Amultinational corprationDefinitionDEFINITION OF 'MULTINATIONAL CORPORATION - MNC'A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries.

Sometimes referred to as a "transnational corporation".

MeaningA multinational corporation/company is an organisation doing business in more than one country. 'In other words it is an organisation or enterprise carrying on business in not only the country where it is registered but also in several other countries. It may also be termed as international corporation, global giant and transnational corporation.According to the United Nations a multinational corporation is "an enterprise which owns or controls production or service facilities outside the country in which it is based". In the words of W H Moreland, "Multinational Corporations or Companies are those enterprises whose management, ownership and controls are spread in more than one foreign country".Thus a multinational company carries on business operations in two or more countries. Its headquarters are located in one country (home country) but its activities are spread over in other countries (host countries). MNC's may engage in various activities like exporting, importing, manufacturing in different countries. It may also lend its patents, licences and managerial services to firms in host countries.

CHARESTRISTIC OF MNCThe multinational companies inIndiarepresent a diversified portfolio of companies from different countries. Though the American companies - the majority of the MNC inIndia, account for about 37% of the turnover of the top 20 firms operating inIndia, but the scenario has changed a lot off late. More enterprises from European Union likeBritain,France,Netherlands,Italy,Germany,BelgiumandFinlandhave come toIndiaor have outsourced their works to this country. Finnish mobile giant Nokia has their second largest base in this country. There are also MNCs like British Petroleum and Vodafone that representBritain.Indiahas a huge market for automobiles and hence a number of automobile giants have stepped in to this country to reap the market. One can easily find the showrooms of the multinational automobile companies like Fiat, Piaggio, and Ford Motors inIndia. French Heavy Engineering major Alstom and Pharma major Sanofi Aventis have also started their operations in this country. The later one is in fact one of the earliest entrants in the list of multinational companies inIndia, which is currently growing at a very enviable rate. There are also a number of oil companies and infrastructure builders fromMiddle East. Electronics giants like Samsung and LG Electronics fromSouth Koreahave already made a substantial impact on the Indian electronics market. Hyundai Motors has also done well in mid-segment car market inIndia.Why AreMNCs InIndiaFollowing are the reasons why MNC consider whyIndiaas a preferred destination for business :Huge market potential of the countryFDI attractivenessLabor competitivenessMacro-economic stabilityThere are a number of reasons why the multinational companies are coming down toIndia.Indiahas got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies inIndia.For quite a long time,Indiahad a restrictive policy in terms of foreign direct investment. As a result, there was lesser number of companies that showed interest in investing in Indian market. However, the scenario changed during the financial liberalization of the country, especially after 1991. Government, nowadays, makes continuous efforts to attract foreign investments by relaxing many of its policies. As a result, a number of multinational companies have shown interest in Indian market.

