|Average quarterly attrition up at 4.7% for MNC R&D Centers-Jobs ...|
2 Jun 2010 ... Multi-national R&D Centers in India will continue to witness attrition during
the first and second quarter of 2010.
http://economictimes.indiatimes.com/articleshow/6003725.cms- 55k- -Cached- Similar Pages
The Group of 20 nations has welcomed the strategies by member countries to phase out oil subsidies -- a bold move followed by India that only on June 25 raised petrol, diesel and cooking fuel prices.
"We welcome the work of Finance and Energy Ministers in delivering implementation strategies and time-frames, based on national circumstances, for the rationalization and phase out over the medium term of inefficient fossil fuel subsidies that encourage wasteful consumption...," the G20 Declaration said at the end of two-day Summit here.
Prime Minister Manmohan Singh attended the Summit. The government's price hike decision was based on recommendations of an expert group headed by former Planning Commission member Kirit Parikh. The group had called for freeing petrol and diesel prices from state control and raising LPG rates by Rs 100 per cylinder and kerosene by Rs 6 per litre.
However, the government settle for freeing only petrol prices, raising diesel by Rs 2 a litre, LPG (cooking gas) by Rs 35 a cylinder and kerosene by Rs 3 per litre.
Before the hike, the oil PSUs were projected to lose Rs 74,300 crore on selling petrol, diesel, domestic LPG and kerosene below cost. The diesel price hike would cut revenue loss by Rs 9,000 crore and cooking fuel price increase would help them garner Rs 5,000 crore.
A lower fuel subsidy bill may help the government reduce the fiscal deficit substantially. It was an estimated 6.9 per cent last year.
"We also encourage continued and full implementation of country specific strategies and will continue to review progress towards this commitment at upcoming summits," the G20 Declaration said.
With the Manmohan Singh government making it clear that there'll be no rollback in fuel prices, which saw a steep hike on Friday, efforts are on to marshal the resources of the combined Opposition and call a Bharat Bandh to tap popular disaffection over the issue.
Janata Dal (United) president Sharad Yadav, who's also the convenor of the NDA, has initiated efforts to rally the entire Opposition together so as to make the bandh call a success. Even though the date for the countrywide protests has not been finalised yet, it is likely that it'll be held in the first week of July.
Given the reluctance of ideologically-opposed parties such as BJP and the Left to be seen in each other's company, on a common platform, it's likely that parties ranged against the Congress-led UPA would offer their support to the bandh call, without coming together formally.
Mr Sharad Yadav, it is learnt, has already broached the issue with CPM general secretary Prakash Karat, his CPI counterpart A B Bardhan, Samajwadi Party supremo Mulayam Singh Yadav, TDP president N Chandrababu Naidu, BJP chief Nitin Gadkari and INLD boss Om Prakash Chautala, and is said to have succeeded in enlisting their support to the cause.
The JD(U) leader is also expected to hold discussions with AIADMK supremo Jayalalithaa and Orissa chief minister Naveen Patnaik to secure their backing to the bandh call.
A similar exercise was kicked off by Mr Sharad Yadav during the budget session of Parliament. Soon after finance minister Pranab Mukherjee, while presenting the general budget, announced a hike in the prices of petrol and diesel, the JD(U) leader had led the entire Opposition in staging a walkout from the Lok Sabha in protest against the move.
Efforts were even then initiated to organise a Bharat Bandh jointly, but the endeavour came unstuck after government managers succeeded in breaking the opposition unity by luring Mr Mulayam Singh Yadav and RJD chief Lalu Prasad Yadav away.
BJP eventually held massive rally on its own in the Capital on April 23, while the Left parties too held a separate protest.
Doubts about the prospects of the entire Opposition closing ranks on the latest round of fuel price hike continue to lurk even now, and the Samajwadi Party and the RJD are once again being seen as "vulnerable'' parties.
