MULTINATIONAL

CORPORATIONS

INTRODUCTION
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Multinational corporations are business entities that operate in

more than one country. The typical multinational corporation or
MNC normally functions with a headquarters that is based in
one country, while other facilities are based in locations in
other countries. In some circles, a multinational corporation is
referred to as a multinational enterprise (MBE) or a transnational
corporation(TNC).The exact model for an MNC may vary slightly.
One common model is for the multinational corporation is the
positioning of the executive headquarters in one nation, while
production facilities are located in one or more other
countries. This model often allows the company to take advantage
of benefits of incorporating in a given locality, while also being able
to produce goods and services in areas where the cost of
production is lower. Another structural model for a multinational
organization or MNO is to base the parent company in one nation
and operate subsidiaries in other countries around the world.
With this model, just about all the functions of the parent
are based in the country of origin. The subsidiaries more or le
ss functionindependently, outside of a few basic ties to the
parent. A third approach to the setup of an MNC involves the
establishment of a headquarters in one country that oversees a
diverse conglomeration that stretches to many different countries
and industries. With this model, the MNC includes affiliates,
subsidiaries and possibly even some facilities that report directly to
the head quarters. The idea of a multinational corporation has been
around for centuries. Some trace the origins of the concept back to
the Dutch East India Company of the17th century, as the corporate
structure involved a presence in more than one country. During the
19th and 20th centuries, the idea of a company that functioned in
more than one nation became increasingly common. In the 21st
century, this business model continues to be highly desirable.
Multinational Corporations (MNCs), also known as
Transnational Corporations (TNCs), are enterprises operating
in a number of countries and having production or service
facilities outside the country of their origin.
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A commonly accepted definition of an MNC is an enterprise

producing at least 25 per cent of its world output outside its
country of origin.
Enabled by Internet based communication tools, a new breed
of multinational companies is growing in numbers. These
multinationals start operating in different countries from the
very early stages. These companies are being called micromultinationals. What differentiates micro- multinationals from
the large MNCs is the fact that they are small businesses.
Some of these micro-multinationals, particularly software
development companies, have been hiring employees in
multiple countries from the beginning of the Internet era. But
more and more micro- multinationals are actively starting to
market their products and services in various countries.
Internet tools like Google, Yahoo, MSN, Ebay and Amazon
make it easier for the micro- multinationals to reach potential
customers in other countries.
Reasons for the diverse and manifold growth of the
multinationals could be:
(1) Expansion of market skills,
(2) Superior marketing,
(3) Huge financial resources,
(4) Technological edge, and
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(5) Innovation of products.

In India, since the announcement of the liberalised foreign
investment policy in 1991, there has been a spurt in the
number of MNCs as well as foreign collaborations.
The multinational companies in India represent a diversified
portfolio of companies from different countries. Though the
American companiesthe majority of the MNC in India
account for about one-third of the turnover of the top 20
firms operating in India, the scenario has changed a lot of
late. More enterprises from the European Union like Britain,
France, the Netherlands, Italy, Germany, Belgium and Finland
have come to India or have outsourced their work to this
country. Finnish mobile giant Nokia has a large base in this
country.
There are also MNCs like British Petroleum and Vodafone.
India has a huge market for automobiles and hence a number
of automobile giants have stepped into this country to reap
the market. French Heavy Engineering major Alstom and
Pharma major Sanofi Aventis have also started their
operations in this country.
The latter is in fact one of the earliest entrants in the list of
multinational companies in India. There are also a number of
oil companies and infrastructure builders from the Middle
East. Electronics giants like Samsung and LG Electronics from
South Korea have made a substantial impact on the Indian
electronics market.
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As to why the multinational companies are coming down to

India, the reasons are: India has got a huge market; it has
one of the fastest growing economies in the world; the policy
of the government towards foreign direct investment has also
played a major role in attracting the multinational companies
in India; there is labour competitiveness.
The impact of MNCs on the development of a country is
highly uneven. In some ways the impact of MNCs in India has
been positive. They have brought in new technology and
products, so the consumers have wide choice and awareness
of international standards.
They have indirectly made Indian companies more efficient
as they brought in competition. But the negative aspects of
their entry into our country are serious. In many situations
these enterprises widen the already high income gap
between the rich and the poor. They tend to promote the
interests of the small number of well-paid modern sector
workers, and this leads to the widening of wage differentials
in the country.
As they are mostly located in urban areas, the MNCs worsen
the already existing imbalance between the rural and urban
areas as well as contribute to accelerated rural-urban
migration. They divert resources away from much- needed
food production to the manufacture of sophisticated products
catering to the demands of the local elite.
These products stimulate inappropriate consumption patterns
through advertisement and their monopolistic market power,
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using inappropriate (capital intensive) technology. Such