MNCs AndGlobalization -Globalization has accelerated in recent years, a development that has significant implications for the regulation and governance of international business, trade and investment. International business implies no fundamental shift in the underlying principles of trading or business functions but simply more cross-border transactions. In simpler terms it includes all commercial transactions private and governmental between two or more countries. Private companies undertake such transaction for profit; governments may or may not do the same in their transactions.The world has seen a tremendous increase in the global transactions and foreign trade in recent years. The main reason behind this is that now more and more countries are getting engaged in trading with each other in order to increase their profit or sales or protecting them from being eroded by competition. The main objectives which are influencing the companies to engage in international business are expansion of sales, acquiring resources, minimizing competitive risk and diversification of sources of sales and supplies (Johnson & Turner, 2003). Besides these there are other few factors like economic factors, cultural factors, technological factors, and social factors which have influence to a greater extent. The emergence and activities of transnational and multinational enterprises had impacted to a huge extent on the concept of globalization, and multinationals have played an important role. Given their international reach and mobility, prospective countries, and sometimes regions within countries, must compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment and economic activity) within. Taxcompetition-Multinational corporations have played an important role in globalization. Countries and sometimes subnationa regions must compete against one another for the establishment of MNC facilities, and the subsequent tax revenue, employment, and economic activity. To compete, countries and regional political districts sometimes offer incentives to MNCs such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labor standards enforcement. This process of becoming more attractive to foreign investment can be characterized as a race to the bottom, a push towards greater autonomy for corporate bodies, or both.However, some scholars for instance theColumbiaeconomist Jagdish Bhagwati, have argued that multinationals are engaged in a 'race to the top.' While multinationals certainly regard a low tax burden or low labor costs as an element of comparative advantage, there is no evidence to suggest that MNCs deliberately avail themselves of lax environmental regulation or poor labour standards. As Bhagwati has pointed out, MNC profits are tied to operational efficiency, which includes a high degree of standardisation. Thus, MNCs are likely to tailor production processes in all of their operations in conformity to those jurisdictions where they operate (which will almost always include one or more of theUS,Japanor EU) that has the most rigorous standards. As for labor costs, while MNCs clearly pay workers in, e.g. Vietnam, much less than they would in the US (though it is worth noting that higher American productivitylinked to technologymeans that any comparison is tricky, since in America the same company would probably hire far fewer people and automate whatever process they performed in Vietnam with manual labour), it is also the case that they tend to pay a premium of between 10% and 100% on local labor rates. Finally, depending on the nature of the MNC, investment in any country reflects a desire for a long-term return. Costs associated with establishing plant, training workers, etc., can be very high; once established in a jurisdiction, therefore, many MNCs are quite vulnerable to predatory practices such as, e.g., expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of unnecessary 'licenses,' etc. Thus, both the negotiating power of MNCs and the supposed 'race to the bottom' may be overstated, while the substantial benefits that MNCs bring (tax revenues aside) are often understated. MarketWithdrawl-Because of their size, multinationals can have a significant impact ongovernment policy, primarily through the threat of market withdrawal.For example, in an effort to reduce health care costs, some countries have tried to forcepharmaceuticalcompanies to license theirpatented drugs to localcompetitorsfor a very low fee, thereby artificially lowering the price. When faced with that threat, multinational pharmaceutical firms have simply withdrawn from the market, which often leads to limited availability of advanced drugs. In these cases, governments have been forced to back down from their efforts. Similar corporate and government confrontations have occurred when governments tried to force MNCs to make theirintellectual propertypublic in an effort to gain technology for local entrepreneurs. When companies are faced with the option of losing a core competitive technological advantage or withdrawing from a national market, they may choose the latter. This withdrawal often causes governments to change policy. Countries that have been the most successful in this type of confrontation with multinational corporations are large countries such asUnited StatesandBrazil, which have viable indigenous market competitors. Patents-Many multinational corporations holdpatentsto prevent competitors from arising. For example,Adidasholds patents on shoe designs, Siemens A.G.holds many patents on equipment and infrastructure andMicrosoftbenefits fromsoftware patents.The pharmaceutical companies lobby international agreements to enforce patent laws on others. DisagreementsWith Corporations Activistsargue that corporate globalization corresponds to a displacement in the transition from a highly industrial-based economy to one where trade development is connected with the financial deregulation on the basis of circulation of capital. An increasing number of diverse societies have been pushed into a market structure, leading to displacement. As this expansion has occurred, market-governed regulation has outrun the grasps of the state. The government cannot control the markets, widening inequalities have developed, and the corporations have gained strength.Activists have been recently pushing for a sort of globalization that claims to promote equality.

