A multinational corporation (MNC) or transnational corporation (TNC), also called multinational enterprise (MNE), is a corporation or enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation.

A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management.

The first modern MNC is generally thought to be the Dutch East India Company, established in 1602. Very large multinationals have budgets that exceed some national GDPs. Multinational corporations can have a powerful influence in local economies as well as the world economy and play an important role in international relations and globalization.

ABB (Asea Brown Boveri)

ABN-Amro

Adidas ltd.

Aditya Birla Group

IBM

ICICI Bank

Infosys Ltd.

General Electric Company

General Motors

Google Inc.

Parker Hannifin

PepsiCo Inc.

Procter & Gamble Co.

Proton

Honda Motor Co. Ltd.

Sony Corporation

Tata Group

Toyota Motor Corporation

Unilever

Nike Inc.

Nokia Corporation

Ford Motor Company

Enterprise operating in several countries but managed from one (home) country. Generally, any firm or group that derives a quarter of its revenue from operations outside of its home country is considered a MNC, and may fall into one of the four categories:

(1) Multinational, decentralized firm with strong home country presence (1920-30),

(2) Global, centralized firm that acquires cost advantage through centralized production wherever cheaper resources are available (1970-80),

(3) International, firm that builds on the parent firm's technology or R&D (postwar years), or

(4) Transnational, firm that combines the previous three approaches.

According to UN data, some 35,000 firms have direct investment in foreign countries, and the largest 100 of them control about 40 percent of world trade.

Multinational corporations can be divided into three broad groups according to the configuration of their production facilities:- Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds)- Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas)- Diversified multinational corporations manage production establishments located in different countries that are neither horizontally or vertically integrated. (example: Microsoft)

The global liberalization has covered the way for fast expansion & growth of the MNCs.

World Investment Reports 2000 & 2003 provide some indication of the economic dominance of the multinational corporations.

Virtually, all countries & economic activities, rendering it a alarming force in a today’s world economy.

According to one comparison of the sales volume of firms with the GDP of countries, the sales of the top 200 firms accounted for 27.5% of world GDP in 1999.

Of the 50 largest “economies”, 14 were TNCs & 36 were countries.

In 2006, foreign affiliates/associates accounted for about 73 million employees, compared to 24 million in 1990.

Sales of almost $25 trillion were much higher than world export in 2006, compared to 1990 when both were roughly equal.

Stock of outward FDD, increased from $1.7 trillion to $6.6 trillion over the same period.

Foreign affiliates now account for 1/10th of world GDP & 1/3rd of world exports.

1. WALL-MART STORES ($351m)

6. TOYATA MOTORS ($204m)

2. EXXON MOBIL ($347m)

7. CHEVRON ($200m)

3. ROYAL DUTCH SHELL ($318m)

8. DAIMLER CHRYSLER ($190m)

4. BRITISH PETROLIUM ($274m)

9. CONOCO PHILLIPS ($172m)

5. GENERAL MOTORS ($207m)

10. TOTAL SA ($168m)

Country Number of global 500 companies

United State 170

Japan 70

Britain, France (tied) 38

China 20

India 6

Country rank Company Global rank 2006 Revenues ($ millions)

1 Indian Oil 135 45,216.6

2 Reliance Industries 269 25,158.9

3 Bharat Petroleum 325 21,862.2

4 Hindustan Petroleum

336 20,935.6

5 Oil & Natural Gas 369 19,237.4

6 State Bank of India 495 15,119.4

Of the world’s top 200 economic players in 2001, 56 were countries and 144 were corporations.

Marks & Spencer sources its goods from more than 70 countries.

In 2000 IBM produced around 60 per cent of its laptops in Mexico.

BP (British petroleum) operates in more than 100 countries.

Hewlett Packard recently slashed supply-chain costs by US$3.5 billion and is now looking to save a further US$1 billion annually.

General Motors, Wal-Mart, Exxon Mobil, and Daimler Chrysler all have revenues greater than the combined economic output (GDP) of the 48 least developed countries.

MNCs have an obligation towards employers, customers, governments, suppliers and communities as well as towards shareholders. This is known as Corporate Social Responsibility (CSR).