capital intensive technology leads to negligible, or even
reduces, job creation.
Although MNCs improve the foreign exchange position of a
country, their long-term impact may be to reduce foreign
exchange earnings of both current and capital accounts. The
current account may deteriorate due to large-scale import of
intermediate goods, and capital account may worsen because
of repatriation of profits, interest, royalties, management
fees, etc. Indeed, the RBI has said that the average rate of
profit of MNCs is something between 20 per cent and 25 per
centwhich is a substantial amount sent out of the country.

While the MNCs contribute to the public revenue in the form

of corporate taxes, their contribution is less than it should be
as a result of liberal tax concessions, excessive investment
allowances, disguised subsidies and tariff protection by the
local government which often offset the gains made from tax
revenue.
MNCs may damage the economies of the underdeveloped
economies because their superior knowledge, worldwide
contacts and advertising skills inhibit the emergence of smallscale local enterprises. Because of their huge resources,
MNCs are able to diversify into various economic activities,
pushing out indigenous companies in those fields.
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Though many MNC initially promise to transfer technology to

the host country, they seldom do so. Even if they do, they
transfer, not the latest sophisticated technology, but obsolete
technology.
They do not often transfer much capital from the parent
company but raise resources from within India.
In conclusion, we may say that foreign investment (if it is
actually done) can be an important stimulus to economic and
social development, only so long as the interests of both the
MNCs and the host country coincide.
It has been pointed out that these companies export too
little, that they tend to declare high dividends, that their
investments are concentrated in certain sectors, that they
transfer very little technology.

CHARACTERISTICS
1.

Productive organization: this organization produces various types

of goods and services. It is supplies in many countries. It uses its own
technology, patent right for manufacturing goods.

2.

World wide: multinational companies operate in whole world. It

extends its business world wide. It establishes many branches in
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various companies. They extend their business in more than one

country.
3.

Ownership and control: ownership of company remains on both

parent and host country. Parent company control, manage and help in
the operation of all host countries. They have control in capital, high
technology, and trade mark.

4.

Transfer of technology: these multinational companies are

establishes with hug capital and advanced technology. It also
transfers the technology in the host countries that can be used for
production.

5.

Marketing superiority: it is large organization which has

international name and fame. It has good network world wide for
distribution of goods.

6.

High efficiency: these organizations operate their business with

efficiency. They use advanced technology. They also involve keenly in
research works. They used many trained person that helps in the
production of quality goods.

7.

Head quarter in one country and i.e. Home country.

8.

Operates in more than one countries.

9.

Resources are at some extent unlimited.

10. Subsidiaries are scattered around the globe.

11. Low cost of production.
12. Huge investment in R & D.
13. Standardisation of methods at all outlets.

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14. Production & services are out sourced to countries with low
costtechnical labour
15. Long term view

FEATURES OF MNCS
Following are the main features of MNCs:

Location MNCs have their headquarters in home countries

and have their operational division spread across foreign
countries to minimize the cost.

Capital Assets Major portion of the capital assets of the

parent company is owned by the citizens of the companys home
country.

Board of Directors Majority of the members of the Board of

Directors are citizens of the home country.

MNCs are large-sized corporation and exercise a great degree

of economic dominance.

We all are quite aware of the bottom line of any business. Every
business has the ultimate goal of making profit. Businesses always
seek to sell more products and services so as to bring in more
revenue and generate profits for its owners.

APPLICABILITY TO BUSINESSES

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MNCs are suitable for only a set of business categories. Following

are some of the suitable cases where the MNC mode of operation
could succeed:

Businesses where the Government itself wants to avail foreign

technology and foreign capital.
Where foreign management expertise is needed.

Where an increase in employment opportunities in the country

can be seen as a national interest.

Where it is desirable to diversify activities into untapped areas

which include core industries and infrastructure.

Pharmaceutical sector

WHY SHOULD A COMPANY BECOME AN

MNC /REASONS TO BECOME AN MNC?

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There are some reasons why companies wish to become

multinationals:

To increase market share companies may find they are at

saturation point in the domestic market and need a new outlet.
They may start by exporting to other countries but eventually they
will want to being production overseas. Coca Cola started this way
following US soldiers around the world after WW1.

To secure cheaper premises and labour cost of land and

labour will be cheaper in developing countries. Sweatshops in the
Far East are an example of cheap labour, whereas production plants
opening in the old Soviet Bloc nations like Poland, Bulgaria etc are
examples of cheap factories.

