of primary data.
Secondary data has been collected through the various magazines and newspaper and by
surfing on internet and also by visiting the websites of Indian Banking Association.
DATA COLLECTION
Data was collected by using two main methods i.e. primary data and secondary data.
PRIMARY DATA primary data is the data which is used or collected for the first time
and it is not used by anyone in the past. There are number of sources of primary data
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from which the information can be collected. We took the following resources for our
research.
a) QUESTIONNAIRE This method of data collection is quite popular, particularly in
case of big enquiries. Here in our research we set 10 simple questions and requested the
respondents to answer these questions with correct information.
SECONDARY DATA Secondary data is the data which is available in readymade form
and which has already been used by other people for various purposes. The sources of
secondary data are newspaper, internet, websites of IBA, journals and other published
documents.
This project is based on secondary Data.

OVERVIEW

Introduction:
Multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or
enterprise that manages production establishments or delivers services in at least two
countries. Very large multinationals have budgets that exceed those of many countries.
Multinational corporations can have a powerful influence in international relations and
local economies. 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.
MNCs are not new in India if we look in the past British East India Company and Dutch
East India companies were there which came to India for trade and by taking advantage
of political conditions of India gained power. After adopting new economic policy by
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government of India in July 1991 many MNCs came in the Indian economic scene
because the government of India gave many incentives to the foreign investors. So it is
clear that government opened the doors of Indian market to MNCs .

MNCs and Indian Industries:

Some economists think that MNCs are helpful for Indian industrial sector they think that
Indian companies learn new technique of production and new management techniques
with the arrival of MNCs in the Indian economic scene. MNCs increase competition in
the industrial sector so when Indian companies compete with global giants they also
improve in their working. With the entrance of MNCs in India demand for skilled persons
increased to a great extent so more and more people are becoming skillful and the
problem of skilled persons is solved for Indian industries also. MNCs also bring foreign
capital in the country, which help to expand the market and Indian industries also take
benefit of it.
There are some economists who have some different opinion according to them the
technology transferred by them is not useful for countries like India because MNCs use
capital intensive technique and developing countries have scarce capital and labour
abundant so the technology they transfer is of little use. The competition increased by
MNCs is also disastrous for domestic industries only few strong domestic industries have
enough strength to face the competition with global giants. As well as skilled persons are
concerned MNCs give higher salaries to the skilled persons and thus able to explore the
services of the most skilled persons and the Indian industries are still out of the services
of these skilled people. No doubt MNCs bring foreign capital in India but this capital
later becomes the cause of reimbursement of profit to the MNCs parent countries, which
cause capital flight from the country.

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MNCs and agriculture:

Indian economy is an agrarian economy; a major part of the population depends on
agriculture directly or indirectly. If we go back to past few decades Indian agriculture was
considered backward but now the time is changing and MNCs such as Mahyco-Monsanto
help in modernizing Indian agriculture. They provide modern agricultural inputs such as
HYV seeds, pesticides, fertilizers and modern agricultural equipments to the Indian
farmers and thus Indian agriculture has turned itself from subsistence level to making
profit. MNCs also encourage research activities in the field of agriculture in developing
countries like India.
If we see the other part of the picture India with billion plus population, has put
agriculture at the heart of its economy and food security at the center of its agriculture
policy. In developing countries, MNCs encourage commercial farming because they need
cheap raw material. Farmers also get good amount for their crop so the result is danger of
food security, which the world is facing these days. A big number of Indian farmers are
small and medium farmers who are not able to use expensive agricultural equipments so
the gap is widening among rich and poor farmers, which is disastrous for the agriculture.
Moreover MNCs are making Indian farmers dependent on HYV seeds provided by them
and thus the biodiversity of Indian varieties are in danger.

MNCs from social and moral viewpoint:

MNCs are not fair in their working in the developing countries. Many MNCs are not
paying their tax liability, they prefer to establish in that country where tax laws are not
strict similarly they prefer to establish in that country where environmental laws are also
not much strict and these are mainly developing countries. They even send their toxic
waste in these countries by taking advantage of loose environmental laws even the
quality of their products vary with country to country we can take the example of coca
cola which is of superior quality in USA and is of inferior in India. MNCs also
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responsible for misallocation of resources in the developing countries. They provide

mainly luxurious products because there is more profit in it. Thus demand for these
products increase due to demonstration effect and this leads to misallocation of resources
towards luxurious goods but the need of developing countries is to produce more and
more necessary goods because most of the people belong to poor or middle class.
Another aspect, which judges MNCs morally, is political interference. Generally it is the
practice of MNCs to gain the economic power in developing countries and then get
political power by giving help to the politicians at the time of elections and then
manipulate industrial policies in their favor they also interfere in the important political
matters of these countries which can cause a big danger to the sovereignty of developing
countries.

Opportunities for Developing Economies:

Services exporting, software development and hardware represent three major market
opportunities for firms in developing and transition economies. Traditional exporters can
also harness new technologies to cut costs and reposition themselves in the international
marketplace.
Old business in new way
The digital economy is reshaping international trade, as business practices change and
new business intermediaries emerge. Old business in new ways, but also new business
opportunities this is what e-trade is all about.

