M.COM-Sem-3, International Financial Management, Unit-2, Role of Multinational companies in Globalization, 15-05-2021

IDOL Institute of Distance and Online Learning ENHANCE YOUR QUALIFICATION, ADVANCE YOUR CAREER.

M.COM 2 All right are reserved with CU-IDOL International Financial MARKETING MANAGEMENT Management  Course Code: MCM612  Semester: 3  Unit: 2 www.cuidol.in Unit-1(MCM 605)

International Financial Management 33 COURSE OBJECTIVES COURSE OUTCOMES  Student would be able to understand the  To expose an introduction to international finance theory (e.g., exchange rate determinants, foreign exchange exposure, various aspect of IFM foreign exchange markets, interest rate parity).   To nurture the knowledge, capability, and skills necessary for making sound financial decisions for a multinational firm. Students will also be able to analyze the International financial Environment  To guide the students on how to run their own MNC and write Learners would be achieving the analytical a quality feasibility report.  skill in IFM www.cuidol.in Unit-1(MCMQ 61051) INSTITUTE OF DAISllTArNigChEt AaNreDrOesNeLrIvNeEdLwEAitRhNCINUG-IDOL

International Financial Management 43 UNIT OBJECTIVES UNIT INTRODUCTION  Role of Multinational companies in  Globalization and multinational Globalization firm-the importance   Rewards and risk of  international finance, goals for international financial  management  Exposure to international risk International monetary system www.cuidol.in Unit-1(MCMQ 61051) INSTITUTE OF DAISllTArNigChEt AaNreDrOesNeLrIvNeEdLwEAitRhNCINUG-IDOL

Globalization 5 Globalization is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange. Globalization has increased the production of goods and services. www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

What Is Globalization? 6 Globalization is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an interdependence of nations around the globe fostered through free trade. 1. Globalization is the spread of products, technology, information, and jobs across nations. 2. 3. Corporations in developed nations can gain a competitive edge through globalization. 4. Developing countries also benefit through globalization as they tend to be more cost-effective and therefore attract jobs. 5. The benefits of globalization have been questioned as the positive effects are not necessarily distributed www.cuidol.in equally. One clear result of globalization is that an economic downturn in one country can create a domino effect through its trade partners. Unit-1(MCM 605) All right are reserved with CU-IDOL

Advantages and Disadvantages of 7 Globalization Advantages • It allows developing countries to catch up to industrialized nations •  increased manufacturing • diversification, • economic expansion, • improvements in standards of living. • Outsourcing by companies • brings jobs and technology to developing countries, which help them to grow their economies • Globalization has advanced social justice  www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Advantages and Disadvantages of 8 Globalization Disadvantages • Spill Over effect of Crisis • Financial • Political • Environmental • Economical  • Globalization has become a polarizing issue • Globalization has also increased homogenization www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Multinational firm 9 The Term Multinational Corporation is used to identity an enterprise which controls assets, factories, mines, sales and other offices in two or more countries. The MNCs are oligopolistic in nature and large in size. Multinational company is the company which is registered in one country but conduct its business operations in multiple countries. According to UNO, multinational companies means, “Those enterprises which own or control production or service facilities outside the country in which they are based.\" www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Multinational firm 10 According to International Labour Organisation “The essential nature of the multinational enterprises lies in the fact that its managerial headquarters are located in one country, while the enterprise carries out operations in number of other countries”. According to N.H. Jacob, “A multinational corporation owns & manages its business in two or more countries.” www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Characteristics of Multinational Companies 11 (MNCs) • Large Size • Integrated activities • Huge Capital • Several forms: • Worldwide operations • Centralized Control: • International management: • Employment: • Mobility of resources: www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Classification of MNCs: 12 www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

MERITS/IMPORTANCE OF MULTINATIONAL COMPANIES (MNCS) 13 • Economic Development • Export Promotion • Technology Gap • Tax Revenues • Industrial Growth • Improvements in Infrastructure • Marketing Opportunities • Raising Standards • Work Culture • Job Creation www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

DEMERITS OF MULTINATIONAL COMPANIES (MNC’S) • Profit maximization 14 • Plunder of wealth • Useless transfer of technology • Undermining Local Cultures • Effect on Employment and Traditions • Misuse of weak Government • High tempo of show and advertisement • Repatriation of profits • Destruction of Local Industries www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Types of Multinational Enterprises 15  Raw Material Seekers  First type of MNEs  Exploit raw materials found overseas  Trading, mining and oil companies  Market Seekers  Post-WWII MNEs  Expand production and sales into foreign markets  Big name companies – IBM, McDonalds etc.  Cost Minimisers  More recent MNEs  Seek out lowest production cost countries  Manufacturing and service companies www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

Rewards and Risk of international 16 finance www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

SUMMARY 17 • The Term Multinational Corporation is used to identity an enterprise which controls assets, factories, mines, sales and other offices in two or more countries. • The Term Multinational Corporation is used to identity an enterprise which controls assets, factories, mines, sales and other offices in two or more countries. • On the basic functional criterion , the MNCs are grouped into the following : • Service MNCs • Manufacturing MNCs • Trading MNCs www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

REFERENCES 18 1. Apte, P.G., International Financial Management, Tata McGraw Hill Publishing Company Ltd.  2. Bekaert, G. and R.J. Hodrick, International Financial Management, Prentice Hall.  3. Eiteman, D.K., Stonehill, A.I. and Moffett, M.H., Multinational Business Finance, Pearson Education. www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL

19 THANK YOU For queries Email: [email protected] www.cuidol.in Unit-1(MCM 605) All right are reserved with CU-IDOL