Major players of MNC and Modes of Operations of MNC

MNCs AND THEIR MODE OF OPERATIONS

MNCs A multinational corporation (MNC) or transnational corporation (TNC) called multinational enterprise (MNE).

It is a corporation or an enterprise that manages production or delivers services in more than one country and also referred to as an international corporation.

The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries.

Some Multinational corporations are very big, with budgets that exceed some nations' GDPs.

Why companies become MNCs?

To protect themselves from the uncertainties and risks of business cycles, political policies and social uncertainties of the domestic country.

To tap the growing global market for various goods and services.

To increase market share.

To reduce costs.

To overcome tariffs.

To have technological advantage.

Operating Characteristics of MNCs

The subsidiaries and headquarters of MNCs are linked by a common vision and mission.

MNCs prefer to relocate their operations in various based on low wage rates, low transportation costs, closeness to suppliers of raw materials and customers and threats posed by the other country governments.

MNCs draw more or less the same resources both at home country and host country.

MNCs resources include financial resources, human resources, material resources, information, patents, trademarks etc.

The subsidiaries of MNCs should respond to the significant environmental forces of both home country and host country.

Factors contributed for the growth of MNCs

(A) Expansion of market territory

The growth of various economics along with the growth of GDP, and per capita income resulted in the rise in the living standards.

These factors contributed towards the expansion of market territory.

(B)Market superiorities

Availability of more reliable and up-to-date data and information.

They enjoy market reputation.

They face less difficulties in marketing the products.

They adopt more affective advertise and sales promotion techniques.

They enjoy quick transportation and warehousing facilities.

(C)Product Innovation

MNCs, by virtue of their widespread operations in many countries, collect information regarding customers, tastes and preferences.

Cont---(D)Technological superiorities

Industrialisation is in a backward state in developing countries and the resources available in developing countries are insufficient to develop the technology and thereby industrialisation.

Developing countries are rich in mineral and natural resources.

Local manpower, materials, capital etc. MNCs are invited by the developing countries to help them in exploiting the resources.

Developing countries would be required to import raw materials, capital equipment, technology etc.

(E) Financial superiorities

Huge financial resources at the disposal of the MNCs.

They have easy access to external capital markets.

They can mobilise different types of resources of high quality easily.

They can have access to international banks and financial institutions.

Advantages of the MNCs to the host countryIncreases economic activity, industrial activity, employment and income levels.

Domestic industry gets the latest technology.

Domestic industry gets sophisticated management techniques.

Domestic input suppliers get more business.

Improves the competitive ability of domestic business due to competition.

Domestic business uses outcome of MNC’s R&D efforts.

Advantages of foreign culture through cultural transformation.

Reduction of imports and favourable effect on balance of payments.

MNCs earn foreign exchange by exporting to the neighbouring countries.

Utilisation of natural resources of the host countries.

Disadvantages of the MNCs to the host countryTechnology developed by the MNCs may not suit the needs of host country.

MNCs may not operate within national autonomy and sovereignty.

Monopolistic practices of MNCs may kill the domestic industry.

MNCs may adopt ethnocentric approach in staffing.

MNCs may use the natural resources of the host country indiscriminately.

A large sum of money may flow from the domestic country in the form of dividends and royalty.

MNCs may distort the economic s structure of the host countries.

MNCs may interfere in the political activities of the host countries.

MNCs normally provide the out dated technology to the host country industry.

Pollutes the environment of the host countries.

Advantages of the MNCs to the home countryCreate the demand for the home country products.

Boost up the industrial activity of the home country.

Create employment for home country people.

Earns foreign exchange for the home country and contributes for the balance of payment.

Get the benefit of foreign culture.

Produce the products required by the domestic consumers in foreign countries with foreign resources.

Saves the domestic country from environmental pollution.

Get the customers/users for the country’s outdated technology.

Optimum utilisation of natural resources and conservation the country’s scarce resources like petroleum resources in the USA.

Generates and accumulate capital for home country by earning profits through business operations in host countries.

 Disadvantages of the MNCs to the home country

Transfer capital to other countries and causes unfavourable balance of payments.

May neglect the industrial development of the home country as the transnational companies follow the secular approach.

May cause erosion of the domestic culture.

May exploit the natural resources resulting in excessive exploitation of natural resources.

May not create employment opportunities to domestic people by following geocentric approach or outsourcing business operations in various countries like USA software companies outsourcing business operations in india.

Control over MNCs

Some industries were not allowed to import technology where the

products are not essential and where domestic capacity was adequate.

The maximum rate of royalty was imposed on technology, imports for

those industries which were allowed to import technology.