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The changing marketplace

E-trade opens new opportunities to export-oriented firms, especially small ones. Firms
can source production inputs more expeditiously, streamline (i.e., eliminate
intermediaries) supply- and export-distribution chains and reduce business transaction
costs. In short, e-trade allows the enterprise to reposition itself in the international
marketplace.
E-trade capability does not mean that the exporter must be able to conduct each stage of
the international transaction electronically. For the moment the market does not demand
it. Export development in the digital economy is not an "all or nothing" proposition.
The challenge is, nevertheless, to work towards acquiring e-trade capability at every stage
of the transaction. This requires a concerted response not just from the entrepreneur, but
also from the public-sector strategy-maker and managers of trade support institutions.
New Business Opportunities
Three major categories of export opportunities have emerged: services exporting,
software and hardware. Services exporting opportunities that exploit information and
communication technology (ICT) are on the rise, as business practices change and new
intermediaries emerge. Both software development and hardware exports are areas of
opportunity, principally through partnerships with multinationals.
Services
The Internet allows service providers to "go international", by broadening market reach.
They can add value by offering a wider range of services, as well as more customization.
New export opportunities for traditional service providers (such as engineering design
and research) work best for companies with an established export track record. There are
also major new opportunities - called "web-enabled services". These include portal site

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management, content development, web site design and promotion, e-training, online
project management and tele health consulting.
Software development
For most software creators in developing and transition economies, the best way to secure
export business is to partner with software producers and solutions companies located in
major markets. Because most software developers outside industrial economies do not
have the brand recognition or market acceptance needed to commercialize their own
products on an international scale. Customized development and IT consulting services,
subcontracting to firms in developing and transition countries is becoming an extremely
important aspect of today's digital economy.
Hardware markets
World import demand for ICT equipment and components (excluding electrical
machinery) was close to US$ 600 billion in 1998, according to ITC calculations based on
the United Nations COMTRADE statistics. Demand is growing at a rate of 12%-15% a
year. As new technologies stimulate broader and deeper demand for Internet-based
services and devices, the world import market for ICT equipment is expected to exceed
US$ 1 trillion before 2005. The ICT sector has, in fact, become one of the major, if not
the major, growth industries in foreign trade, exceeding world trade in agriculture,
automobiles or textiles.
Partner with multinationals
"The best strategy is to work with the MNCs [multinational corporations], rather than
against them. They themselves are looking for partners.
The ICT hardware market is dominated by multinational corporations. From the
perspective of the exporter in a developing or transition country, the market is
characterized by:

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Formidable entry barriers to independent producers;

Geographic and organizational separation of research and product development,
production and marketing activities;
Task or component-specific focus, rather than complete product focus (i.e., component
production or assembly);
Concentration on the lower end of the market's "complexity scale" (i.e., integrated
circuits and computer parts) and limitations on moving up the value chain;
Increasing competition among task and component suppliers, with the highest premium
given to price and capability to respond to the sector's compressed product life cycle; and
Competitiveness determined largely by proximity to major markets and growth poles (a
paradox, given the distance-elimination nature of ICT technology).
Firms in developing and transition countries that have established themselves in the ICT
hardware market have done so primarily through participation in the expanding supply
and subcontracting networks of multinationals.
India's Export Performance:
Two notable developments have taken place in India's export front since 1970s.
First, as stated earlier its exports have grown much faster than GDP. Second, there has
been a substantial change in India's export mix. Several factors appear to have
contributed to these developments, namely the real depreciation of exchange rate,
liberalization in investment policy especially from the early 1980s and the provision of
export subsidies to reduce the anti-export bias created by the IS policy. Export subsidies
took in may form duty drawback, subsidized credit and direct subsidies- which help
reduced the bias against exports. Whenever the real devaluation was maintained, growth
in exports continued. A sharp devaluation of rupee since the early 1990s has further
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strengthened export growth although there was some slowdown and or declined in
exports during the macro economic crisis of the early 1990s. Export growth also slow
down in 1997-98 due partly to the Asian crisis.
Indian exports are dominated by manufactured goods which account for about
76% share by 1997-98- increased from 50% in 1970-71. Four major items (namely gems
and jewellery, readymade garments, engineering goods, and chemicals and allied
products) dominate its manufactured exports. With the exception of jewellery, all
industries have received foreign participation. Engineering goods, and chemical and
allied products are the recipient of foreign investment since 1970s while readymade
garment was open for foreign investment only in the late 1980s.
Models of Export Demand and Supply Functions
Since export performance is influenced by both foreign demand and domestic
supply factors we develop a simultaneous equation model to explain India's export
performance. On the basis of conventional trade theory one would expect that the lower
the relative price of India's exports in relation to world export prices the higher the
demand for its exports. Hence, a negative link between the relative price of exports and
export demand is expected. World income appears to have a positive impact on export
demand and the appreciation of the real effective exchange rate (REER) reduces export
demand (Joshi and Little, 1994 and Srinivasan, 1998).
On the basis of theoretical reasoning one would expect a rise in export supply
when the export prices rise relative to domestic prices and vice versa. Increase in
domestic demand diverts export supply towards domestic consumption, leading to a fall
in exports. This lead us to believe that there is a negative link between domestic demand
and export supply (Joshi and Little, 1994). The role of FDI in export promotion in
developing countries is ambiguous and crucially depends on the motive behind such
investment. If the motive behind such investment is to bypass trade barriers in the host
country, then it is highly unlikely that such investment would result in better export
performance. However, if FDI is motivated by the country's comparative advantage, then
it may contribute to export growth. Thus, the nature of the link between FDI and export
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performance is not clear cut. Reliable and efficient infrastructure facilities are essential
for reducing costs, ensuring timely supply of exports and thereby improving export
performance (Srinivasan, 1998). However, many developing countries including India
lack reliable and efficient infrastructure facilities due mainly to under-investment and the
public sector intervention. This contributes to higher costs and poor export performance.
Thus, we expect a positive link between improved infrastructure facilities and export
supply.
Over the past few decades India's exports have grown much faster than GDP.
Several factors appear to have contributed to this phenomenon including FDI. However,
as yet there has not been any attempt to investigate the role of FDI in India's export
performance. Using annual data for 1970-98 we investigate this issue in a simultaneous
equation framework. Results suggest that demand for Indian exports increases when its
export prices fall in relation to world prices. Also the real appreciation of the rupee
adversely effects India's export demand. Hence, inflation should be kept lower than major
trading partners and reliance on flexible exchange rate be increased to ensure that the real
appreciation of rupee is maintained. Export supply is positively related to the domestic
relative price of exports and a higher domestic demand reduces export supply. This
suggest that tight monetary and fiscal policies are necessary especially at the time of high
growth to check domestic prices and demand pressure. Foreign investment appears to
have statistically no significant impact on India's export performance although the
coefficient of FDI variable has a positive sign. Similarly, we find no evidence to claim
that the level of infrastructure has an impact on export supply.