To avoid tax or trade barriers different nations have different

levels of corporation tax and may have different barriers to entry.
The Japanese only allow a small percentage of foreign cars to be
sold in Japan to protect their own industry.

Government grants many US companies were attracted to

the UK in the 80s due to government giving them money to open
up operations here.

ADVANTAGES OF
MNCS
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Access to Consumers Access to consumers is one of the

primary advantages that the MNCs enjoy over companies with
operations limited to smaller region. Increasing accessibility to
wider geographical regions allows the MNCs to have a larger pool
of potential customers and help them in expanding, growing at a
faster pace as compared to others.

Accesses to Labor MNCs enjoy access to cheap labor, which

is a great advantage over other companies. A firm having
operations spread across different geographical areas can have
its production unit set up in countries with cheap labor. Some of
the countries where cheap labor is available is China, India,
Pakistan etc.

Taxes and Other Costs Taxes are one of the areas where
every MNC can take advantage. Many countries offer reduced
taxes on exports and imports in order to increase their foreign
exposure and international trade. Also countries impose lower
excise and custom duty which results in high profit margin for
MNCs. Thus taxes are one of the area of making money but it
again depends on the country of operation.

Overall Development The investment level, employment

level, and income level of the country increases due to the
operation of MNCs. Level of industrial and economic
development increases due to the growth of MNCs.

Technology The industry gets latest technology from foreign

countries through MNCs which help them improve on their
technological parameter.

R&D MNCs help in improving the R&D for the economy.

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Exports & Imports MNC operations also help in improving the

Balance of payment. This can be achieved by the increase in
exports and decrease in the imports.

DISADVANTAGES OF
MNCS

Laws One of the major disadvantage is the strict and

stringent laws applicable in the country. MNCs are subject to more
laws and regulations than other companies. It is seen that certain
countries do not allow companies to run its operations as it has
been doing in other countries, which result in a conflict within the
country and results in problems in the organization.

Intellectual Property Multinational companies also face

issues pertaining to the intellectual property that is not always
applicable in case of purely domestic firms

Political Risks As the operations of the MNCs is wide spread

across national boundaries of several countries they may result in
a threat to the economic and political sovereignty of host
countries.

Loss to Local Businesses MNCs products sometimes lead to

the killing of the domestic company operations. The MNCs
establishes their monopoly in the country where they operate
thus killing the local businesses which exists in the country.

Loss of Natural Resources MNCs use natural resources of the

home country in order to make huge profit which results in the
depletion of the resources thus causing a loss of natural resources
for the economy
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Money flows As MNCs operate in different countries a large

sum of money flows to foreign countries as payment towards
profit which results in less efficiency for the host country where
the MNCs operations are based.

Transfer of capital takes place from the home country to the

foreign ground which is unfavorable for the economy.

Multinationals can, however, be accused that the jobs they create

may be deskilled jobs (known by some as 'McJobs') and in fact may
be low paid, repetitive assembly line work.
Multinationals' profits are not usually kept in the host country. For
example the money made and saved by General Motors moving
car assembly production to Mexico would still go back to HQ in
Michigan.

Multinational companies can be environmentally irresponsible

Multinationals have been accused of cutting corners. Social
responsibility may be overlooked. They have been accused of
exploiting the workforce and/or the environment. Workers can work
below minimum wage and for longer hours. Both Levi jeans and
Wal-Mart have been accused of exploiting workers in the Far East.
Also, relaxed health and safety laws and little if any environmental
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laws may be in place. For example the Bhopal gas disaster in 1984
killed hundreds of people in India. Union Carbide was held
accountable.
They may exert political muscle. The multinational may threaten to
pull out of a country if they don't get deals on workforce (wages) or
overheads (land, rent and rates) and pollution/clean-up deals.