The Left parties, it is learnt, have assured Mr Sharad Yadav of getting the Samajwadi Party on board. Mr Karat too is said to have spoken to Mr Mulayam Singh Yadav. The latter, in turn, has offered to speak to the other Yadav chieftain —Lalu Prasad.
"The UPA government has not only increased fuel prices, but has also decided to hand over the country to the market. The government is under a false impression that the opposition is divided and hence, it can do whatever it likes,'' Mr Sharad Yadav had said while speaking to newspersons here on Saturday.
"I request all opposition parties to come together to organise a nation-wide bandh and corner the government in Lok Sabha,'' the JD(U) leader said.
Deficit pledges made by Group of 20 leaders on Sunday won't provide a big boost for financial markets, with uncertainty about the strength of global economic recovery still the larger concern for investors.
Analysts said that while targets for debt and deficit ratios included in a communique issued by G20 leaders were a mild positive, they were skeptical about their implementation and warned markets are focused on broader issues right now.
"Any language that is going to address the deficit issue, even if it's tenuous at best, should be positive for the currency markets, positive for the risk trades because capital markets clearly want to see some sort of containment in spending," said Boris Schlossberg, director of currency research at GFT.
"It should be positive for the euro," he added.
But the New York-based analyst said the event generated few surprises overall and "the market is going to remain in a state of flux after this."
Investors may be relieved by agreement between U.S. President Barack Obama and British Prime Minister David Cameron on Saturday that there was nothing to be gained from damaging BP (BP.L). The energy giant's stock has taken a drubbing to a 14-year low, wiping out $100 billion in market value, since the Gulf of Mexico oil spill on April 20.
As they worked to put the global economy on a more stable footing, world leaders meeting in Toronto backed away from one-size-fits-all pledges.
Coming into the meeting, U.S. officials had urged that leaders not move too quickly to cut fiscal stimulus, while many European officials, alarmed by Greece's financial crisis, put more onus on austerity.
The group of developed and emerging nations said it would follow through on delivering existing stimulus plans, while highlighting the importance of properly phased plans to "deliver fiscal sustainability".
Specifically, it said the group would aim to at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.
"In terms of near-term deficit reduction, with no offsetting demand elsewhere, the global outlook is still vulnerable over the next year," said Mark Chandler, head of Canada fixed income and currency strategy at RBC Capital Markets.
While the broad theme of cutting deficits has been a well-worn topic, one of the key challenges is its implementation, which could ultimately put pressure on risk sentiment.
"It'll all be about timelines and whether the market actually buys into three years as being achievable," said Dean Popplewell, chief currency strategist at OANDA.
"I still believe that we'll be in the risk aversion trading strategies," he added. "It will certainly act negatively towards the euro in the short term. Basically it should be (U.S.) dollar positive and euro negative."
CAUTION MAIN WATCHWORD
The euro zone's debt crisis and the world's economic health have been underpinning global trading sentiment, with glimmers of hope sparking rallies, but caution was still the main watchword.
Funding issues in the euro zone are still an issue, as banks need to repay some 442 billion euros in one-year loans to the European Central Bank this week.
When Singh speaks, people listen: ObamaIANS
Shares in Reliance Communications rose as much as 6.4 percent on Monday after India's No.2 cellular carrier announced an agreement on Sunday
to offload its telecoms towers to GTL Infrastructure in a deal that a source said would decrease its debt by about $3.9 billion.
The combined operations would have an enterprise value of over $11 billion and would own more than 80,000 towers, with more than 125,000 tenancies from over 10 operators, Reliance Communications said on Sunday.
GTL Infrastructure shares were up more than 6 percent.
Exact terms were not disclosed, but the deal will result in Reliance Comm, controlled by billionaire Anil Ambani, reducing its debt by 180 billion rupees ($3.9 billion), a person with direct knowledge of the matter said.
Reliance Comm's debt before the deal stood at about 330 billion rupees, including the cost to finance its recent
third-generation (3G) spectrum licences.