What are the Advantages and Disadvantages of Multinational Corporations?

Multinational Corporations no doubt, carryout business with the ultimate object of
profit making like any other domestic company. According to report "for some, the
multinational companies are an invaluable dynamic force and instrument for wider
distribution of capital, technology and employment; for others they are monsters which
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our present institutions, national or international, cannot adequately control, a law to

themselves with no reasonable concept, the public interest or social policy can accept.
MNC's directly and indirectly help both the home country and the host country.

Advantages of MNC's for the host country

MNC's help the host country in the following ways:
1. The Investment level, employment level, and income level of the host country
increases due to the operation of MNC's.
2. The industries of host country get latest technology from foreign countries through
MNC's.
3. The host country's business also gets management expertise from MNC's.
4. The domestic traders and market intermediaries of the host country gets increased
business from the operation of MNC's.
5. MNC's break protectionalism, curb local monopolies, create competition among
domestic companies and thus enhance their competitiveness.
6. Domestic industries can make use of R and D outcomes of MNC's.
7. The host country can reduce imports and increase exports due to goods produced by
MNC's in the host country. This helps to improve balance of payment.
8. Level of industrial and economic development increases due to the growth of MNC's
in the host country.
Advantages of MNC's for the home country
MNC's home country has the following advantages.
1. MNC's create opportunities for marketing the products produced in the home country
throughout the world.

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2. They create employment opportunities to the people of home country both at home and
abroad.
3. It gives a boost to the industrial activities of home country.
4. MNC's help to maintain favourable balance of payment of the home country in the
long run.
5. Home country can also get the benefit of foreign culture brought by MNC's.

Disadvantages of MNC's for the host country

1. MNC's may transfer technology which has become outdated in the home country.
2. As MNC's do not operate within the national autonomy, they may pose a threat to the
economic and political sovereignty of host countries.
3. MNC's may kill the domestic industry by monpolising the host country's market.
4. In order to make profit, MNC's may use natural resources of the home country
indiscriminately and cause depletion of the resources.
5. A large sums of money flows to foreign countries in terms of payments towards profits,
dividends and royalty.
Disadvantages of MNC's for the home country
1. MNC's transfer the capital from the home country to various host countries causing
unfavourable balance of payment.
2. MNC's may not create employment opportunities to the people of home country if it
adopts geocentric approach.
3. As Investments in foreign countries is more profitable, MNC's may neglect the home
countries industrial and economic development.
Applicability to particular business:
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MNC's is suitable in the following cases.

1. Where the Government wants to avail of foreign technology and foreign capital e.g.
Maruti Udyog Limited, Hind lever, Philips, HP, Honeywell etc.
2. Where it is desirable in the national interest to increase employment opportunities in
the country e.g., Hindustan Lever.
3. Where foreign management expertise is needed e.g. Honeywell, Samsung, LG
Electronics etc.
4. Where it is desirable to diversify activities into untapped and priority areas like core
and infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.
5. Pharmaceutical industries e.g. Glaxo, Bayer etc.

Why MNCs must 'Make in India':

When our country's prime minister gave the clarion call of 'Make in India', he didn't just
announce a new national programme to foster investment. He also laid out an invite for
multinational companies (MNCs) from around the world to truly see the potential that
exists in India and capitalize upon it. This vision of our political leadership must be
applauded. It should also spur MNCs to come forward to help transform the
manufacturing landscape in this country much like the way they have been able to do in
the services industry over the last decade or so.
"Make in India" can no longer be seen as "a choice" by MNCs looking to get a bigger pie
of the market here. Today, it has become a 'necessity to win'. And there are three reasons
for this:

1. Manufacturing locally in India enables companies to make significant savings on

import duty and logistics costs, which remain considerably high (up to 25-30% of total
landed cost). In UTC's own case, wherever we have localised our products, like chillers
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and elevators, we have been able to bring the cost down by at least 10-15%, thereby
increasing our competitiveness and ability to penetrate new customer segments/ price
points.
2. There is also a significant reduction in lead time for deliveries to the customer,
especially in the case of complex engineering or high-tech products. Over here, by
localising some of our product lines, we have been able to reduce the order to delivery
lead time from 12 weeks to as low as four weeks. This allows companies to be far more
responsive and flexible to changing customer needs.
3. Local manufacturing also provides an opportunity for MNCs to design and
manufacture products that are tailored to Indian operating conditions, which are different
compared to other countries - be it how products get transported, how they are installed
or under what power conditions they operate. Winning in India requires "designing and
manufacturing for India".
While the government has laid out a bold vision to bring more manufacturing to
India, companies no doubt will face hurdles in doing so and will need to patiently
navigate the path ahead. The core issues impeding the growth of manufacturing today
like labour, land, cumbersome taxation systems and poor infrastructure are issues that
will take time to solve. The new government has been trying to modify the Factories Act
but faces stiff opposition. It is, however, very encouraging to see the recent moves to
bring in more transparency around labour inspections and provide more flexibility in
the employee provident fund (PF) scheme. The onerous land acquisition bill passed by
the earlier government needs to be modified to make it more industry friendly, which is
no easy task, and the roll-out of the Goods and Services Tax (GST) will take some time
given the fact that every state wants to secure its own financial interests. Most
importantly, many of these issues have to be resolved at the state level and we are
beginning to see some states surge forward with more progress and reform (for example
Gujarat, Rajasthan and Madhya Pradesh). With over $100 billion of investments
committed to India by the US, Japan and China during the PM's recent visits, it is up to
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the states to fight for their respective shares by creating an enabling environment. Those
that will do so will receive most of the investment over the next few years. As the
environment changes around us and becomes more conducive to manufacturing, there is
also a lot that the private industry can do at large (both local and multinational
companies), particularly in the areas of attracting talent and developing skills.
'Make in India' is going to be a journey. That India has the potential to be a global
manufacturing hub cannot be questioned. However, MNCs will need to be patient, invest
ahead of the curve and be committed to this opportunity. It's clearly an imperative and no
longer an option.

