Global Enterprises

Multinational Corporations (MNCs), also called global enterprises, have played an important role in the Indian economy over the last two decades and are now a common feature of most developing economies.

Meaning

• MNCs are gigantic corporations with operations in a number of countries.
• They are marked by their huge size, large number of products, advanced technology, marketing strategies and a worldwide network of operations.
• A global enterprise is thus a huge industrial organisation that extends its industrial and marketing operations through a network of branches in several countries, producing multiple products across many nations.
• Their strategy is not to maximise profit from just one or two products, but to spread their branches widely across the world.

Features

• (i) Huge capital resources: they possess enormous financial resources and can raise funds from many sources — issuing equity shares, debentures or bonds to the public, and borrowing from financial institutions and international banks. They enjoy credibility in the capital market; even investors and banks of the host country are willing to invest in them. This financial strength lets them survive under all circumstances.
• (ii) Foreign collaboration: they usually enter agreements with Indian companies covering the sale of technology, production of goods, use of brand names, and so on, collaborating with both public and private sector companies. Such agreements often carry restrictive clauses on technology transfer, pricing, dividend payments and tight control by foreign technicians. Big Indian industrial houses have gained patents, resources and foreign exchange through such collaboration — but it has also fostered the growth of monopolies and concentration of power in a few hands.
• (iii) Advanced technology: they enjoy technological superiority in their production methods and can meet international standards and quality specifications. This aids the industrial progress of the host country by optimally exploiting local resources and raw materials; computerisation and other inventions have flowed from the technological advances MNCs bring.
• (iv) Product innovation: they have highly sophisticated research and development (R&D) departments that develop new products and superior designs of existing ones. Such qualitative research needs huge investment that only global enterprises can afford.
• (v) Marketing strategies: their marketing is far more effective than that of other companies. They use aggressive marketing to raise sales quickly, rely on a reliable, up-to-date market information system, and use very effective advertising and sales promotion. Because their brands are already well known globally, selling their products is not a problem. …