INTRODUCTION IN
INDIA:
With a GDP growth of almost 7 percent ,India is one of the most
promising and fastest-growing economies in the world. But despite
the huge potential of the country, the performance of Multinational
Corporations (MNCs) in India
has been decidedly mixed. Many MNCs which have succeeded re
markablyelsewhere in the world have yet to make a significant
impact in India. The market entry and penetration strategies that
have worked so well for these companies in other countries have
been for less successful in India. Many MNCs have struggled to
understand Indian customers and come up with suitable products
and services. Today, virtually all the big MNCs in the world have
operations in India. These include Unilever, BAT, Colgate Palmolive,
Procter & Gamble, General Electric, General Motors, Ford, Pepsi,
IBM, Intel, Texas Instruments, Microsoft, Oracle and Coca-Cola. India
is now considered by many MNCs to be a strategically important
market.
Historically, the main reason for the entry of MNCs into India was to
jump the tariff wall. High import duties made it difficult if not
impossible to export finished goods from the home country to India.
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On the other hand, once they entered the country and set up
operations, the country's high tariffs guaranteed adequate
protection. In some cases, the need to customize products
necessitated strong local presence. Unilever set up its Indian
subsidiary, Hindustan Lever and gave it full freedom to develop
various products to suit local tastes and usage conditions. This
would obviously not have been possible if Unilever had only been
exporting its products to India. In recent times, other reasons have
made India an attractive destination for MNCs. India has emerged
as a low cost back office, manufacturing and
research base, thanks to its skilled but relatively cheap manpower
. In the computer software industry, many MNCs are establishing
offshore development centers total local manpower. IBM,
Accenture, EDS and Computer Associates have
all been strengthening their presence in the country. Not only
are Indian software workers among the best in the world, when it
comes to technical skills but they are also more comfortable with
English, compared to their counterparts in countries such as China.
Dell and Deloitte have major back office operations in the country.
General Electric (GE) is looking at India as an important R&D base
which can contribute to their global knowledge pool. GE's local
outfit has filed for several patents in the last couple of years. Nokia
has set up three R&D centres that work on next-generation packetswitched mobile technologies and communications solutions. Texas
Instruments is also doing cutting edge R&D work in the country.
While several MNCs have entered India, not all of them are doing
well. This is evident when performances are compared across
industries. However, even within a given industry, some MNCs
seem to be doing better than the others. Consider the automobile
industry. Here, Suzuki and Hyundai are way ahead of formidable
rivals such as General Motors, Honda and Ford. Similarly in the
FMCG sector, even after allowing for its relative late entry, Procter &
Gamble(P&G) remains a marginal player compared to Hindustan
Lever. In some industries, the MNCs have been left high and dry by
the local players. In
the paint industry, the local player, Asian Paints has beaten the M
NCs by a hugemargin. Then, there is also the unique case of an
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MNC, Indian Aluminium(Indal), actually being taken over by an

Indian company, Hindustan Aluminium.
One must be careful while explaining the good performance of
some MNCs and the poor performance of others. An important
point to note here is that different MNCs have entered India at
different points in time and responded to the needs of the
environment accordingly. For example, MNCs which entered India
since the 1990s have in general been more aggressive and
proactive in a
liberalised business environment, than those which began operati
ons during the licenseRaj. Hyundai, Samsung and LG are good
examples. The older MNCs like Bata have also been handicapped
by the baggage accumulated over a period of time. Such
companies are often at a disadvantage due to their
bloated manpower and inefficient manufacturing facilities. Of the
50-plus1 MNCs with a significant presence in India, the nine market
leaders, including British American Tobacco (BAT), Hyundai Motor,
Suzuki Motor, and Unilever, have an average return on capital
employed of
around 48percent. Even the next 26 have an average ROCE of 36
percent. The mostsuccessful MNCs in India have some common
characteristics. Resisting the instinct to transplant to India the best
practices of other countries, they have treated the country as a
strategic market. These companies have also taken along term
view. They have invested time and resources to understand local
consumers and business conditions. They have understood that the
price points that matter in India are different from those in other
countries. In a country where the middle and lower-end segments
are critically important, affordability is a crucial factor. At the same
time, some of the successful MNCs have also realised that price is
not the only factor driving purchase decisions. Value conscious
consumers,
will pay a premium if the benefits of superior features and quality
are seen to far outweigh their cost. LG for example, has
reengineered its TV product specifications in order to develop three
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offerings specifically for India ,including a no-frills one to expand the

market at the low end and a premium 21-inch flat TV for the middle
segment. By keeping the price of the premium offering to within 10
percent of the price of TVs with conventional screens, LG has
persuaded many consumers to buy it. These innovations have
helped the company to establish a very strong competitive position
in the country's consumer durable-goods and electronics appliances
market.