The Organization Structure of a Multinational Company:

Multinational companies are faced with two opposing forces when designing the
structure of their organization. They are faced with the need for differentiation that allows
them to be specialized and competitive in their local markets. They are also faced with
the need to integrate. The structures adopted therefore have to find a balance between
these opposing needs and also remain in strategic alignment for the company to thrive.
Multinational companies have therefore evolved many structural permutations to suit
their business needs.
Subsidiary Model
Owning foreign subsidiaries is one of the most basic structural models of a multinational
company. The subsidiaries are self-contained units with their own operations, finance and
human resource functions. Thus the foreign subsidiaries are autonomous allowing them
to respond to local competitive conditions and develop locally responsive strategies. The
major disadvantage of this model however is the decentralization of strategic decisions
that makes it difficult for a unified approach to counter global competitive attacks.

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Product Division
Organizational structure of the multinational company in this case is developed on the
basis of its product portfolio. Each product has its own division that is responsible for the
production, marketing, finance and the overall strategy of that particular product globally.
The product organizational structure allows the multinational company to weed out
product divisions that are not successful. The major disadvantage of this divisional
structure is the lack of integral networks that may increase duplication of efforts across
countries.
Area Division
Organization using this model is again divisional in nature, and the divisions are based on
the geographical area. Each geographical region is responsible for all the products sold
within its region. Therefore all the functional units for that particular region
namely finance, operations and human resources are under the geographical region
responsibility. This structure allows the company to evaluate the geographical markets
that are most profitable. However communication problems, internal conflicts and
duplication of costs remain an issue.
Functional Structure
Functions such as finance, operations, marketing and human resources determine the
structure of the multinational company in this model. For example, all the production
personnel globally for a company work under the parameters set by the production
department. The advantage of using this structure is that there is greater specialization
within departments and more standardized processes across the global network. The
disadvantages include the lack of inter department communication and networking that
contributes to more rigidity within the organization.

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Matrix Structure
Matrix organizational structure is an overlap between the functional and divisional
structures. The structure is characterized by dual reporting relationships in which
employees report both to the functional manager and the divisional manager. Work
projects involve cross-functional teams from multiple functions such as finance,
operations and marketing. The members of teams would report both to the project
manager as well as their immediate supervisors in finance, operations and marketing. The
advantage of this structure is that there is more cross-functional communication that
facilitates innovation. The decisions are also more localized. However there can more
confusion and power plays because of the dual line of command.
Transnational network
Evolution of the matrix structure has led to the transnational network. The emphasis is
more on horizontal communication. Information is now shared centrally using new
technology such as "enterprise resource planning (ERP)" systems. This structure is
focused on establishing "knowledge pools" and information networks that allow global
integration as well local responsiveness.
Reasons for the growth of MNCs :
Reasons for the growth of multi nationals are manifold, the important ones being as
follows :
1) Expansion of market territory.
2) As the operations of a large size firm expand and as its international image builds up, it
seeks more and more extension of its activities beyond the physical boundaries of the
country in which it is incorporated.
3) Marketing superiorities: A multinational firm enjoys a number of marketing
superiorities over the national firms:
A) It possesses a more reliable and up to date market information system.
B) It enjoys market reputation and faces less difficulty in selling in production.
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C) It adopts more effective advertising and sales promotion technique use and .
D) It has efficient warehousing facilities due to lower inventory requirements.
4) Financial superiorities: A multinational firm enjoys the following financial
superiorities over the national firm :
A) It has huge financial resources with which it can easily turn on circumstances in its
favour.
B) It maintains a high level of funds utilization by generating funds in one country and
using them in another.
C) It has easier access to external capital markets.
D) because of its international reputation it is able to rise more international resources
even investors and banks of the host country are eager to invest in it.
Technological superiorities:
The main reason why MNCs have been encouraged by the underdeveloped countries to
participate in their industrial development is on account of the technological superiorities
which these firms possess as compared to national companies. The under developed
countries regard transfer of technology from MNCs useful on account of the following
reason: 1) Industrialization represents the most important way out of under development
and the resources of these countries are insufficient to sustain the industrial progress on
their own; 2) Local manpower, materials, Local capital equipment etc have to be optimally exploited and these countries are unable to accomplish these; 3) Depending totally
on local companies would required heavy imports of raw materials, capital equipment,
machinery and technical knowledge whereas MNCs bring these on their own; and 4) The
underdeveloped countries have to face stiff competition for selling their products in
international markets. Unless their goods meet international standards and quality
specifications, they cannot sell. MNCs help them in producing such goods.

Product Innovations :

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MNCs have Research and Development Departments engaged in the task of developing
new products and superior designs of existing products. Therefore their production
opportunities are far greater as compared to national companies.
A Critical Appraisal Of MNC Operations On Indian Economy
The operations of MNCs open up the possibilities of interference in the industrial (and
other) activities of the recipient country and are thus resented by the nationalist thinkers.
Their arguments against the operations of MNCs can be summed up as follows:
Payment of dividends and royalty: A large sum of money follows out of the country in
terms of payments of dividends, profits, royalties, technical fees and interest to the
foreign investors.
Distortion of economic structure : MNCs can inflict heavy damage on the host countries
in various forms (such as suppression of domestic entrepreneurship extension of oligopolistic practices such as unnecessary product differentiation, heavy advertising or
excessive profit taking ) supplying the economy with unsuitable technology and
unsuitable products, worsening of income distribution by distorting the production
structure of need the requirements of high-income elites, etc.
Political Interference: Because of their immense financial and technical power, the
MNCs have gained the necessary strength to influence the decision making processes in
underdeveloped countries. Though they do help in transferring technology to
underdeveloped countries, it has been often found that models and patterns to industrial
development and technologies transfer are not in harmony with the interests of the host
countries. The governments of underdeveloped countries have also felt threatened by the
direct and indirect interference of MNCs in their internal affairs. The autonomy and
sovereignty of the host countries is in danger. Because of these reasons, the governments
of various countries have sought to restrict the activities of MNCs in their economies
through a battery of administrative controls and legal provisions.
Technology Transfer not necessarily conducive to development : As far as transfer
to technology to underdeveloped countries in concerned, the behaviour pattern of MNCs
reveals that they do not engage in R & D activities within the underdeveloped countries.
Their R & D efforts are concentrated in laboratories in the home country or in other
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industrialised countries. Though R & D activities continue to be centralised in the parent