CounterArgument -The defenders of corporations would argue that governments do legislate in ways that restrict the actions of corporations and that lawbreaking companies and executives are routinely caught and punished usually in the form of monetary fines. Factually, most amount to a small proportion on their gross annual revenue. However, the Tobacco Industries loss as defendants of a multi-state and Federal legal suit in the 1990's cost them billions of dollars and permanently disrupted their traditional marketing in theU.S.In addition, from the perspective ofbusiness ethicsit might be argued that chief executives are not inherently more evil than anyone else and so are no more likely to attempt unethical or illegal activity than the general population. Large multi-national corporations do continue to peck away at governmental regulations through in-house or contracted lobbyists that work closely with State and Federal legislators. So as corporate laws continue to lean in their favor, corporate members have improved portals to drive up company profits. Alliances Anti-corporate activists may often ally themselves with other activists, such asenvironmental activistsoranimal rights activistsin their condemnation of the practices of modern organizations such as theMcDonalds Corporationand forestry company Gunns Limited.In recent years, there have been an increasing number of books and films such as The Corporationwhich have to a certain extent supported anti-corporate politics. ArtAcitivism -Political artist Billy Knows posted his "Greed" posters all acrossAmericaandEuropein 2004 proclaiming Mickey the Rat as the new American icon.Another artist critical of socio political agendas in business is conceptualistHans Haacke. New DigitalMedia -Media and digital networking have become important features of modern anti-corporate movements. The speed, flexibility, and ability to reach a massive potential audience has provided a technological foundation for contemporary network social movement structure. As a result, communities and interpersonal connections have transformed. The internet supports and strengthens local ties, but also facilitates new patterns for political activity. Activists have used this medium to operate between both the online and offline political spectrums.Email lists, web pages, and open editing software have allowed for changes in organization. Now, actions are planned, information is shared, documents are produced by multiple people, and all of this can be done despite differences in distance. This has led to increased growth in digital collaboration. Activists can presently build ties between diverse topics, open the distribution of information, decentralize and increase collaboration, and self-direct networks. Rise of Anti-Corporate Globalization-Close to fifty thousand people protested the WTO meetings inSeattleon November 30, 1999. Labor, economic, and environmental activists succeeded in disrupting and closing the meetings due to their disapproval of corporate globalization. This event became a symbol as anti-globalization networks emerged and became strengthened.The experiences from the protests were distributed throughout the internet via emails and websites. Anti-corporate globalization movements have also expanded through the organization of mass mobilizations, including the anti-WTO protests, which were remarkably successful. In theUnited States, these movements reemerged after less attention was given to the war inIraq, resulting in an increase in mass mobilizations. The Aidof Technology -Globally oriented and planned protests have benefited from the cheap, quick, efficient means of e-mail. This has also led to the creation of a global connection between alternative transnational counterpublics. Web sites created for mobilizations may not be designed to exist or be used permanently, but their use allows for easy access to resources and contact lists. Face-to-face coordination was also found to be complemented through internet use and has not replaced this aspect.The use of the telephone remains vital, particularly during conflicts that required interactive communication.

Technology& Cultural Politics-For anti-corporate globalization movements, flexible local and global networks make up the most important forms of organization. Activists have preferred this flexible coordination between groups within a small formation. This includes intervallic meetings, commissions discussing concrete tasks, and project areas. Participation that is open is seen as more productive than representation. In some organizations, there are even no formal members. Instead, any person is allowed to participate as long as they agree with the networks basic beliefs, which includes a personal removal from capitalism and systems seen as similar to it.The use of networking through technology is unevenly distributed amongst the organizations and movements. The groups with more available funds are able to incorporate newer technologies into the existing communication techniques. Smaller organizations with fewer resources, therefore, look for more innovative methods in order to take advantage of the low cost. Though the anti-corporate globalization movements may be viewed as unified, there exists numerous movements. Their goals may overlap with one another, but each differs on their targeted issues, political subjectivity, ideologies, culture, and organizational structure.

Features

The term "multinational corporation" is variedly defined. In a broad sense, Multinational Corporation refers to a corporate giant business firm having extended its productive activity in many nations besides its home country. David E. Liliental, considering a wider parameter, defines the MNCs as "corporations which have their home in one country but operate and live under the laws and customs of other countries as well." For brevity, MNC refers to the business enterprise operating in more than one nation.In a report of the International Labour Organisation (ILO), it is observed that, "the essential of the MNC lies in the fact that its managerial headquarters are located in one country (home country), while the enterprise carries out operations in a number of the other countries (host countries)."It follows that even the firms participating in foreign trade or international economic relations simply by exporting or by licensing technology are not regarded as MNCs. To qualify to be a MNC, the firm must carry on production activity by its actual investment in several countries.In India, the Foreign Exchange Regulation Act, 1973 (FERA) provides a specific definition of multinational corporation as follows:"A corporation incorporated in a foreign country or territory shall be deemed to be multinational corporation if such corporation' (a) is a subsidiary or a branch or has place of business in two or more countries or territories, (b) carries on business or otherwise operations in two or more countries or territories."A "multinational corporation" is also referred to as an international, transactional or global corporation. Actually, for an enlarging business firm, multinational is a beginning step, as it gradually becomes transnational and then turns into a global corporation. For, transnational corporation represents a stage where in, the ownership and control of the concerned organisation crosses the national boundaries.The transnational corporation develops into a global corporation when it has capacity to allocate production across countries and the company can equalise the cost of capital across the nations to an extent. A global corporation aims at market maximisation and profit-maximisation rather than welfare maximisation.Features of MNCs:The following are the main features of MNCs:1. MNCs have managerial headquarters in home countries, while they carry out operations in a number of other (host) countries.2. A large part of capital assets of the parent company is owned by the citisens of the company's home country.3. The absolute majority of the members of the Board of Directors are citisens of the home country.4. Decisions on new investment and the local objectives are taken by the parent company.5. MNCs are predominantly large-sized and exercise a great degree of economic dominance.6. MNCs control production activity with large foreign direct investment in more than one developed and developing countries.7. MNCs are oligopolistic in character. It is sustained by modern technologies, management skill, product differentiation and enormous advertising.8. MNCs are not just participants in export trade without foreign investments.