MNCS STRUCTURE
1. Horizontally integrated multinational corporations: Horizontally
integrated multinational corporations manage production
establishments located in different countries to produce the same
or similar products. (Example: McDonalds)
2. Vertically integrated multinational corporations: Vertically
integrated multinational corporations manage production
establishment in certain country/countries to produce products that
serve as input to its production establishments in
othercountry/countries. (Example: Adidas)
3. Diversified multinational corporations: diversified multinational
corporations do not manage production establishments located in
different countries that are horizontally
nor vertically nor straight, nor non-straight integrated. (Example:
Hilton Hotels)

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OPPORTUNITIES FOR DEVELOPING

ECONOMIES
The opportunities for developing economies are significant as well.
Through the application of capital, technology, and a range of skills,
multinational companies' overseas investments have created
positive economic value in host countries, across different
industries and within different policy regimes. The single biggest
effect evidenced was the improvement in the standards of living of
the country's population, as consumers have directly benefited
from lower prices, higher quality goods, and broader selection.
Improved productivity and output in the sector and its suppliers
indirectly contributed to increasing national income. And despite
often-cited worries, the impact on employment was either neutral
or positive in two- thirds of the cases. Foreign direct investment is
already having a dramatic impact on the way companies do
business and developing economies integrate with the global
economy. Compared to its potential, however, it's just a drop in the
bucket.

FOREIGN DIRECT
INVESTMENT
A Foreign Direct Investment (FDI) is a controlling ownership in a
business enterprise in one country by an entity based in another
country. Foreign direct investment is distinguished from portfolio
foreign investment, a passive investment in the securities of
another country such as public stocks and bonds, by the element of
"control". According to the Financial Times, "Standard definitions of
control use the internationally agreed 10 percent threshold of
voting shares, but this is a grey area as often a smaller block of
shares will give control in widely held companies. Moreover, control
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of technology, management, even crucial inputs can confer de

facto control." The origin of the investment does not impact the
definition as an FDI, i.e., the investment may be made either
"inorganically" by buying a company in the target country or
"organically" by expanding operations of an existing business in
that country.

TYPES
1. Horizontal FDI arises when a firm duplicates its home countrybased activities at the same value chain stage in a host
country through FDI.
2. Platform FDI Foreign direct investment from a source country
into a destination country for the purpose of exporting to a
third country.
3. Vertical FDI takes place when a firm through FDI moves
upstream or downstream in different value chains i.e., when
firms perform value-adding activities stage by stage in a
vertical fashion in a host country.
METHODS
The foreign direct investor may acquire voting power of an
enterprise in an economy through any of the following methods:
by incorporating a wholly owned subsidiary or company
anywhere.
by acquiring shares in an associated enterprise.

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 through a merger or an acquisition of an unrelated enterprise.

participating in an equity joint venture with another investor or
enterprise

FDI POLICY AND ITS IMPACT ON MNCS FOREIGN

DIRECT INVESTMENT POLICY
MNCs are source of FDI, the movement of capital across national
borders that grants the investor control over an acquired asset. FDI
may comprise > 20% of global GDP. In its recent foreign direct
investment (FDI) policy, the Government of India had announced
additional methods for issue ofshares for consideration other than
cash, such as: (a) Import of capital goods/ machinery/ equipment
(including second-hand machinery); (b) Pre-operative/ preincorporation expenses (including payments of rent, etc.). The RBI
has now implemented these schemes by prescribing the detailed
conditions on which this share issuance facility willbe available to
Indian companies.)Foreign direct investment (FDI) has become a
key battleground for emerging markets and some developed
countries. Government-level policies are needed to enable FDI
inflows and maximize their returns for both investors and recipient
countries. Foreign direct investment (FDI) has become a key
battleground for emerging markets and some developed countries.
Foreign direct investment (FDI) policies play a major role in the
economic growth ofdeveloping countries around the world.
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Attracting FDI inflows with conductive policies has therefore

become a key battleground in the emerging markets. Developed
countries also seek to bring in more FDI and use various policies
and incentives to attract overseas investors, particularly for capitalintensive industries and advanced technology. The primary aim of
these policies is to create a friendly business environment where
foreign investors feel comfortable with the legal and financial
framework of the country, and have the potential to reap profits
from economically viable businesses. The prospect of new growth
opportunities and outsized profits encourages large capital inflows
across a range of industry and opportunity types. Investors tend to
look for predictable environments where they understand how
decision-making processes work. Governments therefore are
incentivized to build up a track record of rational decision making.
The business environment often requires work to remove onerous
regulations, reduce corruption and encourage transparency.
Governments often also seek to improve their domestic
infrastructure to meet the operational needs of investors. Providing
fiscal incentives for attracting FDI is a subject of controversy
analysts have argued both in favour and against the idea. A general
consensus is developing in favour ofcertain incentives which have
been proven historically to grow profits and therefore foreign
investments. When policies are effective, significant FDI
investments are injected into countries that help the domestic
economy to grow. Different countries