country, the host countries have to bear the bulk of their costs since the affiliates of the
MNCs in these countries remit payments on this account generally in relation to their
sales volume. Such payments by the affiliates are generally over and above those remitted
in the form of royalties and technical fees to the present firm. The satisfaction expressed
on technology transfer is partly misconceived also on account of the fact that MNCs
which generally command a semi-monopolistic position in their product lines do not
transfer their first line or the most advanced technology until foreign firms compel to do
so. In many cases, the technology transferred is of a capital-intensive nature which is not
useful from the point of view of a labour surplus economy.
There is no distinction between an MNCs & a domestic company in India policy
regarding MNCs is the same as for Foreign Private Capital in indie. Large & dominant
MNCs along with Indian Companies are covered under MRTP Act. MNCs are
specifically covered under Foreign Exchange Management Act (FEMA). Now, we study
the operation of MNCs in India:
1.) Profit Maximisation.
2.) International Network of marketing.
3.) Diversification Policy.
4.) Concentration in Consumer goods.
5.) Location of central control offices.
6.) Techniques to achieve Public Acceptability.
7.) Existence of Modern & Sophisticated Technology.
8.) Business but not social Justice.
9.) MNCs & Process of planned Economic Development in India.
10.) Cultural Explosion.
Control Over Multinational Corporations :
Theresponsibilityof controlling the activities of multinational corporation in India rests on
different government agencies. These agencies are :
1) the ministryof Company Affairs,
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2) the reserve Bank of India ,

3) the ministry of Industrial Development, and
4) the Ministry of finance. However, these agencies do not work in close cooperation
with each other.
Role of MNCs in India:
Arguments for MNCs (The positive role):
The MNCs play an important role in the economic development of underdeveloped
countries.
1. Filling Savings Gap:
The first important contribution of MNCs is its role in filling the resource gap between
targeted or desired investment and domestically mobilized savings. For example, to
achieve a 7% growth rate of national output if the required rate of saving is 21% but if the
savings that can be domestically mobilised is only 16% then there is a saving gap of
5%. If the country can fill this gap with foreign direct investments from the MNCs, it will
be in a better position to achieve its target rate of economic growth.
2. Filling Trade Gap:
The second contribution relates to filling the foreign exchange or trade gap. An inflow of
foreign capital can reduce or even remove the deficit in the balance of payments if the
MNCs can generate a net positive flow of export earnings.
3. Filling Revenue Gap:
The third important role of MNCs is filling the gap between targeted governmental tax
revenues and locally raised taxes. By taxing MNC profits, LDC governments are able to
mobilize public financial resources for development projects.
4. Filling Management/Technological Gap:
Fourthly, Multinationals not only provide financial resources but they also supply a
package of needed resources including management experience, entrepreneurial

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abilities, and technological skills. These can be transferred to their local counterparts by
means of training programs and the process of learning by doing.
Moreover, MNCs bring with them the most sophisticated technological knowledge about
production processes while transferring modern machinery and equipment to capital poor
LDCs. Such transfers of knowledge, skills, and technology are assumed to be both
desirable and productive for the recipient country.
5. Other Beneficial Roles :
The MNCs also bring several other benefits to the host country.
(a) The domestic labour may benefit in the form of higher real wages.
(b) The consumers benefits by way of lower prices and better quality products.
(c) Investments by MNCs will also induce more domestic investment. For example,
ancillary units can be set up to feed the main industries of the MNCs
(d) MNCs expenditures on research and development(R&D), although limited is
bound to benefit the host country.
Apart from these there are indirect gains through the realization of external economies.

Arguments Against MNCs (The negative role):

There are several arguments against MNCs which are discuss below.
1. Although MNCs provide capital, they may lower domestic savings and investment
rates by stifling competition through exclusive production agreements with the host
governments. MNCs often fail to reinvest much of their profits and also they may
inhibit the expansion of indigenous firms.
2. Although the initial impact of MNC investment is to improve the foreign exchange
position of the recipient nation, its long-run impact may reduce foreign exchange
earnings on both current and capital accounts. The current account may deteriorate as
a result of substantial importation of intermediate and capital goods while the capital
account may worsen because of the overseas repatriation of profits, interest, royalties,
etc.
3. While MNCs do contribute to public revenue in the form of corporate taxes, their
contribution is considerably less than it should be as a result of liberal tax concessions,
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excessive investment allowances, subsidies and tariff protection provided by the host
government.
4. The management, entrepreneurial skills, technology, and overseas contacts provided by
the MNCs may have little impact on developing local skills and resources. In fact, the
development of these local skills may be inhibited by the MNCs by stifling the growth
of indigenous entrepreneurship as a result of the MNCs dominance of local markets.
5. MNCs impact on development is very uneven. In many situations MNCs activities
reinforce dualistic economic structures and widens income inequalities. They tend to
promote the interests of some few modern-sector workers only. They also divert
resources away from the production of consumer goods by producing luxurious goods
demanded by the local elites.
6. MNCs typically produce inappropriate products and stimulate inappropriate
consumption patterns through advertising and their monopolistic market power.
Production is done with capital-intensive technique which is not useful for labour
surplus economies. This would aggravate the unemployment problem in the host
country.
7. The behaviour pattern of MNCs reveals that they do not engage in R & D activities in
underdeveloped countries. However, these LDCs have to bear the bulk of their costs.
8. MNCs often use their economic power to influence government policies in directions
unfavourable to development. The host government has to provide them special
economic and political concessions in the form of excessive protection, lower tax,
subsidized inputs, cheap provision of factory sites. As a result, the private profits of
MNCs may exceed social benefits.
9. Multinationals may damage the host countries by suppressing domestic
entrepreneurship through their superior knowledge, worldwide contacts, and
advertising skills. They drive out local competitors and inhibit the emergence of smallscale enterprises.
There are now 40,000 TNCs whose tentacles straddle the international economy
through some 2,50,000 overseas affiliates. They possess staggering resources as would be