Praising the statesmanship of Prime Minister Manmohan Singh and the rise of India, U.S. President Barack Obama on Sunday said he was "looking forward" and "excited" about visiting India with First Lady Michelle later this year.
Personally thanking Prime Minister Manmohan Singh and wife Gurcharan Kaur for their friendship, Mr. Obama also hoped his visit to India — scheduled for the early part of November — would be extremely productive for the two sides.
"It is a trip that I'm very much looking forward to," said Mr. Obama, before holding talks with Dr. Singh after the conclusion of the G20 Summit that also saw the convergence of views expressed by India and the U.S.
"We are also just excited because of the tremendous cultural, as well as political and social and economic examples, that India is providing the world and has in the past," said the U.S. president.
Mr. Obama, particularly, had a lot of praise for Dr. Singh.
"I can tell you that here at G20, when the prime minister speaks, people listen," he said, adding it was because of his deep knowledge of economic issues, the nuances of India's rise as a world power and its commitment towards global peace and prosperity.
The U.S. president also recalled that the State dinner hosted by him for Dr. Singh — the first for his presidency — was "wonderful" and that it had set the tone for India-U.S. ties that they had both termed as a strategic partnership.
"We want to make sure that in addition to government-to-government ties, we were initiating people-to-people ties," he said, adding emphasis also remained on how to get the businesses of the two side to work together.
Dr. Singh, on his part, also praised Mr. Obama no length and said it was because of him that the strategic partnership between India and the U.S. was getting a new thrust, meaning and endeavour.
"You are a role model for millions and millions of people all over the world," said the prime minister said of Mr. Obama, almost 30 years his junior. "Your life history is a history that inspires millions of people everywhere."
Dr. Singh said it was his privilege to enjoy Mr. Obama's friendship, and assured that he was waiting to welcome the US president and his family to India so that they could also see for themselves the transformations the nation was undergoing.
G20 nations for balanced approach to growth, fiscal deficit PTI
With the global economy on its way to recovery amid debt crisis in some European nations, the G20 countries on Sunday called for striking a balance between stimulus measures to sustain economic expansion and reducing fiscal deficit to tackle the mess of government finances.
In a declaration after the two-day meeting of the bloc here, the countries also put out a compromise on the different stands of the member nations on bank tax by leaving it to the member countries to levy it or not, which is India's position.
The bloc, considered better representative body than rich nations grouping of G8, resolved to continue with free international trade and refrain from protectionist measures.
"While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt. Strengthening the recovery is key," the declaration said.
To sustain recovery, there is a need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand, it added.
At the same time, it also noted,"...recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances."
Those countries with serious fiscal challenges need to accelerate the pace of consolidation, it added.
Advanced economies have committed to fiscal plans that will halve deficits by 2013 and stabilise or reduce government debt by 2016.
With India among other nations opposing global bank tax, the declaration said,"We recognised that there are a range of policy approaches... Some countries are pursuing a financial levy. Other countries are pursuing different approaches."
The declaration said the nations should have a prudential and supervisory norms for the financial sector.
It also said financial sector should make a fair and substantial contribution to the government interventions at the time of downturn. India's stand has been that prudent regulations also add to the cost of financial sectors and they could be considered their contribution.
"The G-20's highest priority is to safeguard and strengthen the recovery and lay the foundation for strong, sustainable and balanced growth, and strengthen our financial systems against risks," the statement said.
With the global economic crisis leading to the sharpest decline of trade in more than seventy years, G20 nations renewed for a further three years till the end of 2013 their commitment to refrain from raising or imposing barriers to international trade and investment.
The declaration did not refer to the flexibility in exchange rate policies in the context of China's recent announcements on Yuan.
Committing themselves to continue with coordinated actions to bolster economic growth, the G20 nations quoted IMF and World Bank estimate that if a more ambitious path of reforms is undertaken, global output would be higher by almost 4 trillion dollars, tens of millions of jobs would be created and more people would be lifted out of poverty.