Advent ofMultinational Corporations no doubt, carryout business with the ultimate object of profit making like any other domestic company. According to ILO report "for some, the multinational companies are an invaluable dynamic force and instrument for wider distribution of capital, technology and employment; for others they are monsters which our present institutions, national or international, cannot adequately control, a law to themselves with no reasonable concept, the public interest or social policy can accept. MNC's directly and indirectly help both the home country and the host country.Advantages of MNC's for the host countryMNC's help the host country in the following ways1. The investment level, employment level, and income level of the host country increases due to the operation of MNC's.2. The industries of host country get latest technology from foreign countries through MNC's.3. The host country's business also gets management expertise from MNC's.4. The domestic traders and market intermediaries of the host country gets increased business from the operation of MNC's.5. MNC's break protectionalism, curb local monopolies, create competition among domestic companies and thus enhance their competitiveness.6. Domestic industries can make use of R and D outcomes of MNC's.7. The host country can reduce imports and increase exports due to goods produced by MNC's in the host country. This helps to improve balance of payment.8. Level of industrial and economic development increases due to the growth of MNC's in the host country.Advantages of MNC's for the home countryMNC's home country has the following advantages.1. MNC's create opportunities for marketing the products produced in the home country throughout the world.2. They create employment opportunities to the people of home country both at home and abroad.3. It gives a boost to the industrial activities of home country.4. MNC's help to maintain favourable balance of payment of the home country in the long run.5. Home country can also get the benefit of foreign culture brought by MNC's.Disadvantages of MNC's for the host country1. MNC's may transfer technology which has become outdated in the home country.2. As MNC's do not operate within the national autonomy, they may pose a threat to the economic and political sovereignty of host countries.3. MNC's may kill the domestic industry by monpolising the host country's market.4. In order to make profit, MNC's may use natural resources of the home country indiscriminately and cause depletion of the resources.5. A large sums of money flows to foreign countries in terms of payments towards profits, dividends and royalty.Disadvantages of MNC's for the home country1. MNC's transfer the capital from the home country to various host countries causing unfavourable balance of payment.2. MNC's may not create employment opportunities to the people of home country if it adopts geocentric approach.3. As investments in foreign countries is more profitable, MNC's may neglect the home countries industrial and economic development.Applicability to particular businessMNC's is suitable in the following cases.1. Where the Government wants to avail of foreign technology and foreign capital e.g. Maruti Udyog Limited, Hind lever, Philips, HP, Honeywell etc.2. Where it is desirable in the national interest to increase employment opportunities in the country e.g., Hindustan Lever.3. Where foreign management expertise is needed e.g. Honeywell, Samsung, LG Electronics etc.4. Where it is desirable to diversify activities into untapped and priority areas like core and infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.5. Pharmaceutical industries e.g. Glaxo, Bayer etc.