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clear from the fact that the sales of 200 top corporations in 1982 were equivalent of 24.2
per cent of the worlds GDP and had risen to 28.3 per cent of the worlds GDP in 1998.
This shows that 200 top MNCs control over a quarter of the worlds economic activity. In
fact, the combined sales of these 200 MNCs estimated at $ 7.1 trillion in 1998 surpassed
the combined economies of 182 countries. If we subtract the GDP of the big nine
economies ---the United States of America, Japan, Germany, France, Italy, the United
Kingdom, Brazil, Canada and China ---from the worlds GDP, the GDP of the remaining
182 countries of the world stood at $ 6.9 trillion in 1998 which was less than the sales of
the 200 top MNCs.
An idea of the giant size of these MNCs can also be had from the revelation made
in a study conducted by the Washington based Institute of Policy Studies (IPS) that of the
100 largest economies in the world, 51 are corporations; only 49 are countries.
The above data show the massive control exercised by the MNCs on the world economy.
In fact, because of their huge capital resources, latest technology and worldwide
goodwill, MNCs are in position to sell whatever product they choose to manufacture in
different countries. The fact is that people in underdeveloped countries are crazy for the
products of these corporations and prefer their products to the products produced
indigenously.
Role of Multinational Corporations (MNCs) in Foreign Investment!
Multinational corporations are those large firms which are incorporated in one country
but which own, control or manage production and distribution facilities in several
countries. Therefore, these multinational corporations are also known as transnational
corporations.
They transact business in a large number of countries and often operate in diversified
business activities. The movements of private foreign capital take place through the
medium of these multinational corporations. Thus multinational corporations are
important source of foreign direct investment (FDI). Besides, it is through multinational
corporations that modern high technology is transferred to the developing countries.
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For examples, it has been found that giant American and European firms set up
production units to explore and refine oil in Middle East Countries because oil is found
there. Similarly, to take advantages of lower labour costs, and not strict environmental
standards, multinational corporate firms set up production units in developing countries.

Alternative Methods of Foreign Investment by Multinational Companies:

In order to increase their profitability many giant firms find it necessary to go in for
horizontal and vertical integration. For this purpose they find it profitable to set up their
production or distribution units outside their home country.
The firms that sell abroad the products produced in the home country or the products
produced abroad to sell in the home country must decide how to manage and control their
assets in other countries. In this regard, there are three methods of foreign investment by
multinational firms among which they have to choose which mode of control over their
assets they adopt.
There are three main modes of foreign investment:
1. Agreement with Local Firms for Sale of MNCs Products:
A multinational firm can enter into an agreement with local firms for exporting the
product produced by it in the home country to them for sale in their countries. In this
case, a multinational firm allows the foreign firms to sell its product in the foreign
markets and control all aspects of sale operations.
2. Setting up of Subsidiaries:
The second mode for investment abroad by a multinational firm is to set up a wholly
owned subsidiary to operate in the foreign country. In this case a multinational firm has

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complete control over its business operations ranging from the production of its product
or service to its sale to the ultimate use or consumers.
3. Branches of Multinational Corporation:
Instead of establishing its subsidiaries, Multinational Corporation can set up their
branches in other countries. Being branches they are not legally independent business
unit but are linked with their parent company.
4. Foreign Collaboration or Joint Ventures:
Thirdly, the multinational corporations set up joint ventures with foreign firms to either
produce its product jointly with local companies of foreign countries for sale of the
product in the foreign markets. A multinational firm may set up its business operation in
collaboration with foreign local firms to obtain raw materials not available in the home
country. More often, to reduce its overall production costs multinational companies set up
joint ventures with local foreign firms to manufacture inputs or subcomponents in foreign
markets to produce the final product in the home country.
Role of Multinational Corporations in the Indian Economy:
Prior to 1991 Multinational companies did not play much role in the Indian economy. In
the pre-reform period the Indian economy was dominated by public enterprises. To
prevent concentration of economic power industrial policy 1956 did not allow the private
firms to grow in size beyond a point. By definition multinational companies were quite
big and operate in several countries.
While multinational companies played a significant role in the promotion of growth and
trade in South-East Asian countries they did not play much role in the Indian economy
where import-substitution development strategy was followed. Since 1991 with the
adoption of industrial policy of liberalisation and privatisation rote of private foreign
capital has been recognised as important for rapid growth of the Indian economy.

