classification of mnc

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Page 1: Classification of Mnc

5/14/2018 Classification of Mnc - slidepdf.com

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Page 2: Classification of Mnc

5/14/2018 Classification of Mnc - slidepdf.com

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A corporation that has its facilities and

other assets in at least one country other 

than its home country. Such companieshave offices and/or factories in different

countries and usually have a centralized

head office where they co-ordinate

global management.

Page 3: Classification of Mnc

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There are three types of MNC

classification they are:-

1. THE ETHNOCENTRIC MNC

2. POLYCENTRIC MNCS

3. REGIOCENTRIC AND GEOCENTRIC MNCs

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These are the type of MNCs which have

strong orientation towards home country

This means that home country peopleare considered as superior and

allocated all key posts.

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Companies whose values and interests

guide strategic decisions. usually

companies that are involved inextractive FDI such as oil/gas companies

include in ethnocentric mnc.

Ethnocentric organizations manage

overseas operations directly primarily to

protect the company·s competitiveness

in the home market.

Page 6: Classification of Mnc

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´Communication and information is top

down and all strategic decisions are

steered from corporate headquarters.

Subsidiaries sell products design andmanufactured by parent companies

with little or no local control.µ

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Simpler structure

More tightly controlled

More ineffective

Management In flexibility

Social & political backlash

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Just opposite to Ethnocentric polycentric

type of MNCs has strong orientationtowards host country where few key

people are nationals and remaining arefrom the host country.

An MNC that adopts the polycentricinnovation model evolving through four 

successive stages of maturity they are:-

Page 9: Classification of Mnc

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Stage 0: At this stage, the MNC's R&Doperations are mostly concentrated in the

West. While the MNC operates in emergingmarkets, their local units are primarily salesand marketing functions.

Stage 1: Here the MNC starts shifting some

of its R&D work to low-cost countries likeIndia that offer plenty of high-qualityscientists and engineers.

Stage 2: The MNC recognizes the massive

potential of emerging markets anddelegates more responsibilities to local unitsin emerging markets which initiate andmanage their own R&D projects to cater to

local needs.

Page 10: Classification of Mnc

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Stage 3: The MNC starts networking R&D

activities in emerging markets with the rest

of their global network in order to cross-pollinate ideas for new products and

business models across multiple regions. The

P&L responsibilities for new product lines

gradually shift to emerging markets.

Stage 4: At this ultimate stage, the R&D

hubs in emerging markets are given aglobal remit as they now own the P&L

responsibilities for the global design and

rollout of new products.

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HOST COUNTRY ORIENTED

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Extensive knowledge of foreign market &workplace

More support from host government Committed local manager with high

morale

Duplication of work 

Reduced inefficiency

Difficult to maintain global objectivesbecause of intense focus on local traditions

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These MNCs have their concentration inwhole world and they make selection for 

best employees whether they are from hostcountry or home country it does not matter.

When MNCs desire an integration of all of

their foreign subsidiaries and the melding ofa worldwide corporate culture, they adopta geocentric management strategy.

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The geocentric organization has the most

complex organizational structure, requiringthe greatest amount of communication

and integration across national boundaries.

WORLD ORIENTED

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Difficult to achieve.

Managers must have both local and

global knowledge. Forces understanding of global issues.

Balanced local and global objectives.

Best people and work approaches usedregardless of region.

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The liberalization has paved the way for 

easy entry and growth of MNCs in India.

At the same time a number of Indianfirms have been becoming multinational

One of the important ways by which

MNCs can contribute to the

development of the host countries is bytransfer of technology to them.