international business - how mnc keep local company at bay
TRANSCRIPT
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“Achievers”
1-Hurriya Saeed Rana
2-Ameera Sohail
3-Alvina Ashique
4-Afia Abrar
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Topics:
What is MNC & MNE?
Definition & History
Characteristics of MNC
Reasons for becoming MNC
Advantages of MNC
Disadvantages of MNC for Home Country
How local companies keep MNC at bay?
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“HURRIYA”
Topics:
Introduction
Features of MNC
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What is MNC & MNE?
MNC MNE
“Multi-National “ Multi-National
Corporation” Enterprise”
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Definition:
According to ILO (International Labor Organization):
“MNC is any corporation that has its
management head quarters in one country
i.e. (Home Country)
&
operates in several other countries i.e.
(Host Country).”
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History
The MNC’s originated in the 20th century
The first multinational business organization
was the Knights Templar, founded in 1120.
After that came the British East India
Company in 1600
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Origin:
The “Dutch East India”
company was the 1st MNC
in the world to issue stock
founded March 20, 1602 .
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Characteristics of MNC
Large size:
The firms are large in size means their
resources & capital are very huge.
Example: PC
Multi-country Operations:
MNC operates in
several countries other than home country.
Example: McDonalds'
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Characteristics of MNC
Multiple Environments:
MNC operates in
different countries and face various
environments.
Profit back to HQ:
The revenue generated in
host countries is ultimately dragged back to
home countries.
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(2)
“AMEERA”
MUGHALTopics:
Reasons for becoming MNC
Advantages OF MNC
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Reasons for becoming MNC
Increase Market Share
Secure cheaper premises & labor
Avoid Tax & Trade barriers
Enhance profitability
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Advantages
• To diversify themselves against the risks and uncertainties of the domestic business cycle.
• In response to foreign competition MNC move toward the less competitive Countries.
• To Capture more potential Customers .A company may have reached a plateau satisfying domestic demand, which is not growing. Looking for new markets.
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Advantages
• To reduce costs, like cheap labor e.g. United Fruit has established banana-producing facilities in Honduras.
• Take advantage of local low cost & avoid middle man.
• To avoid transportation cost, because transportation costs are like tariffs in that they are barriers which raise consumer prices. e.g. Toyota
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(3)
“ALVINA”
ASHIQUE
Topic:
Disadvantages of MNC
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Disadvantages of MNC
• Interference in the Economic dominion of the Host Country :MNCs affect the independence of any country.
Example: An East India company came in India for business but it made India slave for 200 years
• Cultural Loss:This is the one of biggest drawback of MNCs that it is risky for our cultural loss.
Example: Indian culture is vegetarian but many MNCs employees eat meat and chicken.
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Disadvantages of MNC
• III-effects of Advertisements:The MNCs spend large amount on competitive advertisements which in effect may lead to high prices of the products, manipulation of demand and wastages of economic resources.
• Minimum Transfer of Technology:It has been observed that the MNCs generally do not transfer their advanced technology to the host county. They carry out their research and development in the home country only.
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Disadvantages of MNC
• Creation of Monopolies:
MNCs with high advertising and other ways, these MNCs do not live domestic companies. After this, they increase prices and then get high profit by exploiting consumers.
• Drain of Resources for Profit Maximization:
The basic objective of a MNC is profit maximization through" exploitation of host country's resources. It is least concerned with development.
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(4)
“AFIA”
ABRAR
Topic:
6 Strategies
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Globalization
Since the late “1970s” the winds of
global competition blow.
Policy makers lowered tariff barriers and
permitted foreign investments.
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How local companies
keep MNC at bay?
Create customized products or services:
Develop business models to overcome key
obstacles:
Deploy the latest technologies:
Take advantage of low-cost labor, and train
staff in-house:
Scale up quickly:
Invest in talent to sustain rapid growth:
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1-Create customized products or
services:
Simple customization techniques, based on intimate knowledge of local consumers, have sparked major success for homegrown champions.
Example:
Goodbaby Group of china.
(The largest manufacturers and supplier of infants & children's product.)
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2-Develop business models to
overcome key obstacles:
Adapt at identifying the key challenges i.e.
lack of distribution channel, infrastructure
hurdles, limited telecom width.
Sharpen their first mover advantage.
Example:
Shanda Games (Chinese) vs. Microsoft
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3-Deploy the latest
technologiesInnovative technologies keep operating on low
cost but deliver good quality products.
New technologies can help older companies get a second wind after economic liberalization.
Example:
GCMMF( Gujarat cooperative milk marketing federation)
*India's largest dairy company, manufactures wide range of products under brand Amul.
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4-Take advantage of low-cost
labor, and train staff in-house:
“Many local champions have at their core a
business model that taps a pool of low cost
labor instead of relying on automation.”
Example:
Apollo Hospital India
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5-Scale up quickly:
Go national as soon as possible.
Scale up quickly.
(Expansions by mergers & acquisition)
Create regional entities to speed up organic
growth
Strike local distribution
Open new point of presence quickly
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6-Invest in talent to sustain
rapid growth: Domestic strength
Enterprenual zeal
Great local managers
Management depth and capability
Not need to negotiate headquarters.
Strategy to maintain rapid growth
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How to achieve competitive
advantage in local markets??
• Low-Cost Leadership
• Differentiation
• Niche Strategies
• Operational Effectiveness
• Innovation
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Outcomes of Local business
Community Well-Being
Keeping Dollars in the Local Economy
Job and Wages
Public Benefits and Costs
Environmental Sustainability
Product Diversity
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