Impact of multinational companies on the host countryImpact on developing economies & policy implicationsOctober 2003| byMartin Baily, Richard Cooper, Dani RodrikInvestments by multinational companies (MNC) allow developing economies to share in the considerable benefits of the global economy. Official incentives, trade barriers, and other regulatory policies, though, can result in inefficiency and waste.Case studies reveal that in virtually all cases, MNC investment had a positive to very positive impact on the host country. Rather than leading to the exploitation of lower-wage workers, as some critics have charged, the investments fostered innovation, productivity, and an improved living standard. Therefore, government seeking those advantages would be advised to favor policies of openness, rather than regulation, when it comes to foreign direct investment.Consistent valueMNCs were shown to create substantial value for host countries regardless of whether investments were market seeking (to seek new consumers) or efficiency seeking (to tap into lower local production costs.) Only in retail banking in Brazil did investment fail to make a significant difference.In every other case, foreign investment spillover effects stimulated supplier businesses and fostered improvements in technology and skills. Though in some cases, jobs were lost through elimination of inefficient local players or streamlining inefficient production operations, benefits to consumers were significant in terms of lower prices, more product choice, and increased productivity, which in turn increased national wealth.Policy implicationsBarriers to foreign investment and trade can create a competitive disadvantage for developing nations, rendering the considerable benefits of the global economy inaccessible to them. Targeted incentives, by the same token, rarely have a positive effect and often create harmful unintended consequences.Governments can more effectively grow MNC investments by putting the basic building blocks of productivity in place, through strengthened power, transportation, and legal infrastructures, and the enactment and enforcement of clear and consistent official policies.Impact on global industry restructuring & implications for companiesOctober 2003| byMartin Baily, Richard Cooper, Dani RodrikSeveral powerful factors, from liberalized foreign investment policies to a drop in the costs associated with global operations, are making a convincing case for building truly worldwide businesses. Multinational companies in the auto sector, for example, can find greater profits through savings and revenues that represent roughly 27 percent of the US $ 1.2 billion industry.Thanks to an increasingly mobile and connected world, global corporations stand to simultaneously increase efficiency and lower costs by taking full advantage of the growing expertise and specialization in emerging economies.Five horizons for global successWith the lifting of restrictions and regulations, a number of nations have seen thriving sectors as a result of MNC entry, and building particular skills and expertise that continue to make them competitive in the global marketplace.For MNCs to take advantage of these opportunities, they need to recognize what aspects of their industry best lend themselves to globalization. As a result, five horizons of industry structuring have emerged: Market entry:The predominant form of global expansion allows companies to mine new markets for their products in much the same way they do at home. Product specialization:Certain countries or regions take over the entire production process of a particular product. Value chain disaggregation:Each portion of the supply chain is located in a separate area with relevant expertise within a region. Parts are then assembled in yet another location. Value chain reengineering:After relocating an activity to a new location, production process can be tweaked by adjusting capital/labor ratio to capture further savings. New market creation:Successful global value chain management leads to the creation of better products at lower prices, which in turn can be introduced to whole new markets.No blueprintsWhile the opportunities and the benefits are significant, there is no one correct approach to managing global optimization. Global expansion alone does not ensure success. Just as high-performing companies in developed countries exhibit a broad range of successful management approaches, so do large developing economies.Companies must balance global resources with local knowledge. That includes aligning management incentives globally but tailoring them to local conditions. In Mexico's retail banking, for example, successful approaches ranged from BBV's top-down direction to Citigroup's management coaching of the executives.And companies must recognize that there is no single blueprint that works for every sector in every country. Each situation is different and those managers that can recognize them and build performance around them will be the ones who succeed.

