{"id":22826,"date":"2024-01-27T17:25:03","date_gmt":"2024-01-27T11:55:03","guid":{"rendered":"https:\/\/apboardsolutions.in\/?p=22826"},"modified":"2024-01-29T16:02:59","modified_gmt":"2024-01-29T10:32:59","slug":"ap-inter-1st-year-commerce-study-material-chapter-11","status":"publish","type":"post","link":"https:\/\/apboardsolutions.in\/ap-inter-1st-year-commerce-study-material-chapter-11\/","title":{"rendered":"AP Inter 1st Year Commerce Study Material Chapter 11 Multi National Corporations (MNCs)"},"content":{"rendered":"

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material<\/a> 11th Lesson Multi National Corporations (MNCs) Textbook Questions and Answers.<\/p>\n

AP Inter 1st Year Commerce Study Material 11th Lesson Multi National Corporations (MNCs)<\/h2>\n

Essay Answer Questions<\/span><\/p>\n

Question 1.
\nDefine MNC and explain its features.
\nAnswer:
\nThe word ‘Multinational’ consists of two words Multi and National. Multi means ‘many’ and national means “country or nation”. Therefore Multinational company means a company that operates in several countries.<\/p>\n

Multinational companies are also known as Transnational corporations or International corporations or Global corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with world wide goodwill.<\/p>\n

Definition :
\nAccording to International Labour Organisations (ILO) report –
\n“An enterprise whose managerial headquarters are located in one country, while it carries out operations in a number of other countries as well.”<\/p>\n

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”<\/p>\n

David E. Liliental, considering a wider parameter, defines the MNCs as “Corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” For brevity, MNC refers to the business enterprise operating in more than one nation.<\/p>\n

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.<\/p>\n

Characteristics of MNCs:
\na) Giant size :
\nThe sales and assets of MNCs are quite large. Hence they earn supernormal profits.<\/p>\n

b) Global operations :
\nMNCs carry production and marketing operations in different countries of the world. They possess all the infrastructural facilities.<\/p>\n

c) Centralized control :
\nMNC has its headquarters in the home country. It exercises control over all branches and subsidiaries.<\/p>\n

d) Dominant position and status :
\nMNCs carry on operations in bulk and cover many people. Hence they control the market and enjoy a dominant position and status in all operated countries.<\/p>\n

e) Sophisticated technology :
\nGenerally MNCs had advance technology so as to produce quality goods and services to the consumers.<\/p>\n

f) Professional management:
\nMNCs employ professional trained managers to integrate and manage world wide operations to maximize profits.<\/p>\n

g) International research and development :
\nMNCs internationalize their research and development operations in order to caputre the market of the host countries.<\/p>\n

h) Easy entry :
\nMNCs can enter into any country easily with their huge capital, technology, and managerial skills.<\/p>\n

i) Higher revenues :
\nMNCs generate huge revenues with their large size sales and benefits of large scale economies<\/p>\n

\"AP<\/p>\n

Question 2.
\nDefine MNC and explain the advantages of MNCs.
\nAnswer:
\nThe word Multinational consists of two words Multi and National. Mutli means many and national means “nations or countries”. Therefore Multinational company means a company that operates in several countries.<\/p>\n

Multinational companies are also known as Transnational Corporations or International Corporations-or Global Corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with worldwide goodwill.<\/p>\n

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”<\/p>\n

David E. Liliental, considering a wider parameter, defines the MNCs as.”Corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” For brevity, MNC refers to the business enterprise operating in more than one nation.<\/p>\n

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.<\/p>\n

Advantages to Host Countries:
\n1) Provide Capital :
\nThe MNCs provide required capital for the development of industries in under developing countries. The direct foreign investment is quite useful to the developing countries.<\/p>\n

2) Transfer of Technology:
\nMNCs serve as vehicles for transfer of advanced technology to the developing countries.<\/p>\n

3) Generate Employment :
\nMNCs create employment in various cadres and pay attractive salaries in the host countries.<\/p>\n

4) Foreign Exchange :
\nMNCs enable the host countries to increase their exports and reduce the imports. It improves the position of balance of payments.<\/p>\n

5) Managerial Revolution :
\nMNCs help to professionalise management in host countries. They employ modern management techniques and trained manager.<\/p>\n