GOVERNMENT INITIATIVES
Indias cabinet has cleared a proposal which allows 100 per cent FDI
in railway infrastructure, excluding operations. Though the initiative
does not allow foreign firms to operate trains, it allows them to do
other things such as create the network and supply trains for bullet
trains etc. The government has notified easier FDI rules for
construction sector, where 100 per cent overseas investment is
permitted, which will allow overseas investors to exit a project even
before its completion. It also said that 100 per cent FDI will be
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permitted under automatic route in completed projects for

operation and management of townships, malls and business
centres. With the objective of encouraging foreign firms to transfer
state-of-the-art technology in defence production, the government
may increase the FDI cap for the sector to 74 per cent from 49 per
cent at present. India is expected to spend US$ 40 billion on
defence purchases over the next 4-5 years, mostly from abroad.
The Union Cabinet has cleared a bill to raise the foreign investment
ceiling in private insurance companies from 26 per cent to 49 per
cent, with the proviso that the management and control of the
companies must be with Indians. The Reserve Bank of India (RBI)
has allowed a number of foreign investors to invest, on repatriation
basis, in non-convertible/ redeemable preference shares or
debentures which are issued by Indian companies and are listed on
established stock exchanges in the country. In an effort to bring in
more investments into debt and equity markets, the RBI has
established a framework for investments which allows foreign
portfolio investors (FPIs) to take part in open offers, buyback of
securities and disinvestment of shares by the Central or state
governments.

NESTLE
ORIGIN:
Nestl S.A. (French pronunciation: [nsle]; English /nsle/, /
nsl/, /nsli/) is a Swiss transnational food and beverage
company headquartered in Vevey, Vaud, Switzerland. It is the
largest food company in the world measured by revenues,[4]
[5] and ranked #72 on the Fortune Global 500 in 2014.[6]
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Nestls products include baby food, bottled water, breakfast

cereals, coffee and tea, confectionery, dairy products, ice
cream,frozen food, pet foods, and snacks. Twenty-nine of Nestls
brands have annual sales of over CHF1 billion
(aboutUS$1.1 billion),[7] including Nespresso, Nescaf, Kit
Kat, Smarties, Nesquik, Stouffers, Vittel, and Maggi. Nestl has
447 factories, operates in 194 countries, and employs around
339,000 people.[1] It is one of the main shareholders of LOreal,
the worlds largest cosmetics company.[8]
Nestl was formed in 1905 by the merger of the Anglo-Swiss Milk
Company, established in 1866 by brothers George Page and
Charles Page, and Farine Lacte Henri Nestl, founded in 1866
by Henri Nestl (born Heinrich Nestle). The company grew
significantly during the First World War and again following the
Second World War, expanding its offerings beyond its
early condensed milk and infant formula products. The company
has made a number of corporate acquisitions, includingCrosse &
Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree
Mackintosh in 1988, and Gerber in 2007.
Nestl has a primary listing on the SIX Swiss Exchange and is a
constituent of the Swiss Market Index. It has a secondary listing
on Euronext. In 2011, Nestl was listed No. 1 in the Fortune Global
500 as the worlds most profitable corporation.[9]With a market
capitalisation of US$239.6 billion, Nestl ranked No. 11 in the FT
Global 500 2014.
[10]

Nestl's relationship with India dates back to 1912, when it began

trading as The Nestl Anglo-Swiss Condensed Milk Company
(Export) Limited, importing and selling finished products in the
Indian market. After India's independence in 1947, the economic
policies of the Indian Government emphasized the need for local
production. Nestl responded to India's aspirations by forming a
company in India and set up its first factory in 1961 at Moga,
Punjab, where the Government wanted Nestl to develop the milk
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economy. Progress in Moga required the introduction of Nestl's

