Global Business – Multinational Companies (MNC) in India
All you need to know about multinational companies (MNC) in India, courtesy of 3E Accounting.
Multinational companies have a long tradition of doing business across the world. They are considered empire builders that extend a company’s reach globally. One of the first multinational companies (MNC) in India and the world was the East India Company. Established in 1600, it was used to ply the trade for Britain throughout its colonies.
As of 2020, India has more than forty thousand MNCs, with approximately a quarter-million affiliates overseas. MNCs are popular as India has one of the fastest-growing economies and a significant market population. The Government has also recently eased its Foreign Direct Investment (FDI) regulations by allowing 100% foreign equity.
MNCs generate enormous revenue, employ hundreds of thousands, and contribute significantly to the economy. They are massive firms that originate from one country (the ‘home’ country) and set up businesses globally (the ‘host’ countries). An absolute majority of the Board of Directors and more than half the capital assets are from the home country.
Operations are usually set up in host countries that are still developing. Here, resources such as labour and materials are generally cheaper than in the home country. Developing countries will also have more flexible rules and regulations. In return, MNCs introduce modernization, contribute to infrastructure growth, stimulate the economy, provide employment, and reduce the technological gap.
The World is Your Oyster
MNCs are usually categorized based on where more than half their revenue is generated from, for example:
- Manufacturing: based on economies of scale and involved in producing goods such as Nestlé, Coca-Cola, etc.
- Service: based on economies of scope and usually found in IT, finance, transport such as Google, CITI Group, DHL, etc.
- Trading: involved in trading activities such as TATA Group, etc.
MNCs can have a strong presence in their home countries or form a global, centralized corporation. Local laws, environmental factors, and governance usually dictate the type of MNC entities. As such, they can be:
- Subsidiaries: host country enterprise where another entity owns more than half the interest. If less than half, then it is known as an Associate.
- Foreign Affiliates: foreign investors own interests in an enterprise and its management.
- Branches: an unincorporated entity that is wholly or jointly owned. It can be a Joint Venture (JV), an office, a piece of land, or even a ship or oil rig.
- Transnational Corporations: parent enterprise controls assets and a percentage of equity capital in companies located in host countries.
Some of the prominent MNCs with business entities in India include Microsoft, IBM, Apple Inc., Amazon, Reebok, Sony Corp., etc. Indian MNCs with foreign affiliates include Aditya Birla Group, Bajaj, Wipro, Ranbaxy Laboratories, Infosys, etc.
If having multinational companies (MNC) in India is part of your overall business plans, then engaging industry experts should be a priority. A proven track record as purveyors of business solutions sets 3E Accounting apart from the competition. 3E Accounting proffers exceptional professional service and customization for all your business needs.
Contact 3E Accounting today to speak to the leaders in industry best practices.