Growth of MNCs

The MNCs share in global investment, production, employment and trade has assumed considerable proportions.

According to the UN, there are 63,000 MNCs with 6,90,000 affiliates all over the globe with 2,40,000 in China and only 1400 in India. The US was the forerunner in giving births to MNCs. Today, biggest MNC’s are Japanese. T

He global liberalization wave, paved the path for faster expansion and growth of MNCs. The value added by the foreign affiliates of MNCs, as a percentage of global GDP grew from 5% in the 1980s to about 7% by the end of 90s. The MNCs control about a third of world output and the total sales of their foreign affiliates is almost equal to the GNP of all developing countries. The value of the annual sales of the largest manufacturing multinational General Motors, was about $178bn in 1996. The total sales of the 3 largest automobile firms of the world, namely, General Motors, Ford and Toyota is greater than the value of India’s GDP.

In terms of direct employment, the MNCs accounted for 73mn people worldwide and if indirect employment is considered, the figure approximates 150mn people. Over 350m people were employed by the foreign affiliates of MNCs in 1988.

A number of factors have contributed to the phenomenal growth of MNCs. Some of the important factors are as follows: –

1)    Expansion of market territories: –

Rapid economic growth in a number of countries resulting in rising GDPs and per capita incomes contributed to the growing standards of living. This in turn contributed to the continuous expansion of market territories. MNCs, both contributed to the expansion of market territories and also grew in size and spread as a result of expansion of market territories.

2)    Market superiorities: –

In many ways, MNCs have an edge over domestic firms, such as: –

a)     Availability of reliable and current data,

b)    MNCs enjoy market reputation,

c)     MNCs encounters relatively less problems and difficulties in marketing the products,

d)    MNCs adopt more effective advertising and sales promotion techniques, and

e)     MNCs enjoy faster transportation and adequate warehousing facilities

3)    Financial superiorities: –

      MNCs also enjoy a number of financial advantages over domestic firms. These are: –

a)     Availability of huge financial resources with the MNCs helps them to transform business environment and circumstances in their favor.

b)    MNCs can use the funds more effectively and economically on account of their activities in numerous countries.

c)     MNCs have easy access to international capital markets, and

d)    MNCs have easy assessed to international banks and financial institutions.

4)    Technological superiorities: –

MNCs are technologically prosperous on account of high and sustained spend on R&D. developing countries on account of their technological backwardness welcome MNCs to their countries because of the attendant benefits of technology transfer.