Agricultural Services to educate advice and help the farmer in a
variety of aspects. From increasing the milk yield of their cows
through improved dairy farming methods, to irrigation, scientific
crop management practices and helping with the procurement of
bank loans. Nestl set up milk collection centres that would not only
ensure prompt collection and pay fair prices, but also instill
amongst the community, a confidence in the dairy business.
Progress involved the creation of prosperity on an on-going and
sustainable basis that has resulted in not just the transformation of
Moga into a prosperous and vibrant milk district today, but a
thriving hub of industrial activity, as well. Nestl has been a partner
in India's growth for over nine decades now and has built a very
special relationship of trust and commitment with the people of
India. The Company's activities in India have facilitated direct and
indirect employment and provides livelihood to about one million
people including farmers, suppliers of packaging materials, services
and other goods. The Company continuously focuses its efforts to
better understand the changing lifestyles of India and anticipate
consumer needs in order to provide Taste, Nutrition, Health and
Wellness through its product offerings. The culture of innovation
and renovation within the Company and access to the Nestl
Group's proprietary technology/Brands expertise and the extensive
centralized Research and Development facilities gives it a distinct
advantage in these efforts. It helps the Company to create value
that can be sustained over the long term by offering consumers a
wide variety of high quality, safe food products at affordable prices.
Nestl India manufactures products of truly international quality
under internationally famous brand names such as NESCAF,
MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and
in recent years the Company has also introduced products of daily
consumption and use such as NESTL Milk, NESTL SLIM Milk,
NESTL Dahi and NESTL Jeera Raita. Nestl India is a responsible
organisation and facilitates initiatives that help to improve the
quality of life in the communities where it operates. After more than
a century-old association with the country, today, Nestl India has
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presence across India with 8 manufacturing facilities and 4 branch

offices. Nestl India set up its first manufacturing facility at Moga
(Punjab) in 1961 followed by its manufacturing facilities at Choladi
(Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989; Samalkha
(Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997,
respectively; and Pantnagar (Uttarakhand), in 2006. In 2012, Nestle
India set up its 8th manufacturing facility at Tahliwal (Himachal
Pradesh). The 4 Branch Offices located at Delhi, Mumbai, Chennai
and Kolkata help facilitate the sales and marketing activities. The
Nestl Indias Head Office is located in Gurgaon, Haryana. Research
and Development (R&D) in India is part of Nestl S.A.s global R&D
network and supports all markets worldwide with new product
development and manufacturing excellence for Noodles. It is also a
Centre of expertise for local Indian cuisine within the Nestl R&D
network and offers assistance to Culinary, Confectionery, Nutrition
and Dairy products in the South Asia Region (SAR). Better nutrition
in the region is a perpetual challenge. Its meaning changes with the
stage of development, the degree of social awareness, and
scientific advancement. The new Nestl R&D facility in India will
help develop great tasting food solutions that are relevant for
consumers in the South Asia Region, creating products that take the
promise of taste and health to a broader economic and social
section than ever before. It will also strengthen Nestls position as
the leader in Nutrition, Health and Wellness in the emerging
markets. Nestl India has always had Research and Development
support from the Nestl R&D network across the world. Now, with
the new R&D Centre in Manesar, Nestl South Asia.
Region will benefit from a greater regional consumer focus. Having
an R&D Centre in India also brings Research and Development
closer to Nestl India businesses, and reflects the Nestl spirit of
R&D-Business partnership towards developing winning concepts,
suited to the local consumer. It will in turn help Nestl R&D to bring
out strong local concepts that are in accordance with the Nestl
Group ambition to provide affordable Nutrition, Health and
Wellness. Ultimately, these concepts will not just be relevant for
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emerging markets like India, but could be transferred to Nestl

worldwide.

CASE STUDIES
NESCAF PLAN helping Indian coffee farmers
Baduvandra Laxhipathi Gowda is among the 176,040 proud Coffee
farmers associated with the NESCAF Plan operational across ten
countries. His farm, Morning Mist is located in Margodu Village, the
Coorg District of Karnataka on the foothills of the Western Ghats
where the NESCAF Plan was launched in 2012. The Western
Ghats, one of the eight hottest hot spots of biodiversity in the world
are home to shade grown eco-friendly coffee plantations. Mr.
Laxmipathi shares his association and experience with NESCAF
Plan, India. My name is Baduvandra Laxhipathi Gowda. Im 40
years old and Ive been in coffee farming for over 20 years. I live
with my wife, Vidhya, and our daughters Punarva, 7 years and
Monal, 3 years old. Ive been involved with the NESCAF Plan since
2012, when Nestl Agronomists came to my farm and explained
how the plan would benefit coffee farming communities. I also
encouraged other farmers to participate in this programme and
brought along 85 farmers for the Nestl Better Farming Practices
training sessions. We are all now a part of the NESCAF Plan.
Sustainable approach to coffee cultivation My farm is about six
hectares and produces around 2,500 kg/ hectare of Robusta coffee
annually. I also get additional income from the 600 pepper vines
that I have cultivated.

