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MANAGING MNCs
Presented by:Mahendra Singh ChauhanShashank Shekher SinghShudhanshu Sharma
CONTENT• What is an MNC• Difference between multinational and non-multi-national• Types of multi-national on the basis of investment on the basis of operation• Impact of MNC –INDIA• Positive/negative effect• What INDIA offers• Indian companies in fortune 500 list• Trend of MNC in INDIA• Advantage of MNC in INDIA• Key issues in Indian context• Example: Asian paints
WHAT IS AN MNC?
Manages production
In more than one country
Delivers services
It is a corporation that:
And/or
According to Franklin Root (1994), an MNC is a parent company that:
• engages in foreign production through its affiliates located in several countries,
• exercises direct control over the policies of its affiliates,
• implements business strategies in production, marketing, finance and staffing that transcend national boundaries.
WHAT IS AN MNC?....continued
• A firm to be an MNC following criteria has to be fulfilled:
The firm should own or control operations in multiple countries, typically across the world
It should generate a substantial portion of its revenue by its operations from foreign countries
Should employ workforce from multiple countries, including employees at the senior levels
It should have a strategic management perspective and a vision of multinational operations
What differs a multinational firm from a non multi-national firm
• For this one must know what constitutes a non- multinational firm. The key attributes of a non-multinational firm are:
1. It produces and market goods and services in one country
2. It is headquartered in one country3. It faces low international risk exposure
ASSOCIATES: an enterprise in which a non resident investors own between 10 and 50%
SUBSIDIARIES: an enterprises in which a non-resident investor owns more than 50%
BRANCHES: unincorporated enterprises wholly or jointly owned by a non-resident investor
ON THE BASIS OF INVESTMENT
TYPES OF MULTINATIONALS
P100%
A60%
B
C
D65%
E 25%
F
12%
G
60%
30%
H
I
K I
55%
20%
30% 15%
80%
COUNTRY Z
COUNTRY X
COUNTRY Y
80%
70%
MNC: ownership & control
ON THE BASIS OF OPERATIONS
HORIZAONTALLY INTEGRATED MULTINATIONALS ... have manufacturing operations located in different countries to produce same or similar products. They have multi-plant firms replacing roughly the same activities in many locations
VERTICALLY INTEGRATED MULTINATIONALS ... have manufacturing operations in certain country/countries to manufacture products that serve as inputs to their production establishments in other country/countries. Such firms fragment production geographically into stages in multiple countries on the basis of factor intensities.
DIVERSIFIED INTEGRATED MULTINATIONALS ... have manufacturing operations located in different countries that are either horizontally or vertically integrated
ON THE BASIS OF MANAGEMENT ORIENTATION
ETHNOCENTRIC FIRMS... The HQ of the parent company, located in the home country, dominate the strategic decisions and exert high level of control over the subsidiaries through centralized decision making. eg…MAKSAT, SUKHOI
POLYCENTRIC FIRMS... Such firms have level of market orientation wherein subsidiaries have autonomy in decision making.eg….ELBIT SYSTEM INDIA
GEOCENTRIC FIRMS... Such follow a collaborative approach to decision- making between HQ and subsidiaries. Eg…Phillips
REGIOCENTRIC FIRMS... Foreign affiliates consolidates their decision making and organization on regional basis. Eg…Mc Donald
ON THE BASIS OF MANAGEMENT ORIENTATION continued……
ORIENTATION ETHNOCENTRIC POLYCENTRIC REGIOCENTRIC GEOCENTRIC
Mission Profitability(viability)
Public acceptance (legitimacy)
Both profitability and public acceptance
Governance•Direction of goal setting
Top down Bottom up Mutually negotiated between region & subsidiaries
Mutually negotiated at all level
communication Hierarchical with HQ giving high volumes of orders, commands and advice
Little communication to & from HQ & between subsidiaries
Both vertical & lateral communication within region
Both vertical and lateral communication within company
ORIENTATION ETHNOCENTRIC POLYCENTRIC REGIOCENTRIC GEOCENTRIC
•Allocation of resources
Investment opportunities decided at HQ
Self-supporting subsidiaries, no cross-subsidiaries
Regions allocate
resources under
guidelines from HQ
Worldwide projects
allocation influenced by
local and HQ’s manager
STRATEGY Global integrative
National responsiveness
Regional integrative and national responsiveness
Global integrative and national responsiveness
STRUCTURE Hierarchical product division
Hierarchical area division, with autonomous national units
Product & regional organizations tied through a matrix
A network of organizations
CULTURE Home country Host country Regional Global
IMPACT OF MNC
POSITIVE EFFECT OF MNCs
• Bring in FDI• Transfer of technology• Promote competition • Promote research and development • Benefit customer• Promote export in the host economies
NEGATIVE EFFECT
• Influencing host-country government decisions
• Transfer of inappropriate technology• Dumping of obsolete technology • Cultural imperialism • Exploitation of host country resources• Perceived as agents of neo-colonialism
• Promotes unhealthy market competition • Promotes hostile mergers and acquisitions• Crowding out domestic entrepreneurship• Limited benefits to host countries• Circumventing host countries’ regulatory
framework
Mnc in india
MNC IN INDIA
What India offers…. to the worldOne billion plus population.