Impact of multinational companies on the host countryClearly, multinational corporations can provide developing countries with critical financial infrastructure for economic and social development. However, these institutions may also bring with them relaxed codes of ethical conduct that serve to exploit the neediness of developing nations, rather than to provide the critical support necessary for countrywide economic and social development.When a multinational invests in a host country, the scale of the investment (given the size of the firms) is likely to be significant. Indeed governments will often offer incentives to firms in the form of grants, subsidies and tax breaks to attract investment into their countries. This foreign direct investment (FDI) will have advantages and disadvantages for the host country.AdvantagesThe possible benefits of a multinational investing in a country may include: Improving the balance of payments- inward investment will usually help a country's balance of payments situation. The investment itself will be a direct flow of capital into the country and the investment is also likely to result in import substitution and export promotion. Export promotion comes due to the multinational using their production facility as a basis for exporting, while import substitution means that products previously imported may now be bought domestically. Providing employment- FDI will usually result in employment benefits for the host country as most employees will be locally recruited. These benefits may be relatively greater given that governments will usually try to attract firms to areas where there is relatively high unemployment or a good labour supply. Source of tax revenue- profits of multinationals will be subject to local taxes in most cases, which will provide a valuable source of revenue for the domestic government. Technology transfer- multinationals will bring with them technology and production methods that are probably new to the host country and a lot can therefore be learnt from these techniques. Workers will be trained to use the new technology and production techniques and domestic firms will see the benefits of the new technology. This process is known as technology transfer. Increasing choice- if the multinational manufactures for domestic markets as well as for export, then the local population will gain form a wider choice of goods and services and at a price possibly lower than imported substitutes. National reputation- the presence of one multinational may improve the reputation of the host country and other large corporations may follow suite and locate as well.DisadvantagesThe possible disadvantages of a multinational investing in a country may include: Environmental impact- multinationals will want to produce in ways that are as efficient and as cheap as possible and this may not always be the best environmental practice. They will often lobby governments hard to try to ensure that they can benefit from regulations being as lax as possible and given their economic importance to the host country, this lobbying will often be quite effective. Access to natural resources- multinationals will sometimes invest in countries just to get access to a plentiful supply of raw materials and host nations are often more concerned about the short-term economic benefits than the long-term costs to their country in terms of the depletion of natural resources. Uncertainty- multinational firms are increasingly 'footloose'. This means that they can move and change at very short notice and often will. This creates uncertainty for the host country. Increased competition -the impact the local industries can be severe, because the presence of newly arrived multinationals increases the competition in the economy and because multinationals should be able to produce at a lower cost. Crowding out -if overseas firms borrow in the domestic economy this may reduce access to funds and increase interest rates. Influence and political pressure- multinational investment can be very important to a country and this will often give them a disproportionate influence over government and other organisations in the host country. Given their economic importance, governments will often agree to changes that may not be beneficial for the long-term welfare of their people. Transfer pricing- multinationals will always aim to reduce their tax liability to a minimum. One way of doing this is through transfer pricing. The aim of this is to reduce their tax liability in countries with high tax rates and increase them in the countries with low tax rates. They can do this by transferring components and part-finished goods between their operations in different countries at differing prices. Where the tax liability is high, they transfer the goods at a relatively high price to make the costs appear higher. This is then recouped in the lower tax country by transferring the goods at a relatively lower price. This will reduce their overall tax bill. Low-skilled employment- the jobs created in the local environment may be low-skilled with the multinational employing expatriate workers for the more senior and skilled roles. Health and safety -multinationals have been accused of cutting corners on health and safety in countries where regulation and laws are not as rigorous. Export of Profits- large multinational are likely to repatriate profits back to their 'home country', leaving little financial benefits for the host country. Cultural and social impact -large numbers of foreign businesses can dilute local customs and traditional cultures. For example, the sociologist George Ritzer coined the termMcDonaldizationto describe the process by which more and more sectors of American society as well as of the rest of the world take on the characteristics of a fast-food restaurant, such as increasing standardisation and the movement away from traditional business approaches.