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Since source of bulk of foreign capital and investment are Multinational Corporation,
they have been allowed to operate in the Indian economy subject to some regulations.
The following are the important reasons for this change in policy towards multinational
companies in the post-reform period.
1. Promotion of Foreign investment:
In the recent years, external assistance to developing countries has been declining. This is
because the donor developed countries have not been willing to part with a larger
proportion of their GDP as assistance to developing countries. MNCs can bridge the gap
between the requirements of foreign capital for increasing foreign investment in India.
The liberalised foreign investment pursued since 1991, allows MNCs to make investment
in India subject to different ceilings fixed for different industries or projects. However, in
some industries 100 per cent export-oriented units (EOUs) can be set up. It may be noted,
like domestic investment, foreign investment has also a multiplier effect on income and
employment in a country.
2. Non-Debt Creating Capital inflows:
In pre-reform period in India when foreign direct investment by MNCs was discouraged,
we relied heavily on external commercial borrowing (ECB) which was of debt-creating
capital inflows. This raised the burden of external debt and debt service payments
reached the alarming figure of 35 per cent of our current account receipts.
Moreover, the advantage of investment by MNCs lies in the fact that servicing of nondebt capital begins only when the MNC firm reaches the stage of making profit to
repatriate Thus, MNCs can play an important role in reducing stress strains and on Indias
balance of payments (BOP).
3. Technology Transfer:

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Another important role of multinational corporations is that they transfer high

sophisticated technology to developing countries which are essential for raising
productivity of working class and enable us to start new productive ventures requiring
high technology.
Whenever, multinational firms set up their subsidiary production units or joint- venture
units, they not only import new equipment and machinery embodying new technology
but also skills and technical know-how to use the new equipment and machinery.
4. Promotion of Exports:
With extensive links all over the world and producing products efficiently and therefore
with lower costs multinationals can play a significant role in promoting exports of a
country in which they invest. For example, the rapid expansion in Chinas exports in
recent years is due to the large investment made by multinationals in various fields of
Chinese industry.
However, in case of Pepsi, a famous cold -drink multinational company, while for getting
a product license in 1961 to produce Pepsi Cola in India it agreed to export a certain
proportion of its product, but later it expressed its inability to do so. Instead, it ultimately
agreed to export things other than what it produced such as tea.
5. Investment in Infrastructure:
With a large command over financial resources and their superior ability to raise
resources both globally and inside India it is said that multinational corporations
could invest in infrastructure such as power projects, modernisation of airports and posts,
telecommunication.
In view of above, even Common Minimum Programme of the present UPA government
provides that foreign direct investment (FDI) will be encouraged and actively sought,

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especially in areas of (a) infrastructure, (b) high technology and (c) exports, and (d)
where domestic assets and employment are created on a significant scale.
Should MNCs be favored or not?
MNCs should definitely be favored, as they help host countries. They help in training
of local labour with more sophisticated techniques which on the long run will bring
external benefits to the host country when these techniques can be used in all economic
sectors. They raise the growth rate of host nation by introducing new investment and new
technology and also induce their local rivals to become more innovative and competitive.
They contribute to taxes, plus provide the host country with foreign exchange that can be
used to purchase vital imports. By initiating a higher level of investment, reducing the
technological gap, The foreign exchange gap is reduced and The natural resources are
utilized fully. The country has got many M. N. C. S operating here. Following are names
of some of the most famous multinational companies, who have their headquarters of
operational branches based in the nation.
1. IBM
This is the number one MNC present in the country. IBM also known as
International Business Machine is credited to make this planet better.

Revenue: The total revenue of the company is over $100 billion.

Country: IBM is based in USA in New York.

Founders: The company was founded in June 16, 1911. Thomas J Watson and
Charles Ranlett Fint are the founders of the company.

Core Business: The core business of the company is Computer hardware,

Computer software, IT services, IT consulting.

Number of Employees: The total number of employees are well over 450,000
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Website: www.IBM.com

2. COCA COLA AND PEPSICO

The second most popular MNCs are Coca Cola and pepsico. Here we would like to talk
about pespico in detail. However, both companies are beverage
companies.

Revenue: The total revenue generated by the Pepsico is around $66 billion until
now.

Country: The company is headquartered in New York, USA with operations

around the world.

Founders: The company was founded by Donald Kendell and Herman Lay in
1965 in North Carolina.

Core Business: Core business of the company is beverages and some of its
products are Pepsi, Mountain Dew, Diet Pepsi, Lays Chips etc

Number of Employees: Total number of employees that are working for the
company around the world could be 278000

Website: www.pepsico.com

3. CITIGROUP
Citigroup is the third most popular MNC in India. It is a company from banking sector.

Revenue: The total revenue generated by the bank is $70 billion.

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Country: The company is headquartered in Manhattan, NY, USA with operations

in different parts of the world

Founders: Company was founded in 1812 and key people involved are Michael o
Neil and Michael Corbet.

Core Business: Core business of the company is Credit cards, consumer banking,
corporate banking, investment banking, global wealth management, financial
analysis, private equity

Number of Employees: Employees are around 260,000+

Website: www.Citigroup.com

4. APPLE INC
The fourth most popular brand or MNC is the Apple Inc. This is an iconic company as far
as mobile phones are concerned. They have revolutionized the smart
phones.

Revenue: The total revenue generated by Apple is around $156

billion and still growing.

Country: The company is headquartered in California, USA with operations in

more than 50 countries.

Founders: The company was founded by Steve Jobs in the year 1977.

Core Business: Core business of the company is computer hardware and

software. Some of the products are iphone, ipad, imac etc

Number of Employees: Total number of employees that are working for the
company in various countries are around 80,000
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Website: www. Apple.com

5. PROCTER & GAMBLE

The fifth MNC in our top down countdown list is Procter and Gamble and it is a
pharmaceutical company.

Revenue: The total revenue generated by the company is around

$84 billion.

Country: The company is headquartered in Ohio, USA with operations around

the world.

Founders: William Procter and James Gamble formed this company in the year
1837.

Core Business: Core business of the company is consumer goods and some of
their products are Foods, beverages, cleaning agents and personal care products

Number of Employees: Total number of employees that are working for the
company around the world could be 125,000.

Website: www.pg.com

6. TOYOTA
The sixth company in our countdown list is an automobile company named Toyota.

Revenue: The total revenue generated by Toyota Motors is around

$80 billion.

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Country: The company is headquartered in Japan with operations in 6 different

continents.

Founders: Company was founded by kilchiro Toyoda in the year 1937.

Core Business: Core business of the company is commercial vehicles and it has
built over 10 million units.

Number of Employees: Total number of employees that are employed for the
company around the world are 340,000.

Website: www.toyota-global.com

7. SONY CORPORATION
Seventh most popular MNC in India is Sony Corporation. Sony is basically an electronic
goods manufacturing company.

