Group members..

Sarthak Suyal- 001 Utpal Jana- 002 Sudeep Bhunya- 003 Shitij Bhola- 004 Astha Pandey- 005 Vineet Nankani- 006

Agenda..
Introduction to international business. Factors for international business Types of international corporations MNC- multinational corporations Pros and cons of MNC Structure of MNC Market entry strategy MNC core issues faced FDI Taxation Issue MNC- Indian Perspective

Introduction to international business.

Global business operations IB is interdisciplinary concept between economics, politics, sociology, marketing, management. Mainly dominated by various types of corporations. All commercial transactions are between parties of two or more countries

Factors for international business

Global Economy
Resources, markets and competition are worldwide in scope.

Globalization
The process of growing interdependence among elements of the global economy.

Global Sourcing
Firms purchase products and services from around the world for local use.

Types of international corporations..

Transnational corporations: because companies transcend or operate across national borders. UN favors this type of corporations. MNC: companies operate in multiple countries..eg: HSBC / citi group. MNE(multinational enterprise): some international giants are state owned enterprises, rather than corporation. Eg: ONGC Global corporations: these are those corporations which operate in more than 100 nations. Eg: NESTLE

MNC- multinational corporations

Enterprise that operates in more than one country in global economy. Play a vital role in international relations and globalization.

Requires Vast financial resources, managerial resources, marketing resources.

Pros..
Economic development Technology gap Industrial growth Marketing opportunities Work culture Research & development

Cons..
Problem of technology transfer acceptance Political interference Self interest Outflow of money Exploitation Investment

Structure of MNC
Chief Executive Officer
Production
Domestic Division Paint

Marketing
Domestic Division Tools
Japan

Finance
Domestic Division Furniture
Italy

Personnel
Domestic Division Hardware

International Division

Australia

Office Operations

Marketing

Government Relations

 Exporting - Local products are sold abroad. Done when either of

two motives are there. either surplus or sole motive of export. them in domestic markets. companys products.

Importing - The process of acquiring products abroad and selling Licensing - one firm pays a fee for rights to make or sell another Franchising - a firm pays a fee for rights to use another
companys name and operating methods.

Direct investment strategy

 Joint Venture
A firm operates in a foreign country through co-ownership with local parties.

Strategic Alliance
each partner hopes to achieve through cooperation things they couldnt do alone.

Foreign Subsidiary
a local operation completely owned by a foreign firm.

Core issues faced..

Protectionism
A call for tariffs and special treatment to protect domestic firms from foreign competition.

Corruption
Illegal practices to further ones business interests.

Currency Risk
The possible loss of profits because of fluctuating exchange rates

FDI..
It is direct investment way of entering into foreign market. Comparatively expensive. MNCs go for FDI because of transportation cost, market imperfections, competition, product life cycle, location advantages and to take advantages of markets of developing countries. FDI can be by merger or acquisition of an existing firm, by participating in the construction of a new firm, or by expanding existing subsidiaries.

Contd..
The main decision for FDI is whether it is more profitable to set up production in one form or another with a foreign subsidiary or to increase production at home and expand exports of the good. the most significant motivation for FDI is the avoidance of trade restrictions Another factor which may encourage FDI is the idea of risk diversification FDI policies of a nation becomes major issue for consideration by a MNC.

Taxation issues..
Need to pay taxes in both the nations..host as well as entering nation. Double taxation may increase the cost pattern. Need to obey tax rules with respect to TDS criteria for employees, excise duty for production, service tax for services provided, octroi for transportation, fines and penalties for delays of payment. Payment of custom duty for exports/imports. Getting IE code from government. In other words, business visa for operations. Clearance from various departments of respective product area of the operations of the corporation.

MNC Indian Perspective

MNCs in INDIA..

MNC success dimension in India..

Success for MNCs in India can be defined along 2 dimensions..

Capturing the Domestic Market Opportunity Leveraging Indias resource base to derive additional value for the corporation
R&D / Manufacturing / Sourcing / BPO

Source: Boston Consultancy Group report, 2011.

Many MNCs have managed to achieve success along both lines

Source: Boston Consultancy Group report, 2011.

Performance of MNCs An Analysis

Over the last few decades, most MNCs have shown typical characteristics in their growth plans in India
Prefers operations to be less assets intensive (basically less capital intensive) Preference of profitability over growth

Most businesses generate high ROCEs

Extremely cagey to enter non-Parent growth areas

Performance of MNCs Growth Vs Profitability

Growth - 5 year sales CAGR Pharmaceuticals Unichem 17% FDC 20% Glenmark 30% Paints Asian Paints 12% Berger 13% FMCG Marico 8% Agrochemicals United Phosphorus Wy eth Merck 2% 6% Profitability - 3 year Average EBITDA margins Pharmaceuticals Unichem 17% Wy eth FDC 23% Merck Glenmark 20% Paints Asian Paints 14% Goodlass Nerolac Berger 10% FMCG Marico 10% GSK Nestle Agrochemicals United Phosphorus 25% Monsanto Sy ngenta 21% 24%

Goodlass Nerolac

11%

12%

GSK Consumer Nestle Monsanto Syngenta

7% 9% 29% 10%

18% 19% 24% 18%

25%

Source: CMIE report, 2011.

Key Advantages of existence of MNCs in India .i.e what has India really gained?
Work culture for employees Systems Training and Learning Technology especially concept of working with better technologies Safety Health and Environmental Learnings Culture and Ethos Excellent training grounds for many entrepreneurs

The Indian MNCs the list is subjective and endless.

Paints Asian Paints Auto & Components Tata Motors, Bharat Forge Chemicals Tata Chemicals, United Phosphorus Metals Sterlite Industries, TISCO Packaging Essel Pharmaceuticals Ranbaxy, Wockhardt, Sun, DRL Oil & Gas ONGC Communication Bharti telecommunication & Rcom.

Key challenges that Indian MNC would face

Domestic market like India vis a vis International expansion Language Culture Autonomy to local managers how comfortable are we ? Styles of doing business Handling of potential liabilities related to Labour, IPR etc And Right time for Right Action.

Questions..