Implementing Basel norms
Calling for prudential norms for financial sectors, the declaration said implementation of the Basel norms will raise the amount and improve the quality of capital.
"This will enable banks to withstand — without extraordinary government support — stresses of a magnitude associated with the recent financial crisis," the bloc said.
The nations said that agreement on new capital norms will be reached by the next G20 meeting in Seoul in November.
"We agreed that all members will adopt the new standards and these will be phased in over a time frame that is consistent with sustained recovery and limits market disruption, with the aim of implementation by end-2012..." the declaration said.
With many blaming relaxed norms for hedge funds and credit rating agencies for the global financial downturn, the G-20 nations agreed to a strong regulatory oversight of these funds and agencies and over-the-counter derivatives.
They also emphasised the importance of high quality global accounting standards and sound compensation policies for high ranking officials of the financial sector.
These nations said central banks monetary policies will continue to achieve price stability which would contribute to the recovery process.
Asserting that corruption threatens the integrity of markets, the bloc agree to set up a working group to make recommendations on how to fight this menace.
The bloc also talked of addressing the issue of tax havens, money laundering and terror financing.
"We are addressing non-cooperative jurisdictions, based on comprehensive, consistent and transparent assessment with respect to tax havens, the fight against money laundering and terrorist financing," the declaration said.
While endorsing the reforms being undertaken in the World Bank to shift 4.59 per cent voting power to developing countries, the G-20 nations resolved to carry out similar reforms in IMF.
The G20 nations also took note of the recent oil spill in the Gulf of Mexico and called for sharing best practices to protect the marine environment, prevent accidents related to offshore exploration.
The declaration did not refer to the foreign exchange policy of governments in the context of recent Chinese announcements on Yuan.
CPM urges Pawar to act against 'corrupt' Dow
28 Jun 2010, 0633 hrs IST,ET Bureau
NEW DELHI: Reminding the government of its assurance three years ago to act against Dow Chemicals in the wake of reports of bribing Indian officials for selling an insecticide, CPM has said that while the company had to pay fine in the US for indulging in "corrupt practices" in India, New Delhi is yet to take action.
In a letter to agriculture minister Sharad Pawar, CPM polit bureau member Brinda Karat recalled that the minister had promised a CBI inquiry in Rajya Sabha into the "corrupt practices" of Dow Chemical and demanded that if the report has been submitted it should be made public. "It is strange indeed that although Dow has had to pay a fine in the United States for corrupt practices indulged in within India, the Government of India has still not taken any action either against the Indian officials or more importantly the company itself," she said in the letter released on Sunday.
Ms Karat had made a special mention in the House in 2007 on the revelations made in the US Security Exchange where Dow Chemical had to pay a fine, according to US law for bribery to Indian officials and demanded criminal action against those involved and blacklisting of the company. Mr Pawar had agreed to institute a CBI inquiry.
"It is now three years since then. Has the CBI report been received? It is strange indeed that although Dow has had to pay a fine in the United States for corrupt practices indulged in within India, the Government of India has still not taken any action either against the Indian officials or more importantly the company itself," Ms Karat said.
She said the matter was important because it concerned the sale of an insecticide (chlopyriphos) which has been
banned in the US because of its harmful effects on children. She said that in India the Plant Protection Advisor constituted a committee which recommended that the use of the insecticide could continue though with strict monitoring and asked the government to spell out if it had put in place such monitoring. She also wanted to know from the government if it had collected the data as advised by the committee.
"In view of the corrupt practices revealed has the government considered a review of the entire process of recommendation that the insecticide could be used in India?" she asked. Ms Karat said that since there was prima facie evidence of corruption it was inexplicable why the ministry was not acting against those involved in bribery and corruption.
"A strong message must be sent to the company and others like it who bribe and corrupt willing Indian officials thus circumventing the rules and procedures which govern granting of licences to foreign companies to sell or manufacture products in India," she said.