ROLE OF MULTINATIONAL CORPORATIONSMultinational corporations (MNCs) are huge industrial organizations having a wide network of branches and subsidiaries spread over a number of countries. The two main characteristics of MNCs are their large size and the fact that their worldwide activities are centrally controlled by the parent companies. Such a company may enter into joint venture with a company in another country. There may be agreement among companies of different countries in respect of division of production, market, etc. These companies are to be found in almost all the advanced countries, with theUSAperhaps the biggest amongst them. Their operations extend beyond their own countries, and cover not only the advanced countries but also the LDCs.Many MNCs have annual sales volume in excess of the entire GNPs of the developing countries in which they operate. MNCs have great impact on the development process of the Underdeveloped countries.Let us discuss the arguments for and against the operation of MNCs in underdeveloped countries.Arguments for MNCs(The positive role):The MNCs play an important role in the economic development of underdeveloped countries.1. Filling Savings Gap:The first important contribution of MNCs is its role in filling the resource gap between targeted or desired investment and domestically mobilized savings. For example, to achieve a 7% growth rate of national output if the required rate of saving is 21% but if the savings that can be domestically mobilised is only 16% then there is a saving gap of 5%. If the country can fill this gap with foreign direct investments from the MNCs, it will be in a better position to achieve its target rate of economic growth.2. Filling Trade Gap:The second contribution relates to filling the foreign exchange or trade gap. An inflow of foreign capital can reduce or even remove the deficit in the balance of payments if the MNCs can generate a net positive flow of export earnings.3. Filling Revenue Gap:The third important role of MNCs is filling the gap between targeted governmental tax revenues and locally raised taxes. By taxing MNC profits, LDC governments are able to mobilize public financial resources for development projects.4. Filling Management/Technological Gap:Fourthly, Multinationals not only provide financial resources but they also supply a package of needed resources including management experience, entrepreneurial abilities, and technological skills. These can be transferred to their local counterparts by means of training programs and the process of learning by doing.Moreover, MNCs bring with them the most sophisticated technological knowledge about production processes while transferring modern machinery and equipment to capital poor LDCs. Such transfers of knowledge, skills, and technology are assumed to be both desirable and productive for the recipient country.5.Other Beneficial Roles:The MNCs also bring several other benefits to the host country.(a) The domestic labour may benefit in the form of higher real wages.(b) The consumers benefits by way of lower prices and better quality products.(c) Investments by MNCs will also induce more domestic investment. For example, ancillary units can be set up to feed the main industries of the MNCs(d) MNCs expenditures on research and development(R&D), although limited is bound to benefit the host country.Apart from these there are indirect gains through the realization of external economies.Arguments Against MNCs(The negative role):There are several arguments against MNCs which are discuss below.1. Although MNCs provide capital, they may lower domestic savings and investment rates by stifling competition through exclusive production agreements with the host governments. MNCs often fail to reinvest much of their profits and also they may inhibit the expansion of indigenous firms.2. Although the initial impact of MNC investment is to improve the foreign exchange position of the recipient nation, its long-run impact may reduce foreign exchange earnings on both current and capital accounts. The current account may deteriorate as a result of substantial importation of intermediate and capital goods while the capital account may worsen because of the overseas repatriation of profits, interest, royalties, etc.3. While MNCs do contribute to public revenue in the form of corporate taxes, their contribution is considerably less than it should be as a result of liberal tax concessions, excessive investment allowances, subsidies and tariff protection provided by the host government.4. The management, entrepreneurial skills, technology, and overseas contacts provided by the MNCs may have little impact on developing local skills and resources. In fact, the development of these local skills may be inhibited by the MNCs by stifling the growth of indigenous entrepreneurship as a result of the MNCs dominance of local markets.5. MNCs impact on development is very uneven. In many situations MNC activities reinforce dualistic economic structures and widens income inequalities. They tend to promote the interests of some few modern-sector workers only. They also divert resources away from the production of consumer goods by producing luxurious goods demanded by the local elites.6. MNCs typically produce inappropriate products and stimulate inappropriate consumption patterns through advertising and their monopolistic market power. Production is done with capital-intensive technique which is not useful for labour surplus economies. This would aggravate the unemployment problem in the host country.7. The behaviour pattern of MNCs reveals that they do not engage in R & D activities in underdeveloped countries. However, these LDCs have to bear the bulk of their costs.8. MNCs often use their economic power to influence government policies in directions unfavorable to development. The host government has to provide them special economic and political concessions in the form of excessive protection, lower tax, subsidized inputs, cheap provision of factory sites. As a result, the private profits of MNCs may exceed social benefits.

9. Multinationals may damage the host countries by suppressing domestic entrepreneurship through their superior knowledge, worldwide contacts, and advertising skills. They drive out local competitors and inhibit the emergence of small-scale enterprises.India Market

A market is described as a platform where buyers and sellers are allowed to trade, exchange goods, services, and information. These involvements of the goods and the parties to trade simplify the demand and supply concepts and are thus the fundamentals of an economy. Any type of trade can take place in a market. The two major dependant factors by which a market can operate are buyers and sellers. It is in an India market place that the physical meeting of the buyers and sellers take place such that they can trade. Nobody can deny the importance of physical India market places, but still there are virtual marketplaces mainly supported by IT networks such as the internet.Some India markets are really very competitive - with a large number of players (vendors) selling the same kind of products or services. On the other hand, few of the markets have very low or no competition at all (with a single player in the market). It depends on the number of buyers and sellers in the market that how much will be the price of the good or service that is sold in the market. This determines the law of demand and supply in the market.

In an India market place, where there is more number of sellers than the buyers, the supply is bound to bring down the prices. On the other hand, if there are more buyers than sellers in a market place, the reciprocative action would take place - demand pushing up prices.