Most agree that CSR includes a duty to behave honestly, legally and with integrity, not to be corrupt but to deal fairly and obey the host country’s laws.

Some MNCs would say that no more than this bare minimum can be expected of them. They would argue that the cost of CSR could eat into their profits and push them out of business.

ADVANTAGES:

MNCs can help to reduce poverty.

They can bring money into a country through employment and investment.

Three quarters of international investment in developing countries is from MNCs and private sources.

They can create jobs and raise labor standards.

They can pass on expertise in their field.

They work to equalize the cost of factors of production around the world.

MNCs help increase competition & break domestic monopolies.

DISADVANTAGES:

The MNC can be guilty of pollution or human rights abuse (e.g. by sourcing products from factories where child labor is used or by forbidding its workers to join trade unions).

The finance brought into a country by an MNC may be badly managed by that country’s government.

Multinationals create false needs in consumers and have had a long history of interference in the policies of sovereign nation states.

MNCs may destroy competition & acquire monopoly powers.

The transfer pricing enables MNCs to avoid taxes by manipulating prices on intra-company transactions.

According to Peter Drucker the period of the most rapid growth of multinational trade was ------- fifties & sixties.

During this period, the world trading economy grew faster – at an annual rate of 15% or so in most years.

It is estimated that between 1/4th & 1/3rd of manufactured goods now moving in world trade are being shipped from one branch to another branch of the MNCs.

The sale of foreign subsidiaries in the host countries in which they are located are 3 to 4 times as large as total world exports.

There was a very significant increase in the export intensity (i.e., the percentage of exports to total sales) of the foreign affiliates of many MNCs.

The export intensity of foreign affiliates of US MNCs doubled from 20 to 40% in the case of developed economies.

It also increased from 6 to 22% in the case of Latin American affiliates.

It increased from 23 to 64% for developing Asia.

But in the case of India, it is very low.

More than 40% of the total exports of China is done by MNCs affiliates.

The export contribution of foreign affiliates in China is far larger than the total exports of India.

Comparatively very little investment has taken place in India due to several reasons, like the dominant role assigned to the public sector in the industrial policy & the restrictive Government policy toward foreign investment. Some multinationals, Coca Cola & IBM, even left India in the late 1970s as the Government conditions were unacceptable to them.

A common criticism against the MNCs is that they tend to invest in the low priority & high profit sectors in the developing countries, ignoring the national priorities. However, in India the government policy confined the foreign investment to the priority areas like high technology & heavy investment sectors of national importance & export sectors.

Multinationals in several developing countries make substantial contribution to export earnings. However, the performance in the case of India has been very dismal. This is attributed mostly to the government policy.

Although export promotion has been pursued since the Third plan, the highly protected domestic market & the unrealistic much more attractive than exports.

However, since the mid 1980s with the economic liberalization that increased domestic competition & the steady depreciation of the rupee, exports began to become attractive & several foreign companies & companies with foreign participation, as well as Indian companies, have become serious about exports. This was reflected in the acceleration of the export growth.

Since the economic liberalization ushered in 1991, many multinationals in different lines of business have entered the Indian market. A number of multinationals which were in India prior to this have expended their business.

The scenario for 'MNC in India' has changed a lot in recent years, since more and more firms from European Union like Britain, Italy, France, Germany, Netherlands, Finland, Belgium etc have outsourced their work to India.

Finnish mobile handset manufacturing giant Nokia has the second largest base in India.

A host of automobile companies like Fiat, Ford Motors, Piaggio etc from Italy have opened shop in India with R&D wing attached.

Oil companies, Infrastructure builders from Middle East are also flocking in India to catch the boom.

South Korean electronics giants Samsung and LG Electronics and small and mid-segment car major Hyundai Motors are doing excellent business and using India as a hub for global delivery.

Japan is also not far behind with host of electronics and automobiles shops.

Companies like Singtel of Singapore and Malaysian giant Salem Group are showing huge interest for investment.

India is perceived to be at par with China in terms of FDI attractiveness by 'Multinational Companies in India'

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