Mr Pawar had assured action against Dow Chemicals, the company which took over Union Carbide, while replying to a BJP member. He said the incident had taken place in 1996-2001 and that preliminary inquiries showed that some officers were involved.
Govt deregulates petrol prices
http://economictimes.indiatimes.com/quickiearticleshow/6098103.cmsThe impact of an MNC in india...powerpoint
|International Journal of Indian Culture and Business Management |
| ||Issue: ||Volume 1, Number 1-2 / 2007 |
| ||Pages: ||136 - 150 |
| ||URL: ||Linking Options|
|The emergence of Indian multinationals in the new global order|
Niladri Das A1
A1 Department of Management Studies, Indian School of Mines, Dhanbad 826004, India
Economic integration across countries has created a global market for different types of products and services. It has given companies an access to the world's best resources cheap but talented labour, largest markets in terms of size, vast capital market, most advanced technologies and lowest-cost suppliers of inputs. Global companies find their origin not only in developed countries but also in emerging markets. Emerging markets in particular provide an invaluable springboard to companies to achieve global standards of competitiveness in their core activities at home, which are then leveraged internationally. This trend has been observed in India as well, which necessitated a study to review the key strategies of Indian companies, with a view to analyse their success in establishing a global footprint. This paper tries to highlight some major strategies employed by Indian companies in going abroad, particularly the pharmaceutical and auto companies, the need for creating a powerful brand India Inc. and suggest an innovative roadmap for all aspiring multinationals of South Asia.
INDUSTRY & ECONOMY
ECONOMY: Pranab not in favour of full stimulus exit for now
India is not looking at complete rollback or a full exit of its fiscal stimulus for now, the Finance Minister, Mr Pranab Mukherjee, ...
ECONOMY: UK's new Chancellor sets out his 'unavoidable' Budget
A new tax on bank assets, a freeze in payments to the Queen, and a hike in sales tax are hardly the trappings of an easy first budget for a young ...
INFRASTRUCTURE: SEZs migrating to other zones may face tax hurdles
CBDT must clarify tax treatment, say experts. The Commerce Ministry may have allowed SEZ units to migrate from one SEZ to another, but such units may face tax difficulties in the absence of specific guidance from tax authorities to cover such ...
AIR-CONDITIONERS & REFRIGERATORS: Summer heats up durables retail sales
Consumer durables retailers are reporting brisk sales owing to healthy summer sales and consumer finance companies renewing their offerings. Retailers in the category are also moving ahead with private labels to improve on ...
REAL ESTATE & CONSTRUCTION: Higher FSI rules may not mean more affordable housing
The State Government's order raising the Floor Space Index (FSI — the ratio of built-up area allowed to the size of the plot) in planning areas of nine corporations and areas abutting Chennai has led to expectations of prices of ...
POLLUTION: Damage-control: Does it add up?
It is a double-edged sword. When used carefully, you can carve and create. Else, it cuts and bleeds. The reference is to science, and new-technologies born of it. Creator of wealth when used well, but are we prepared when it cuts? Do we have ...
ECONOMY: Focus on real results than lofty promises, Canada tells G20
National objectives take precedence over total global cooperation. The Prime Minister of Canada, Mr Stephen Harper, who is hosting the forthcoming Summit of the G-20, believes that members should focus on getting past decisions implemented ...
ECONOMY: New Kerala PWD manual by Aug 15, 'tender excess' raj to end
The Kerala Finance Minister, Dr T.M. Thomas Isaac, who has recently been given the additional charge of Public Works Department (PWD), has said that 'tender excess' regime would not, henceforth, be permitted in the State under ...
EDUCATION: Accept global standards without sacrificing identity: Vice-President
The Vice-President, Mr Hamid Ansari, said educational institutions, including those of higher learning, should play a major role in the national effort of educating, grooming and nurturing ...
EVENTS: Countdown begins for Classical Tamil meet
Coimbatore gets a facelift, wears a festive look. The countdown has begun. With less than a day to go for the World Classical Tamil Conference to start, the district administration and government officials are practically on their toes to make ...