Import of foreign capital was allowed but sometimes they were based on

administrative decisions.

Permissible period of agreement was reduced from 10 years to 5 years.

Exports and other marketing restrictions were imposed.

Role of MNCs in IndiaProfit maximisationInternational network marketing.Diversification policyConcentration in consumer goodsLocation of central control officesTechniques to achieve public acceptabilityExistence of modern and sophisticated technologyBusiness, But not social justiceUnconcern Towards Social Responsibilities and business ethicsMNCs and process of planned economics development in indiaCultural ErosionUnconcern for environmental pollution and ecological balance.

Approaches to organisational structure of MNCs

(1)Product Organisation structureAdvantage:-

The product organisation structure is more appropriate than the functional form of organisation for firms producing multiple products.

It will result in fast decisions, enhancement of organisational competency to compete in rapidly charging environment.

Responsibility and accountability for market share, sales, profit/loss are clearly fixed.

Disadvantage:-

One of the major limitations is that there is unnecessary duplication of equipment and personal and various department.

Some decisions like pay, promotion, product quality, design and pricing strategy may be inconsistent between departments.

Inter- departments conflicts arise regarding sharing of common resources, allocation of common and overhead expanses etc.

Product Organisation structure

Managing director

Product Divisions

Product A Product B Product C Product D Product E

Head Office support Department

Cont---(2) Geographical Organisation structureAdvantage:-

Products and services are better designed to the climatic and cultural needs of specific geographical regions.

A geographical structure allows a firm to respond to technical needs of different international area.

This organisation structure enables a company to adopt to varying legal systems.

It also allows firms pinpoint the responsibility for profits or losses.Disadvantage:-

There would be duplication of equipment and facilities.

Co-ordination of company-wide activities would be difficult.

There would be a problem of imposing a degree of uniformity and diversity.

It is difficult to maintain consistent company image of reputation.

This structure adds another layer of management to run geographic units.

Geographical Organisation structure

Managing Director

Headquarters Managers: Production, Marketing, Finance, HR, & R&D

Afirca Asia Europe North America South America

Subsidiary Unit SalesManufacturing

Cont---(3)Decentralised business divisionsAdvantage:-

Diversification is generally managed by decentralised decision-making and delegating authority and responsibility to a manger at each business unit.

Each business unit should be managed by an entrepreneurially oriented general manger who is delegated with authority to formulate and execute business strategies.

Each business unit is structured on the basis of either functional structure or geographic structure depending upon strategy, key activities and operating requirements.

Disadvantage:-

The major problem of this type of organisation is absence of mechanism for co-ordinating related activities across business units.

General manger in charge of each business unit functions independently. It makes co-ordinations a complicated task.

Decentralised business divisions structure

Managing Director

Headquarters Managers: Production, Marketing, Finance, HR, & R&D

Chief Manager Business

X

Chief Manager Business

Y

Product A Product B Product C

Marketing Manager

Finance Manager

Production Manager

Manager HR

Manager R&D

Product D

Chief Manager Business

Z

Cont---(4)Strategic business units

Advantage:-

This structure permits better coordination between divisions with similar missions, products, markets and technologies.

It allows strategic management to be done at the most relevant level within the total enterprise.

It helps to allocate corporate resources to areas with greatest growth opportunities.

Business units are organised based on the strategically relevant method.

Disadvantage:-

Corporate headquarters becomes more distant from the division.

Conflicts between/among the strategies business unit managers for greater share of corporate resources can become dysfunctional.

Corporate portfolio analysis becomes a complicated one in this structure.

Strategic business units structure

Managing Director

Headquarters, Level Managers

Group Manager

SBU1

Straegically Related

Business Unit

Group Manager

SBU2

Straegically Related

Business Unit

Grooup Manager

SBU3

Straegically Related

Business Unit

Marketing

Finance

Production

HR

R & D

Cont---(5)Matrix Organisation structureAdvantage:-

Give formal attention to each dimension of strategies priority.

Create check and balances among competing viewpoints.

Facilities capture of functionality based strategies fits in diversified companies.

Promoters making trade-off decisions on the basis of, ”what is best for the organisation as a whole”.

Disadvantage:-

Very complex to mange

Hard to maintain balance between the two lines of authority

It is hard to move quickly and decisively without getting clearance from many other people.

Violates unity of command.

Cont---(6) Virtual Organisation structureAdvantage:-

These structures enable for doing business with less capital, less human resources and less inputs.

These structure provided for flexibility of operations.

These structures react to environmental demands most effectively.