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Through NESCAF Plan, I learnt about a lot of sustainable practices

and I have started implementing them. I was able to get the soil of
my farm tested and now apply fertilizer based on this. I also learnt
about how I can better manage the plastic waste on the farm. I
have invested in a rain water harvesting facility with support from
Nestl after learning more about water and soil conservation. We
were also given training on improving the skills of farm labour and
implementing health and safety measures for them. By improving
post-harvest practices such as drying coffee on plastic sheets,
drying to optimum moisture levels and storing dried coffee in a
proper place, I have benefited with premiums for good quality
coffee over the market price. Community development The
NESCAF Plan has been very helpful in improving existing
cultivation practices, enhancing coffee quality and protecting our
environment. I feel fortunate to be associated with it as whenever I
need technical assistance or information, the NESCAF Plan team
make themselves available. I also like the transparent method of
quality based payment system followed in NESCAF Plan. I have
been able to better understand the quality of coffee produced in my
farm and the price it fetches. Now I also understand the importance
of maintaining the quality. Our day to day life in coffee cultivation is
affected by changes in climate and variation in coffee prices. But I
am hopeful that NESCAF Plan will improve my farm income in
coming years and help me to play a role in environmental
conservation through my efforts. NESCAF Plan in India: Facts and
figures Launched in 2012, with a focus on three Districts in the main
coffee growing regions: Coorg and Chikmagalur in Karnataka and
Waynad in Kerala Total number of farmers trained - 1227 Global
Partners 4C Association

Village Women Dairy Development Programme

Acknowledging dairy farming as one of the substantial contributing
factors to rural development, Nestl India has been working with
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local dairy farmers since 1961. This successful long term

relationship is based upon the foundation of trust that the Company
has built with farmers by closely working with them through its
philosophy of Creating Shared Value. Today, we work with around
100,000 milk farmers collecting about 300 million kilograms of
quality milk every year.
Our Agri services team, including agronomists and veterinarians,
engage people at the farm level to provide training and technical
assistance to farmers to improve quality and productivity of milk
while developing sustainable farming practices at the same time.
While engaging with rural communities, we recognised that village
women are the primary caretakers of cattle and play a significant
role in dairy farming.
As a result, the Village Woman Dairy Development (VWDD)
Programme - an initiative focusing on empowering village women
engaged in dairy farming was formally launched in 2006. The
objective of the programme is to empower women dairy farmers to
improve quality and productivity of milk. Through education we aim
to harness their potential by building an entrepreneurial spirit in
village women.
To date, the programme has reached to over 58,600 village women
across the States of Punjab, Haryana and Rajasthan. The
programme has positively impacted lives of women dairy farmers
and enhanced their understanding on how to adopt sustainable
dairy farming practices.

CONCLUSION
Liberalisation has paved the way for the growth of MNCs in
different countries. It should not be that MNCs are not simply
agents of exploitation but they also act as agents of development
Page | 29

by helping the host countries to increase domestic investment and

employment generation, boost exports, transfer technology and
accelerate economic growth.
What is needed is to have a proper code of conduct for MNCs and
an effective competition policy and law in the host countries.
Multinational companies are like double-edged sword. The sword
can harm if not handled properly. Similarly the Multinational
companies have their own pros and cons.
The extent of technology and management of know-how transfer
by the MNCs depend to a large extent on their corporate strategy;
for example, firms desiring to have a longer-term relationship with
the suppliers (rather than those simply using the host country as a
marketing/export base) will be more inclined to effect transfer
technology. As pointed out in the World Investment Report, 2000,
MNCs may restrict the access of particular affiliates to technology in
order to minimize inter-affiliate competition.
It is noted that MNCs are more likely to licence older technologies
from which they have already derived significant rents than newer
technologies on which there are still relying for market leadership.
Further, they may hold back the upgrading of the affiliate
technology or invest insufficiently in host- country training and R&D
in accordance with their global corporate strategies. Therefore,
arguing that FDI inflows and economic liberalization automatically
facilitates technology transfer is being extremely nave.

BIBLIOGRAPHY

http://www.investopedia.com/terms/m/multinationalcorporatio
n.asp
http://www.answers.com/Q/What_is_the_role_of_MNC_in_India

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 http://theglobaljournals.com/ijsr/file.php?
val=October_2013_1380979753_205f5_154 .pdf
http://www.yourarticlelibrary.com/company/multinationalcorporations-of-india- characteristics-growth-andcriticisms/23462/
Economics of Global Trade and Finance Manan Prakashan
Johnson and Mascarenhas
http://en.wikipedia.org/wiki/Multinational_corporation modified on 7 February 2015
http://business.mapsofindia.com/indiacompany/multinational.html
http://www.nestle.in/aboutus/allaboutnestl%C3%A9
http://www.nestle.in/csv/case-studies
http://www.nestle.in/csv/case

studies/coffee http://www.nestle.in/csv/casestudies/villagewomendairy

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