PHARMACEUTICALS: Access Index: Generic drug makers less transparent in developing nations
Generic drug-makers are less transparent about programmes to make medicines accessible to people in developing countries than originator companies in Europe and the US, says the second Access to Medicine ...
INFRASTRUCTURE: PM to lay stone for Tirupati airport, power gear plant
The Prime Minister, Dr. Manmohan Singh, is slated to lay the foundation stones for the NTPC-BHEL joint venture project to manufacture power equipment and the Tirupati international airport project at the temple town ...
PETROLEUM: Anil Ambani calls on Petroleum Minister
The corridors of Petroleum Ministry saw a lot of action on Tuesday with Mr Anil Ambani calling on the Petroleum Minister, Mr ...
EVENTS: Two-day workshop on export-import policy
The Confederation of Indian Industry (CII), Thoothukudi, is organising a two-day workshop on 'Export/Import Policy, Procedures and Documentation' on June 24 and 25 ...
EVENTS: 'Spiritual' protest
PETROLEUM: EGoM on petro pricing to meet on Friday
The Empowered Group of Ministers (EGoM) on petroleum product pricing led by the Finance Minister, Mr Pranab Mukherjee, will meet on Friday to decide on a possible freeing of petrol prices and a marginal hike ...
WATER: EoIs submitted for Mumbai wastewater treatment project
The contract for the Rs 1,500-crore water treatment project in Mumbai is likely to be awarded ...
ECONOMY: PM leaves for G20 meet; to discuss N-energy issues with Canada
Indian and Canadian economic and commercial cooperation in science and technology, health, agriculture and culture are likely to get a fresh impetus during the forthcoming meeting of Prime Ministers of the two countries when Dr Manmohan ...
REAL ESTATE & CONSTRUCTION: Institute of Architects deplores delays
The Indian Institute of Architects, Kerala Chapter, has protested against the delay in bringing out the amended Kerala Municipal Building Rules (KMBR) in spite of the understanding during discussions with all concerned by the State ...
ECONOMY: RBI should act on inflation, says Rangarajan
The RBI needs to take 'some' action to contain the rate of inflation which has reached an uncomfortable level, according to Dr C. Rangarajan, Chairman, Prime Minister's Economic Advisory Council. "The RBI needs to decide on ...
EDUCATION: New VC for BIT-Ranchi
Dr Ajay Chakrabarty has joined Birla Institute of Technology, Mesra, Ranchi, as Vice-Chancellor. Prior to this, Dr Chakrabarty, a Professor of Electronics & Communication Technology, was Dean, Continuing Education Programme, IIT, ...
Manmohan, Obama discuss terrorism, global economy
Toronto: Prime Minister Manmohan Singh and US President Barack Obama on Sunday held their second substantive dialogue in two months, during which they are understood to have discussed terrorism, global economy and other issues of mutual concern.
Prime Minister Manmohan Singh and US President Barack Obama on Sunday held their second substantive dialogue in two months, during which they are understood to have discussed terrorism, global economy and other issues of mutual concern.
Singh and Obama met on the sidelines of the G20 Summit here and are believed to have discussed the situation in the region.
This was the the first meeting between the two leaders after they met and reviewed bilateral ties on the sidelines of the Nuclear Security Summit in Washington in April. Ahead of the meeting, Obama told reporters: "Whenever the Indian Prime Minister speaks, the whole world listens to him."
During the meeting, the two leaders are also understood to have discussed about the global economic recovery and the G20 Summit. At the Summit, India and the US had cautioned against winding up of the government funding. The Prime Minister said a "very warm welcome" awaits Obama, the First Lady Michelle and their children when they visit India.
The Prime Minister said a "very warm welcome" awaits Obama, the First Lady Michelle and their children when they visit India.
He said during the visit, Obama can see for himself what India is trying to do, the difficulties of managing social and economic transformation in the framework of a democracy committed to the rule of law, committed to all fundamental human freedoms.