Revenue: The total revenue generated by Sony is more than $72 billion until now.

Country: The company is headquartered in Tokyo Japan with operations around

the world.

Founders: Founders of Sony Inc are Masaru Ibuka and Akio Morita in the year
1946.

Core Business: Core business of the company is in Consumer electronics,

Semiconductors, Video games, Media/Entertainment, Computer hardware

Number of Employees: Total number of employees that are working for the
company around the world could be 146,000.

Website: www.sony.net
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8. NESTLE
The eighth MNC company is Nestle which is a food processing company. It is the worlds
largest food processing company as per the revenue.

Revenue: The total revenue generated by the company is around

$92 billion.

Country: The company is headquartered in Vevey, Switzerland with operations

around the world.

Founders: The company was founded by Henri Nestl, Charles Page and George
Page

Core Business: Core business of the company is Baby food, coffee, dairy
products, breakfast cereals, confectionery, bottled water, ice cream, pet foods

Number of Employees: Total number of employees that are working for the
company around the world are 340,000

Website: www.nestle.com

9. MICROSOFT
The ninth most popular company in India is Microsoft. Perhaps it is the most popular
company but we have listed ninth because of its revenue.

Revenue: The total revenue generated by Microsoft is more than $78 billion.

Country: The company is headquartered in Washington, USA with operations

around the world.

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Founders: The founders of the company are Bill Gates and Paul Allen. They
founded this company in year 1975.

Core Business: Core business of the company is computer software and their
products are Windows (Phone, Server), Office, Dynamics, Azure, Xbox, Surface,
Bing, Skype

Number of Employees: Total number of employees that are working for the
company are 97,000.

Website: www.Microsoft.com

10.WALMART
The last but not the least retail company that is present in India is walmart. Although by
revenue Wal-Mart is the number one company in the world. But its presence in India is
very limited hence we listed it at 10th.

Revenue: The total revenue generated by Wal-Mart is

around whopping $466 billion.

Country: The company is headquartered in Arkansas, USA with operations

around the world.

Founders: Sam Walton founded this retail giant in the year 1962.

Core Business: Core business of the company is retail and some of its products
are Apparel/footwear specialty, cash & carry/warehouse club, discount store,
hypermarket/supercenter/superstore, supermarket

Number of Employees: Total number of employees that are working for the
company around the world could be 2.2 million.

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Website: www.Walmart.com

The Rural Impact:

It is, however, the rural impact that multinationals have had that makes the largest
difference. What may have begun as corporate social responsibility soon got merged with
the need to tap the fortune at what was perceived as the bottom of the pyramid. Rural
India today plays a critical part in multinational technologies and processes in their
various forms and not out of altruism: rural India is a sheer necessity; just as staying
away from India as some were doing earlier is a big risk. Filling the gaps left by
government, MNCs have built roads in rural India that help them deliver their goods,
provided education and health care for communities whose workforces they rely upon,
and implemented environmental programs to protect precious natural resources needed to
keep supply chains running smoothly. Nevertheless, the world of MNCs has miles to go
to reach a segment that is provides a demand base of at least 600 million people and 128
million households living in some 6,27,000 villages. The secret lies in figuring out the
magic price points that do not eat into margins but increase volumes; much depending on
distribution. MNCs have to be cost efficient says PepsiCo that has been well served by its
Indian customers. India revenue at its drinks business grew 40 per cent in 2009, while
volume jumped 32 per cent, well outpacing most other countries in PepsiCo's portfolio.

CONCLUSION

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Multinational companies are like double-edged sword. The sword can harm if not
handled properly. Similarly the Multinational companies have their own pros and cons.
The extent of technology and management of know-how transfer by the MNCs depend to
a large extent on their corporate strategy; for example, firms desiring to have a longerterm relationship with the suppliers (rather than those simply using the host country as a
marketing/export base) will be more inclined to effect transfer technology. As pointed out
in the World Investment Report, 2000, MNCs may restrict the access of particular
affiliates to technology in order to minimise inter-affiliate competition. It is noted that
MNCs are more likely to licence older technologies from which they have already
derived significant rents than newer technologies on which there are still relying for
market leadership. Further, they may hold back the upgrading of the affiliate technology
or invest insufficiently in host-country training and R&D in accordance with their global
corporate strategies. Therefore, arguing that FDI inflows and economic liberalization
automatically facilitates technology transfer is being extremely nave.
After discussing various aspects of MNCs in developing country like India the big
question before us is whether MNCs play positive or negative role in developing
countries. Generally the governments of developing countries dont keep control on the
working of MNCs, which is major fault on their side. MNCs can be helpful for
developing countries only when they are kept under control. We should not give
incentives to the MNCs only because they are coming from some powerful advanced
countries. So MNCs should face same rules and regulations as the domestic industries of
the developing countries are facing. By allowing information technology to be infused
into the smallest hamlet of India, it makes access to information available to the poor or
not so poor in the countryside who have been empowered by the mobile phone and can
access such services as banking, learning, telemedicine, commodity and stock exchanges,
agriculture information and citizen interface portals. The cloud has potential to drive
down costs of e-Governance, education, medical care and other government
computerization initiatives; the cloud bridges the great divide between rich urban India
and poor rural India and gives the same level-playing field to all Indians; lastly, the cloud
enables non-English speaking literate Indians to join the information revolution and
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participate in governance and the future of the country by allowing to transact on the web
in the Indian language of their choice. Not just MNCs but India companies too are
already out there to grab a piece of the action. Meanwhile, 3D printers, sensor
networks, virtual humans and other technologies under development now will drastically
change the world in the decade to come.

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BIBLIOGRAPHY

www.scribd.com
www.idscdc.org
www.mckinscy.com
smallbusiness.chron.com
www.companiesinindia.com
www.unisg.ch
www.tradeforum.org
www.businessdictionary.com
www.ukessays.com
seminarprojects.com
www.businessgyan.com
theglobaljournals.com

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