What is a Global Company?
Global enterprises are large industrial organisations that expand their industrial and commercial operations across many nations through a network of subsidiaries. Their financial resources, cutting-edge technology, and goodwill put them in a position to exert significant control over the global economy. Instead of focusing on just one or two products, they try to spread their branches throughout the country. These companies have a broad range of operations, produce a wide range of goods, and have a global business strategy. Their subsidiaries are also known as Majority Owned Foreign Affiliates (MOFA). Coca-cola is an example of a global company.
Characteristics of Global Enterprises
These firms stand out from other private sector businesses, public sector businesses, and public sector enterprises because of their distinctive characteristics. These are the following:
Large Capital Resources: These businesses are distinguished by vast financial resources and the capacity to raise capital from a variety of sources. They have access to funds from a variety of sources. They may provide public equity shares, debentures, or bonds. Additionally, they are able to borrow money from domestic and foreign banks. They have credibility in the financial sector. Local banks and investors are also eager to invest in them. They can endure any situation due to their strong financial position.
Foreign Collaboration: Global corporations typically enter into agreements with Indian firms about the sale of technology, the manufacture of items, the usage of brand names for final products, and so on. These MNCs could work with businesses in both the public and private sectors. The agreement often has a number of restrictive conditions that deal with things like price, dividend payments, tight management by foreign technicians, technology transfer, and more. Large industrial enterprises that wanted to diversify and develop realised the benefits of working with MNCs in terms of patents, resources, foreign exchange, and other things. However, these international collaborations have resulted in the creation of monopolies and the concentration of power in the hands of a few.
Advanced Technology: These businesses use technologically advanced production techniques. They have the ability to meet quality norms and international standards. This helps the nation where these firms are based advance industrially since they can best use the raw materials and resources there. The technological advances offered by MNCs have led to computerisation and other breakthroughs.
Product Innovation: These businesses have effective research and development teams working out of their own R & D facilities. The major objective is to produce new items and redesign current ones in order to satisfy consumer requests while also making them appear modern and appealing.
Marketing Strategies: Multinational firms' heavy investment in marketing and advertising is one of their most successful survival techniques. This is how they are able to market and sell every brand and product they produce.
Expansion of Market Territory: When these businesses' network of activities grows beyond their current physical borders, they increase their market territory. They operate through their branches and subsidiaries in host nations, where they hold strong positions in a number of markets.
Centralised Control: They maintain administrative control over all branches and subsidiaries of their home nation, where they also have their headquarters. This control is only applicable to the parent company's wide policy framework. There is no disruption to routine activities.
Characteristics of Global Business
International Business Services
They are doing the following instead of managing outsourcing suppliers on their own and running several shared service centres-
Implementing services for international business.
Integrating governance, locations, and business procedures across all shared services.
Enterprise-wide outsourcing of activities.
A global enterprise owns and controls operations in two or more countries. For example, Coca-Cola, Samsung, Volkswagen, Unilever Ltd., etc.
Many global corporations operate in India, but the vast majority of them provide goods and services for the wealthy. The weaker members of society are least worried. In many situations, resources are being devoted to manufacturing dog food, while 26 million people in the country go to bed without eating. As a result, it would seem that manufacturing should be left in the hands of Indian businesses aware of Indian goals and appropriately deploying resources.
1. Discuss the benefits and drawbacks of multinational corporations in light of the aforementioned facts.
Some advantages of multinational corporations are:
The enormous scale of operations
Low production cost
New job opportunities in the established country.
However, there are disadvantages to MNCs. These are as follows:
It fails to consider national priorities
Significant capital expenditure
It results in the establishment of a monopoly.
It causes natural resource depletion.
It puts the country's sovereignty at risk.
MNCs have been crucial to the Indian economy for the past decades. They are distinguished by their enormous size, numerous goods, cutting-edge technology, marketing tactics, and global network of activities. Therefore, global firms are enormous industrial organisations that expand their activities in marketing and manufacturing through a network of subsidiaries in many nations. These corporations stand out from other private sectors, public sector, and public sector enterprises due to their unique characteristics, including (i) large capital resources, (ii) foreign collaboration, (iii) advanced technology, (iv) innovative products, (v) marketing strategies, (vi) market territory expansion, and (vii) centralised control.
FAQs on Global Enterprises: Manufacturers from Different Countries
1. What drives a corporation to expand globally?
Corporations expand their operations globally to get access to the new market and grow the clientele of the company. These are only possible by setting up their own enterprise in other countries. Establishing an enterprise in the new country would also help in achieving long-term plans and would help in getting access to the new market. To build an enterprise, the company need to consider the cost-effectiveness and the kind of market and products that are prevailing in the country.
2. Describe global corporations and their influence on a country's economic growth.
A company with its headquarters in one nation and its activities in other nations is referred to as a multinational corporation. This indicates that this kind of company will conduct business internationally. An MNC conducts its commercial activities in a number of other nations while maintaining its registered office in the so-called "home country" (called host countries).
Multinational corporations have a significant role to play in many emerging economies, including India.
Using idle resources
Instigation of Positive Competition
Development of Domestic Businesses
3. How can you differentiate between a global company and an MNC?
Global companies and MNCs do have their operations in multiple countries, but the manner in which they operate makes them different. A global company needs to be consistent in its product offering to different countries, while an MNC may change its product offering as per the demand of the customers in the market. An MNC adapts to the locality of culture, whereas global companies do not. An MNC functions independently at every location, while a global company has a coordinated function in different geographies across the world.