These structures develop the ancillary industries.Disadvantage:-

Companies do not have strong foundations or strengths in their operations.

Organizations have to depend heavily on outsourcing.

Failure in the network results in the failure of the entire organisation.

Cont---(7) Team Organisation structure

Project team

Task force team

Venture team

Views of MNCs  Whereas 30 or 40 year ago many countries, Developed as well as Developing, were suspicious of FDI and regulated it heavily, FDI has, especially since about 1985, come to be regarded as a positive factor in the host economies. One should not fall into the opposite trap and regard all FDI as benign. One senior executive of GM in the USA once famously remarked that “ What is good for GM is good for the country.”Host economies must guard against anti-competitive behavior, tax evasion, adverse effects of production on the environment and other harmful effects of some MNC actions.There has been a recent counter-movement among NGOs which is highly critical of MNCs on particular issues such as The need for codes relating to labor standards (“sweatshops”), corporate governance, actions that affect the environment Criticisms of pharmaceutical corporations and patented drugseg compulsory licensing in the WTO

International power of MNCsTax competitionMultinational corporations have played an important role in

globalization. To compete, countries and regional political districts sometimes

offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards enforcement.

Multinationals are engaged in a 'race to the top.‘While multinationals certainly regard a low tax burden or low labor

costs as an element of comparative advantage, there is no evidence to suggest that MNCs deliberately avail themselves of lax environmental regulation or poor labour standards.

MNC profits are tied to operational efficiency, which includes a high degree of standardisation.

Cont----Market withdrawal multinationals can have a significant impact on government policy, primarily

through the threat of market withdrawal. This withdrawal often causes governments to change policy.Lobbying Multinational corporate lobbying is directed at a range of business concerns,

from tariff structures to environmental regulations. Corporations lobby tariffs to restrict competition of foreign industries. Patents Many multinational corporations hold patents to prevent competitors from

arising.

ex:- Adidas holds patents on shoe designs, Siemens A.G. holds many patents on equipment and infrastructure and Microsoft benefits from software patents.

Government power Multinational corporations to affect governments, there is much government

action intended to affect corporate behaviour

LARGEST MULTINATIONALS Ranking Corporation Home Economy Foreign Assets Total Assets

1. General Electric United States 401 290 797 769

2. Royal Dutch ShellNetherlands / United Kingdom

222 324 282 401

3. Vodafone Group United Kingdom 201 570 218 955

4. BP United Kingdom 188 969 228 238

5. Toyota Motor Japan 169 569 296 249

6. ExxonMobil United States 161 245 228 052

7. Total France 141 442 164 662

8. E.On Germany 141 168 218 573

9. Électricité de France France 133 698 278 759

10. ArcelorMittal Luxembourg 127 127 133 088

LIMITATION OF MNCs

Inflation 

Changes in social values 

Increase in unrest and lack of personal life 

Competition to home industries 

Reduce transport and distribution costs

Avoid trade barriers

Meet different rules and regulations (avoid non-tariff barriers)

Secure supplies of raw materials or markets

Cost advantages - for example low labour costs

corporations making global assignments

ORGANIZATIONAL CHARACTERISTICS ↓

Multinational corporations

Global corporations Transnational corporations

CONFIGURATION OF ASSETS & CAPABILITIES

(1)decentralised and nationally self-sufficient (Unilever, Philips)

(1)centralised and globally scaled, but trending to decentralised model.

(1)dispersed, interdependent, and specialised

ROLE OF OVERSEAS OPERATIONS

(2)sensing and exploiting local opportunities

(2)implementing parent company strategies

(2)differentiated contributions by national units to integrated worldwide operations

TYPICAL EXPATRIATE ROLES

(3)engineers, specialists as needed

(3)senior managers (3)both: specialists and managers, depending on cultural climate

ARE THEY 'EXPORTING' BEARS, BEES or SPIDERS?

(4)bees and spiders (4)bears, mostly (4)mostly bees & spiders

Type:- Public(NYSE: WMT), Dow Jones Indust. Average Component

Industry:-Retailing

Founded:-Rogers, Arkansas, U.S. (1962)

Founder(s):-Sam Walton

Headquarters:-Bentonville, Arkansas, U.S.