6) Break Monopoly :
\nMNCs encourage healthy competition and break domestic monopolies.<\/p>\n

7) Growth of Domestic Business Firms:
\nMNCs encourage domestic suppliers, ancillary units, bankers, and other institutions to expand their activites.<\/p>\n

8) Innovation :
\nMNCs bring out innovation in their production and distribution activities which are required to provide goods and services to needs of the consumers of the host country.<\/p>\n

9) Better Standard of Living :
\nMNCs help to improve standard of living in host countries by providing superior products and services at a reasonable rate.<\/p>\n

10) Improves Public Relations among Nations :
\nThey encourage international brotherhood through international business.<\/p>\n

Advantages to Home Countries :
\n1) Availability of resources:
\nMNCs procure the land, labour, materials at cheap rates and can supply goods and services at reasonable rates.<\/p>\n

2) Develop exports :
\nMNCs encourage the export of several products. This will imporve their foreign exchange earnings.<\/p>\n

3) Generate income :
\nThey can earn huge income from dividends, licenising fees, royalty and profits from their operations. This will improve the home country’s income.<\/p>\n

4) Provides employment:
\nMNCs provide employment to the people of home country, as managers, technicians and other staff members.<\/p>\n

5) Make use expertise :
\nThe MNCs make use the latest technical knowledge and expertise of managers of different countries to run their business.<\/p>\n

Question 3.
\nDefine MNC and explain the limitations of MNCs.
\nAnswer:
\nThe word Multinational consists of two words Multi and National. Mutli means many and national means “nations or countries”. Therefore Multinational company means a company that operates in several countries.<\/p>\n

Multinational companies are also known as Transnational Corporations or International Corporations or Globed Corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with worldwide goodwill.<\/p>\n

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”<\/p>\n

David E. Liliental, considering a wider parameter, defines the MNCs as “Corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” For brevity, MNC refers to the business enterprise operating in more than one nation.<\/p>\n

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.<\/p>\n

Disadvantages of MNCs:
\n1) Monopolize the markets :
\nMNC may join hands with big business units in host country to monopolize the markets. This ultimately leads to concentration of economic power.<\/p>\n

2) Disregard host countries’ priorities :
\nMNCs invest only in porfitable business and ignore priorties set by the host countries. This results in regional backwardness in the host country.<\/p>\n

3) Imbalance in the foreign exchange remittances :
\nMNCs and their subsidiaries collect huge amounts in the form of dividend. This creates an imbalance in the foreign exchange remittances.<\/p>\n

4) Transfer of outdated technology :
\nThe MNCs transfer the outdated technology, which is unsuitable and absolute by charging higher rates.<\/p>\n

5) Impose restrictions :
\nMNCs try to impose restrictions with host countries related to non transfer of technical knowlege, determination of price, etc. to discourage the exports.<\/p>\n

6) Threat to sovereignty :
\nMNCs may interfere in the political affairs of the country and try to create internal disturbances.<\/p>\n

7) Spread of foreign culture :
\nMNCs cause damage to the cultural values of the host countries. They spread the foreign culture and change the attitudes, desires and fashions of the people.<\/p>\n

8) Depletion of natural resources:
\nMNCs cause rapid depletion of some of the natural resources in host countries.<\/p>\n

9) Retard growth of employment :
\nMNCs try to provide employment to their own nations. This bias attitude of the MNCs may lead to unemployment in the host country.<\/p>\n

10) Business strategies and practices :
\nMNCs dump harmful products, give deceptive advertisements attract the consumers to purchase outdated and unwanted goods.<\/p>\n

\"AP<\/p>\n

Question 4.
\nWhat is globalisation and explain the necessity of Globalisation?
\nAnswer:
\nGlobalisation refers to the increasing integration of markets (exchange) and production, to include the mobility of resources (capital, labour, ‘organisation and knowledge\u2019).<\/p>\n

The world is moving away from self-contained national economies toward an interdependent, integrated global economic system. Globalisation refers to the shift toward a more integrated and interdependent world economy.<\/p>\n

Globalization has two facets :<\/p>\n

    \n
  1. The globalization of markets<\/li>\n
  2. The globalization of production<\/li>\n<\/ol>\n

    1) Globalization of Markets:<\/p>\n