Q.Define a Multinational Company. Discuss various forms of a multinational company. Or Distinguish between a Government Company and a Non-government Company.
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** Half 1 defines a Multinational Company and sets out the different organisational forms through which it conducts business in host countries. Half 2 contrasts government companies with non-government (private) companies on ownership, control and accountability.
Half 1 — Define a Multinational Company. Discuss various forms.
Definition: A Multinational Company (MNC) is a large-scale business enterprise that has its registered office/headquarters in one country (the home country) but carries on business operations — manufacturing, marketing, or services — in several other countries (host countries), through branches, subsidiaries or affiliates.
Forms through which an MNC operates abroad:
- Branch offices: The MNC opens a branch in the host country that is legally part of the parent company itself, not a separate entity.
- Wholly owned subsidiaries: The MNC sets up a fully owned company (a separate legal entity) in the host country, with 100% shareholding retained by the parent.
- Joint ventures: The MNC partners with a local company in the host country, sharing ownership, control, risk and profit — often used where foreign ownership laws or local market knowledge make partnership advantageous.
- Franchising/licensing: The MNC permits a local firm to use its brand name, technology or production process in return for a fee/royalty, without directly owning operations (e.g., global fast-food or soft-drink brands).
- Turnkey projects: The MNC designs, constructs and hands over a complete, ready-to-operate project (e.g., a plant) to the host-country client for an agreed fee.
- Management contracts: The MNC manages a facility or business owned by a host-country party in exchange for a fee, without owning the assets.
MNCs are generally characterised by huge financial and technological resources, advanced research and production techniques, a global network and strategy, and centralised control/coordination exercised from the home-country headquarters.
Half 2 — Distinguish between a Government Company and a Non-government Company.
| Basis | Government Company | Non-government (Private) Company |
|---|---|---|
| Ownership | Not less than 51% of the paid-up share capital held by the Central and/or State Government | Owned predominantly by private promoters/shareholders |
| Control/Management | Directors largely appointed/nominated by the government; government exercises significant control over policy | Controlled by private shareholders/Board of Directors elected by them |
| Formation | Registered under the Companies Act (currently 2013), like any other company | Also registered under the Companies Act |
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