India is ranked as the 10th largest economy, 3rd largest in terms of Purchasing Power Parity.
200-250 million middle class.
Gross Domestic Product 6.48 %, (avg. of last 5 years) making it one of the fastest growing economies in the world.
Opportunities for world exporters with the right products or services.
Easier access to capital.
INDIAN MNCs
1. TATA STEEL 2. TATA MOTORS3. Wipro4. HCL5. Tally Solutions6. Infosys7. NIIT 8. I-Flex Solutions9. Zenith Computers10. Microtek
Trends Of MNCs In INDIAFirst MNC in India was the EAST INDIA Company. in
1600
American companies account for around 37% (approx.)of the turnover of the top 20 firms operating in India
Oil companies and Infrastructure builders from the Middle East are also flocking in India to catch the boom
Hewlett-Packard (HP) is the largest multinational corporation operating in INDIA
Increasing flocking of European Union companies to India.JCB owned by INDIOPHILE is one of the most successful multinational corporation in India.Italian automobile giants like Fiat, Ford Motors, Piaggio etc expanded their operations in India with R&D wing attached.
South Korean Electronics giants Samsung and LG Electronics and small and mid-segment car giant Hyundai Motors are doing excellent business and using India as a hub for global delivery.
India currently has some 750 captive centres of foreign multinationals; of these around 350 are engaged in engineering R&D
Key Advantages of existence of MNCs in India
Work culture of employees.
Training and Learning. Technology – especially concept of working
with better technologies. Safety, Health and Environmental Learning. Excellent training grounds for many
entrepreneurs.
What are the key issues in the Indian context which have hindered MNCs growth?
• “Global parent strategy” dictates India plans
• Limitations of growth due to regulatory / legislation / IPR issues
• Limited Autonomy for top MNC Managers
• Sometimes bureaucratic setups have delayed decision making – sharp contrast to most Indian entrepreneur companies
• Insistence of some companies on having expats
• Rigidity and insistence on evaluating India like any other market
• Not being able to recognize early enough that India is a price and quality conscious market
• Limitations of following aggressive M&A options
• Many MNCs have got consistently caught in rounds of “parent consolidation”
• 100% subsidiary conundrum
Case study : Asian Paints
• Asian Paints rise from a mid sized domestic focused coatings company to a $ 1.6 billion multinational with a global presence across 17 markets. Among the top 10 decorative coatings companies globally. – Key strengths are continuous innovations in all spheres of
operations, economies of scale, strong management team, IT capabilities, stronghold over the distribution network, width of product portfolio and strong brand equity
– Consistently generated EBITDAs of 14.2% and ROEs of 20%+ - higher than most Indian and global peers
– Operates in 17 countries across the world - manufacturing facilities in each of these countries and is the largest paint company in 11 of these market
DELMEGE FORSYTH
Sri Lanka October 1999 76% 3.6 crore
PACIFIC PAINTS Australia November 2001 100% $375,000
HAWCOPLAST India November 2001 100% 16 crore
SCIB Egypt August 2002 60% 25 crore
BERGER INTERNATIONAL
Global August 2013 75.82%(+25.72%) SD 0.25 per share
TAUBMANS Fiji September 2003
100% $ 1.4 m
COMPANY COUNTRY YEAR STAKE ACQUIRED COST
Caribbean Region (Barbados, Jamaica, Trinidad and Tobago)• the revenue from paint sales has increased by 15% to 197.2
crores from 171.8 crores• PBIT (profit before interest and tax) for the region is 11.2 crores
as compared to ` 7.6 crores during the previous year(2012)• Continuing economic slowdown in all the Caribbean economies,
impacted demand conditions
Middle East Region(Egypt, Oman, Bahrain and UAE)• the revenue from paint sales has increased by 26% to 726.7
crores from 578.4 crores during the previous year(2012) • PBIT for the region is 73.9 crores as compared to 61.5 crores
during the previous year(2012)
Asia Region (Bangladesh, Nepal, Sri Lanka and Singapore)• Revenue from paint sales has increased by 21% to ` 380
crores from ` 314.7 crores during• the previous year• The PBIT for the region is ` 35.6 crores as compared to ` 24.6
crores during the previous year(2012)
any questions?
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