Types of India Market -

Free Markets-Usually free markets are operational under the 'laissez-faire' conditions - where there is no government intervention. A free market may get distorted if there exists a monopolistic situation (seller controlling major portion of the supply) or a monopsonistic situation (a buyer having power on majority of the demand). In case of these distortions, the government or business bodies make an entry to ensure that the free markets operate smoothly.

CurrencyMarkets-Currency markets are among the largest traded markets in the globe, on a continual basis. Money flows are continuous around the globe - governments, banks, investors and consumers - all of them are involved in buying and selling currency round the clock. That is the velocity of money is huge with so many constantly changing hands.

Stock Markets-Stock markets seem to be the backbone of any economy - and of late they have become the most complex structure allowing investors the scope of buying and selling shares in multitude companies. Majority of the Indian stock markets are operating on an electronic network, with a physical location being maintained for buyers separately. This is the place where the parties involved can interact with each other directly.

Types of Consumer India Markets -

Previously, India Markets originated from the center of villages and towns, where there was a sale or barter of farm produce, clothing and tools and various other products. Later on these street markets went on to become consumer-oriented markets like the specialist markets, shopping centers, supermarkets.

1.CommodityMarkets-In India, with high oil and food prices, the commodity markets have again gathered all the attention. The prices of the essential commodities steer the economy to a desired level. Commodity markets deal in energy (oil, gas, coal, and biodiesel), soft commodities and grains (wheat, oat, corn, rice, soya beans, coffee, cocoa, sugar, cotton, frozen orange juice, etc), meat, and financial commodities like bonds.

2.CapitalGoods & Industrial Markets-India capital goods market help businesses to buy durable goods that can be used in industrial and manufacturing methods. There are usually wholesale trades that take place with bulk goods being transacted at very cheap prices.

Importance of India market -

Markets in India after the liberalization era have been leveraged to the extent that they are well protected by legal procedures and boasts of efficient administrators. The government has always been proactive in its strategies to make the future of India market lucrative and attractive. India market has witnessed outstanding growth over past few years. The liberal and transparent financial policies have steered the economy towards free flow of FII and that is why India Market has achieved a sound place in the international arena.

The returns on investments in the India market have been substantially moderate from all the listed stocks. Public Private Partnership (PPP) is the new trend in the Indian marketplace, with red tape and bribes being shed off to quite an extent. The few public enterprises like IOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC etc are giving the private players a run for their money. Whereas at the same time, private players like Reliance Industries Limited, Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI have been performing exponentially in all the financial years.

Multinational companies are the organizations or enterprises that manage production or offer services in more than one country. And India has been the home to a number of multinational companies. In fact, since the financial liberalization in the country in 1991, the number of multinational companies in India has increased noticeably. Though majority of the multinational companies in India are from the U.S., however one can also find companies from other countries as well.Destination India

The multinational companies in India represent a diversified portfolio of companies from different countries. Though the American companies - the majority of the MNC in India, account for about 37% of the turnover of the top 20 firms operating in India, but the scenario has changed a lot off late. More enterprises from European Union like Britain, France, Netherlands, Italy, Germany, Belgium and Finland have come to India or have outsourced their works to this country. Finnish mobile giant Nokia has their second largest base in this country. There are also MNCs like British Petroleum and Vodafone that represent Britain.India has a huge market for automobiles and hence a number of automobile giants have stepped in to this country to reap the market. One can easily find the showrooms of the multinational automobile companies like Fiat, Piaggio, and Ford Motors in India. French Heavy Engineering major Alstom and Pharma major Sanofi Aventis have also started their operations in this country. The later one is in fact one of the earliest entrants in the list of multinational companies in India, which is currently growing at a very enviable rate. There are also a number of oil companies and infrastructure builders from Middle East. Electronics giants like Samsung and LG Electronics from South Korea have already made a substantial impact on the Indian electronics market. Hyundai Motors has also done well in mid-segment car market in India.The list of multinational companies in India is ever-growing as a number of MNCs are coming down to this country now and then. Following are some of the major multinational companies operating their businesses in India:

British PetroleumVodafoneFord motorsLGSamsungHyundaiAccentureReebokSkoda MotorsABN Amro Bank