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Evolution, Growth in India, Reasons, Advantages, Disadvantages of MNC - Multi National Corporation (MNC) | 10th Social Science : Economics : Chapter 2 : Globalization and Trade

Chapter: 10th Social Science : Economics : Chapter 2 : Globalization and Trade

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.

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.

 

Evolution of MNC

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.

 

Growth of MNCs in India

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.

 

Reasons for the growth MNC

1. Expansion of Market territory.

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.

2. Marketing superiorities:

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.

3. Financial Superiorities

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.


4. 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 posses as compared to national companies.


5. Product innovations:

MNCs have research and development engaged in the task of developing new products and superior designs of existing products.

 

Advantages of MNC

• 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

 

Disadvantages of MNC

• 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’

Tags : Evolution, Growth in India, Reasons, Advantages, Disadvantages of MNC , 10th Social Science : Economics : Chapter 2 : Globalization and Trade
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10th Social Science : Economics : Chapter 2 : Globalization and Trade : Multi National Corporation (MNC) | Evolution, Growth in India, Reasons, Advantages, Disadvantages of MNC


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