MNC's

MNC’s : 

1 MNC’s Definition: - A MNC or MNE is a company that is Headquarter in one Country but has operations in many other countries. There are approx 12,000 MNE’s, but the Largest 500 account for approx 80% of FDI and of these 414 are from the “Triad” block of EU, USA and Japan USA - 161 JAPAN - 128 EU - 125

MNC’s…. : 

2 MNC’s…. Total sale of these 500 firms is in excess of $5 Trillion and they employ 25 million people. They are engaged in Autos, Chemicals, Computers, Consumer Goods, Industrial Goods, Oil & Steel Production. They have significant effect on International Business & World Economy.

Characteristics of MNC : 

3 Characteristics of MNC MNC has two major areas of concern The Home Country Host Country environment and their affiliates must be responsive to a number of important environmental forces i.e. competitors, Customers, Supplies, Financial Institutions, Govt.

Characteristics of MNC : 

4 Characteristics of MNC It draws on a common pool of resources including assets, patents, trade marks, Information and Human resource. For example. Changes in European Cars are incorporated in USA Cars, Funds Required at Japan can be supplied from Europe if cheap. MNC’s and their affiliates are linked with common strategic vision. Each MNC will formulate their corporate plan in line with overall plan

Why Firms become MNC : 

5 Why Firms become MNC To protect from Risk & uncertainties of Domestic business cycle. By setting up units in other countries, this is also called international Diversification. To tap the growing world Market for Goods & Services as part of Globalization. Firms also become MNC in response to increased competition and to protect world Market share “Follow the Competitor” strategy.

Why Firms become MNC…….. : 

6 Why Firms become MNC…….. To Reduce Cost by setting up units near Customer and avoid transportation cost & take advantage of local low cost & avoid middle man. Overcome Tariff. Take advantage of Technological expertise by manufacturing Goods direct rather than allowing other to take advantage of license.

Benefits of MNC & Negative Effects of MNC : 

7 Benefits of MNC & Negative Effects of MNC MNC make substantial contribution to growth of developed countries. Increase in Production, GDP & Employment, Export & Import for the Host Country. Better use of technology due to linkage effect, Training, Building of Markets, Provide better Products at lower cost. Improve BOP by increasing Export & access to required new material.

Benefits of MNC & Negative Effects of MNC…. : 

8 Benefits of MNC & Negative Effects of MNC…. Exploit local labor & resources by paying lower. Overpricing Imports & under pricing Export. Effect local industry by competition.

Factor Influencing the CHOICETop Management Staffing outlook : 

9 Factor Influencing the CHOICETop Management Staffing outlook Ethnocentric Foreign subsidiary should be staffed by citizens from Home Country at key positions. It perceives that people from Host-Country do not have adequate Qualification, Experience & Competence. Japanese always fill Top & Middle management position by expatriate & never use managers from III World Country. American & European have started using managers from host as well as Third world managers.

Top Management Staffing outlook……. : 

10 Top Management Staffing outlook……. Polycentric View holds that key positions in the subsidiary should be staffed by locals. Initially they send Expatriate to Train & develop locals. Americans (Wal-Mart) have sent Two Managers to all subsidiaries. Sony is now trying to employ Host Country & have started shifting from Ethnicity.

Top Management Staffing outlook……. : 

11 Top Management Staffing outlook……. Regiocentric: - Top position at Regional HQ should be held by person from the region. Initially Americans & Europeans send Expatriate to develop & Trains people from Region. MNC do not provide Top positions to Host Country managers (Hence Regional Top positions for locals).

Top Management Staffing outlook……. : 

12 Top Management Staffing outlook……. Geocentric Nationality should not matter for key assignment. Competence should be criterion. Coca-Cola accept geocentric approach. It operate 195 Countries & 2/3 of its 31000 work outside USA and mostly managed by other than Americans. Gillette have managers from France, Egypt & Other Countries.