We at MBARendezvous.com have started series of articles to equip MBA aspirants with general awareness with the hope that you would get success in various MBA entrance exams
Following article on” Influence of Indian MNCs in the World” is part of our series on general awareness:
A Multi National Corporation (MNC) is a company that has its facilities and assets in at least one country other than its home country. Such companies have offices and factories in different countries and usually have a centralized head office where they co-ordinate global management. Multinationals are sometimes also referred to as ‘transnational corporations’. The term ‘multinational’ is more of an American term whereas the term ‘transnational’ is European. Conservatively counted there are about 63,000 multinational corporations in the World.
The first multinational appeared in 1602 and was the Dutch East India Company. These corporations originated early in the 20th century and proliferated after World War II. Today, some of the very large multinationals have revenues that exceed the GDP of many developing countries. For instance, Wal-Mart’s global revenue in 2007 was $287,989mn while GDP of Norway same year was $250,805mn. Similarly, Shell Group’s revenues were $268,690mn and South Africa’s GDP was $213,100mn.
About a decade back, all major multinationals were American, Japanese or Western European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda and BMW etc. This is true to some extent today also but as of now, India also boasts of many MNCs like Wipro, Infosys, Tata, Reliance, ONGC, GAIL, ITC etc are to name a few. Many Indian MNCs had made their global presence felt to others. Following facts give an insight into the significance of Indian MNCs-
1)Tata Motors sells its passenger-car Indica in the UK through a marketing alliance with Rover and has acquired a Daewoo Commercial Vehicles unit giving it access to markets in Korea and China.
2)Dr Reddy’s Laboratories became the first Asia-Pacific pharmaceutical company outside Japan to list on the New York Stock Exchange in 2001
3)Asian Paints is among the 10 largest decorative paints makers in the World and has manufacturing facilities across 24 countries.
4)Small auto components company Bharat Forge is now the World’s second largest forgings maker. It became the World’s second largest forgings. Its workforce includes Japanese, German, American and Chinese people. It has 31 customers across the world and only 31 percent of its turnover comes from India.
5)Essel Propack is the world's largest manufacturers of lamitubes - tubes used to package toothpaste. It has 17 plants spread across 11 countries and a turnover of Rs 609.2 crore for the year ended December 2003. The company commands a staggering 30 percent of the 12.8 billion-units global tubes market.
6)About 80 percent of revenues for Tata Consultancy Services (TCS) comes from outside India
7)Infosys has as many as 30 marketing offices across the world and 26 global software development centers in the US, Canada, Australia, the UK and Japan.
8)Sundram Fasteners, a nuts and bolts company decided to acquire a plant in China. The plant in Jinxing city in the Haiyan economic zone has ensured one fact: that its customers who were earlier buying Sundram products in Europe and the US, did not have to go far from home to access the product.
9)Vedanta Resources, the holding company of the Sterlite group raised a record $1 in its maiden public offering on the London Stock Exchange (LSE).
10)Aurobindo Pharma is already part global with eight subsidiaries across the World, two JVs in the US and a new acquisition in China. Half of its revenues come from exports, which accounted for 47 percent of the total sales. It has strong presence in emerging markets of Asia, Brazil and Latin America.
Indian MNCs before the advent of the global slowdown in 2007 were actively involved in acquiring companies around the globe like Infosys Technology’s acquisition of Expert Information Services, Australia; Bharat Forge purchased Carl Dan Peddinghaus, Germany; Wockhardt acquired CP Pharmaceuticals, UK; Cadilla Health acquired Alpharma SAS, France; Wipro acquired NerveWire Inc, US; acquisition on Oryzalin Herbicide, US but United Phosphorous are to name a few.
However, the picture of all Indian MNCs is not that rosy. As per a study by the Hindu Business Line, in 2009 about 40% of all Indian MNCs suffer from negative performance of their overseas subsidiaries.
The presence, growth, and competitiveness of Indian companies in overseas markets is primarily being driven by two factors - One, the process of liberalization and globalization of the Indian economy has led to the development of competitive capabilities by the Indian companies and has brought about intensive interaction with global corporations, professionals, capital, ideas, and practices. Two, the transforming impact of information and communication technology (ICT) on the world of business has resulted in the emergence of new types of businesses and Indian companies utilized both the factors for best use.
There is no element of doubt that liberalization has supported the Indian economy and enabled it to churn the wheels of development and progress moving. The advent of multinationals in India has evolved through various stages but even as of now these companies have not come of age. Globalization has, of course, provided wings to the activities of investment, financing and operations of Indian companies. Indian multinationals have just begun to mark their global presence.
The coming of age of these multinationals would mean revenues, profits and assets at par with those leading in the World. Indian multinationals are performance-wise improving every year. But what still matters are global presence and reach to a much larger extent. Further, presence of Indian MNCs are more tilted in service and energy sector and they are absent in primary sector.
Thus, not only Indian MNCs should strive more aggressively to take on other companies in increasingly competitive environment but also participate more actively in handling their corporate social responsibility.
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