Multi National Corporation (MNC)
Multi National Corporation is a
Corporate organization which owns or controls production of goods or services
in at least one country other than its home country.
Like, the
East India Company, which came to India as a trading company and then its net
throughout the country to become politically dominant, these multinationals
first start their activities in extractive industries or control raw materials
in the host countries during 1920s and then slowly entered. In to the
manufacturing and service sectors after 1950s. Most of the MNC’s at present
belong to the four major exporting countries viz., USA, UK, France, Germany.
However, the largest is American. 11 of the 15 largest multinationals are
Americans.
A common
form of MNC Participation in Indian industry is through entering into
cooperation with Indian industrialist. Trends of liberalization in the 1980s
gave a substantial spurt to foreign collaborations.
This
would be clear from the fact that of the total 12,760 foreign collaboration
agreements signed between 1948-1988. As a result of liberalized foreign
investment policy (FIP) announced in July-Aug 1991 there has a further spurt of
foreign collaborations and increase flow of foreign direct investment.
As the
operations of large sized firm expand, it seeks more and more extension of its
activates beyond the physical boundaries of the country in which it is in
corporate.
A
multinational firm enjoys a number of marketing superiorities over the national
firms. It enjoys market reputation and faces less difficulty in selling its
products and it adopt more effective advertising and sales promotion
techniques.
It has
financial resources and high level of funds utilization. It has easier access
of external capital markets. Because of its international reputation it is able
to raise more international resources.
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 posses as compared to national companies.
MNCs have
research and development engaged in the task of developing new products and
superior designs of existing products.
• Producing the same quality of goods at lower cost
and without transaction cost
• MNC reduce prices and increase the Purchasing
power of consumers world wide
• A MNC is able to take advantage of tax variation.
• Spurring job growth in the local economies
• They are a way for the corporations to develop a
monopoly (for certain products)
• They are also a detrimental effect on the
environment.
• The introduction of MNC in to a host country’s
economy may also lead to the downfall of smaller, local business.
• MNC breach ethical standards, accusing them of
evading ethical laws and leveraging their business agenda with capital.
FERA (Foreign Exchange Regulation Act 1974)
This Act referred directly
to the operations of MNCs in India
FEMA (Foreign Exchange Management Act 1999)
Under FEMA the
emphasis is on ‘Management’ rather than ‘regulation’
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