Area served:-Worldwide

Key people:-Mike Duke(CEO) S. Robson Walton (Chairman)

Products:-Discount Stores, Supercenters, Neighborhood Markets

Revenue:-▲ US$408.21 billion (2009)

Operating income:- ▲ US$ 23.95 billion (2009)

Net income:-▲ US$ 14.33 billion (2009)

Total assets:- ▼ US$ 170.70 billion (2010)

Total equity:-▲ US$ 70.74 billion (2009)

Employees:-approx. 2,100,000 (2009)

INTRODUCTION OF WAL MART

2010 world's largest public corporation by revenue, according to the Forbes Global 2000 for that year.Largest majority private employer and the largest grocery retailer in the United States.It operates under its own name in the U.S., including the 50 states. The company was incorporated as Wal-Mart Stores, Inc. on Oct. 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas.38 stores operating with 1,500 employees & sales of $44.2 million.publicly held company on October 1, 1970, and was soon listed on the New York Stock Exchange.The first stock split occurred in May 1971 at a market price of $47.It moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3 million.

CONT----25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates.

Same year also marked the completion of the company's satellite network and it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores.

In 1988, the first Walmart Supercenter opened in Washington, Missouri.

In 1998, Walmart introduced the "Neighborhood Market" concept with three stores in Arkansas.

2005, estimates indicate that the company controlled about 20% of the retail grocery and consumables business.

2005, Walmart had $312.4 billion in sales, more than 6,200 facilities around the world—including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6 million "associates" worldwide.

In March 2006, Walmart sought to appeal to a more affluent demographic.

CONT---September 12, 2007, Walmart introduced new advertising with the slogan, "Save Money Live Better," replacing the "Always Low Prices, Always" slogan.

On June 30, 2008, Walmart unveiled a new company logo, featuring the non-hyphenated name "Walmart" and in place of the star, a symbol that resembles a sunburst or flower.

On March 20, 2009, Wal-Mart announced that it is paying a combined $933.6 million in bonuses to every full and part time hourly worker of the company.

On February 22, 2010, the company confirming it was acquiring video streaming company Vudu, Inc. for an estimated $100 million.

Wal-Mart's operations are organized into three divisions: Wal-Mart Stores U.S., Sam's Club, and Wal-Mart International.

Nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas , cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants.

Type:-Limited liability companyIndustry:-AutomotiveFounded:-1908Founder(s):-William C. DurantHeadquarters:-Renaissance Center,

Downtown Detroit, Michigan, USAArea served:-WorldwideKey people:- Edward Whitacre(Chairman) Daniel Akerson(CEO)Products:-AutomobilesOwner(s):-United States Department of the Treasury(61%) Canada Development Investment Corporation(7.9%) Government of Ontario(3.8%) Bond holders of Motors Liquidation Company(9.8%)Employees:-204,000 (2009)Divisions:-Chevrolet, Buick, Cadillac, GMC

CONT--Subsidiaries:-Vauxhall AC Delco General Motors Canada General Motors do Brasil General Motors India General Motors Ventures Global Hybrid Cooperation General Motors South Africa GM-AvtoVAZ GM Daewoo(70.1%) GM Holden Ltd GM Performance Division OnStar Opel

INTRODUCTIONBy sales, GM ranked as the largest U.S. automaker and the world's second-largest for 2008 having the third-highest 2008 global revenues among automakers on the Fortune Global 500.

The company plans to focus its business on its four core North American brands: Chevrolet, Buick, GMC, and Cadillac.

In 2008, GM sold 8.35 million cars and trucks globally.

GM Defense 1950–2003 was once part of General Motors Diesel Division and as General Dynamics Land Systems division of General Dynamics

Electro Motive Division of General Motors was also once part of General Motors Diesel Division and now known as Electro-Motive Diesel

Transit division was sold to Motor Coach Industries & Transportation Manufacturing Corporation.

CONT---Detroit Diesel sold to Penske Corporation; broken up & portion sold to the former Daimler-Chrysler AG ( Now Daimler AG)

RTS and Classic bus rights owned by MCI And TMC were sold off to Nova Bus; now produced by Millennium Transit Services.

Diesel Division of General Motors of Canada Limited spun off and later acquired by General Motors Canada as Diesel Division of General Motors of Canada Limited

EDS – Electronic Data Systems

Hughes Electronics (Now The DirecTV Group[Liberty Media])

1999 GM spun off its parts making operations as Delphi.

Top-four markets/regions by vehicle sales in 2008 (thousands)

Rankin GM

Market/Region

Vehicesales

Mkt.share (%)

1North

Ameria3,552 21.9%

2 China 1,095 12.0%

3European Union

905 12.3%

4South America

815 20.8%

GM worldwide vehicle sales by country 2008[13]

(thousands)

Rankin GM

CountryVehicle

salesMarket

share (%)

