Multinational Corporations (MNCs) – Entry Strategies & Growth

MNCs are major players in today’s globalised business environment.

1. Meaning / Definition of MNC

A Multinational Corporation (MNC) is a company that owns or controls production, distribution or other facilities in more than one country.

Features:

• Head office in home country, operations in host countries.
• Global strategy for production, marketing and R&D.

2. Entry Strategies of MNCs

1. Exports

   • First step – serving foreign markets from home country production.

2. Licensing and Franchising

   • Allow local firm to use brand, technology or business model in return for fees/royalties.
   • Example: Fast‑food chains, retail brands.

3. Joint Ventures

   • MNC partners with local company; share ownership and control.
   • Useful where law or market conditions favour local participation.

4. Wholly Owned Subsidiaries

   • MNC sets up 100% owned subsidiary (greenfield or acquisition).
   • Greater control but higher risk and investment.

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3. Factors Behind Growth of MNCs

• Advances in technology and communication.
• Liberalisation of trade and FDI policies in many countries.
• Search for new markets, resources and efficiency (cheap labour, raw materials).
• Ability to spread risk across countries.

4. MNCs in India – Role and Issues

Role / Contributions

• Brought FDI, technology and modern management to sectors like automobiles, telecom, FMCG, IT.
• Expanded exports and integrated India into global supply chains.
• Created employment, especially for skilled workers.

Issues / Concerns

• Possibility of unfair competition for domestic small firms.
• Transfer pricing and profit shifting.
• Cultural impact and standardisation of consumption patterns.

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5. Quick Revision Points

• MNC = firm operating in multiple countries with global strategy.
• Entry modes: exports, licensing, franchising, joint ventures, subsidiaries.
• In India, MNCs have both positive impacts (FDI, technology) and concerns (competition, cultural change).

6. Quiz Time 🎯

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