1   United States 2,981 22.1%

2   China 1,095 12.0%

3   Brazil 549 19.5%

4   United Kingdom 384 15.4%

5   Canada 359 21.4%

6   Russia 338 11.1%

7   Germany 300 8.8%

8   Mexico 212 19.8%

9   Australia 133 13.1%

10   South Korea 117 9.7%

11   France 114 4.4%

12   Spain 107 7.8%

13   Argentina 95 15.5%

14   Venezuela 91 33.3%

15   Colombia 80 36.3%

16   India 66 3.3%

Compression of Old GM & New GMOld GM (before July 10, 2009) New GM (after July 10, 2009)

Vauxhall, Pontiac, Chevrolet, Cadillac, GMDaewoo (48.2%), Hummer, GMC, Saturn, Holden, Saab, Buick, Opel

BrandsVauxhall, GMDaewoo (70.1%), Chevrolet, Cadillac, GMC, Holden, Buick, Opel

5,900 U.S. Dealerships 5,000

Common shareholders, bondholders and secured creditors

Ownership

U.S. Treasury, Canada Development Investment Corporation, Government of Ontario, Old GM bondholders, and the United Auto Workers sponsored VEBA

47 U.S. Plants 34

US$94.7 billion Debt US$17 billion

91,000 U.S. employees 68,500

Year wise sell of GM product of different markets

Marque Years used Markets

 Buick since 1908 North America, China, Israel, Taiwan

 Cadillac since 1909Global (except South America, India, SE Asia, Australia)

 GMC since 1912 North America, Middle East

 Chevrolet since 1917 Global (except Australia)

 Vauxhall since 1925 United Kingdom

 Opel since 1929Europe (except UK), Africa, Asia, Oceania, South America

 Holden since 1948Australia, New Zealand, China, Middle East (not Kuwait),South Korea, South Africa, UK, Japan (by Autoprestige)

 Daewoo since 2002 South Korea, Latin America, Europe

Type:- Public, NASDAQ: Dell

Industry:- Computer Systems, Computer Peripherals,

Computer Software, IT consulting & services

Founded:- Austin, Texas, November 4, 1984

Founder(s):-Michael Dell

Headquarters:-T exas,U.S.

Area served:-Worldwide

Key people:-Michael S. Dell(Chairman & CEO)

Products:-Desktops, Servers, Notebooks, Netbooks, Peripherals,

Printers, Televisions, Scanners, Storage, Smart Phones

Operating income:-▼ $2.172 billion (2010)

Net income:-▼ $1.433 billion (2010)

Total assets:- ▲ $33.652 billion (2010)

Total equity:-▲ $5.641 billion (2010)

Employees:-96,000 (2010)

HISTORYIn 1984, when Michael Dellcreated PCs Limited while a student at the University of Texas at Austin.

Dell started trading by selling personal computer directly to customers, better understand customers' needs and provide the most effective computing solutions to meet those needs

After getting about $300,000 in expansion-capital from his family Dell dropped out of school .

In 1985, the company produced the first computer of its own design — the "Turbo PC", sold for US$795

In 1988 after changed its name to "Dell Computer Corporation" and began expanding globally—first in Ireland and market capitalization grew by $30 million to $80 million in july 1988

In 1996, Dell began selling computers via its web site, and in 2002, Dell expanded its product line to include televisions, handhelds, digital audio players, and printers.

On August 16, 2010, Dell announced its intent to acquire the data storage company 3PAR

Green initiativesDell became the first company in the information technology industry to establish a product-recycling goal (in 2004) and completed the implementation of its global consumer recycling-program in 2006.

On February 6, 2007, the National Recycling Coalition awarded Dell its "Recycling Works" award for efforts to promote producer responsibility.

On July 19, 2007, Dell announced that it had exceeded targets in working to achieve a multi-year goal of recovering 275 million pounds of computer equipment by 2009. 

On June 5, 2007 Dell set a goal of becoming the greenest technology company on Earth for the long term. The company launched a zero-carbon initiative that includes:-

Reducing Dell's carbon intensity by 15 % by 2012

Requiring primary suppliers to report carbon emissions data during

quarterly business reviews

Partnering with customers to build the "greenest PC on the planet“

BRANDS OptiPlex (office desktop computer systems)

N-Series (desktop and notebook computers shipped

with Linux or Free DOS installed)

Latitude (business-focused notebooks)

Precision (workstation systems & high-performance notebooks),

PowerEdge (business servers)

Power Vault (direct-attach and network-attached storage)

Power Connect (network switches)

Dell/EMC (storage area networks)

Equal Logic 

PRESENTED BY:-SANTU KUMAR

PATELSANTOSH KUMAR

SAROJ KUMAR