"I think that's what India seeks to achieve," he said. Obama also recalled the State Visit of Singh in November, when the two leaders decided to launch a Strategic Dialogue between the two countries.
"...we instituted what we termed a strategic partnership that involves all of our ministers at the highest levels working together to try to find ways to enhance commercial ties, security ties, coordination on critical multilateral issues like climate change," he said.
"And as a consequence, (External Affairs) Minister S M Krishna led a delegation to Washington to follow up, and working with Secretary (of State Hillary) Clinton, conducted some very high-level talks. I had the opportunity to participate in that dialogue," the US President said.
Obama said the two countries would continue to see how businesses of both countries can get to work together and then generating recommendations to "each of us in terms of how we can improve ties between the United States and India."
Source: The Indian Express
RCom-GTL tower merger creates $11-billion giant
Mumbai/New Delhi: Reliance Infratel, the tower arm of Anil Ambani-led Reliance Communications (RCom), today agreed to merge its 50,000-tower portfolio with GTL Infrastructure in a cash and stock deal, making it arguably one of the largest merger and acquisition transactions in India.
Business Standard was the first to report the likelihood of this transaction in the first week of June. Post the merger, the Manoj Tirodkar-led GTL will become the world's largest independent tower company with 82,500 towers and 125,000 tenancies from 10 operators. On top of this, there is a commitment of close to 75,000 tenancies from both RCom and Aircel over the next 10-15 years.
GTL had in January snapped up Aircel's 17,500-tower portfolio. Anil Ambani will retain a 25 per cent stake in the new entity, but entirely in his personal capacity as a strategic financial investor, a first in Reliance's history.
The combined enterprise value of Reliance Infratel and GTL Infra -- including debt and equity of the two -- is about $11 billion (Rs 50,000 crore). This includes Reliance Infratel's debt of an estimated Rs 18,000 crore. This debt will now get transferred to GTL, drastically reducing RCom's debt burden. The total debt in RCom, after the recent payment for the 3G spectrum licence, is Rs 33,000 crore.
There will be substantial value creation for the two million RCom shareholders as they will get free shares of GTL Infra. The swap ratio is being decided. "This is a classic example of a large conglomerate and a mid-size company with competence agreeing to work together in a partnership. There will be no compromise on our independence and neutrality of operations," a GTL spokesperson said.
Over the weekend, both parties agreed on a non-binding arrangement. Independent valuers and auditors will now take about two months to complete the exercise and will help finalise the swap ratio. A definitive agreement will be signed between the two parties after that. The closure of the transaction can be expected three months from then.
"Keeping in mind (that) there will be a court process in the merger, we expect the deal should conclude by November," said a person with direct knowledge of the process. People involved in the transaction told Business Standard that RCom towers, with an average tenancy of 1.7, will attract a per tower enterprise value of Rs 52-55 lakh.
This means a portfolio of 50,000 towers would translate to an enterprise value of Rs 26,000-27,500 crore for Reliance Infratel. This is a significant premium to the Aircel tower deal that saw an enterprise value of Rs 45 lakh per tower. Aircel's average tenancy was 1.2.
Reliance Infratel will retain its optic fibre cable (OFC) network and divest only the physical towers into the merged entity. People close to the development said the OFC network was independently valued at close to Rs 6,500 crore. Combining that would have become unwieldy and GTL also wanted to principally remain just a tower company.
Also, such a move would have meant the transfer of the network management centre, a critical nerve centre for all telecom companies. RCom, therefore, was unwilling to part with it.
Some people involved in the transaction said post the merger, Tirodkar's Global Group would emerge the single largest shareholder of the merged entity with 30-33 per cent holding. This will be routed through the current promoter group, which includes Global Holding Corporation and GTL Ltd.
The existing financial investors of Reliance Infratel since July 2007 -- George Soros, HSBC, Fortress Capital, New Silk, Galleon, DA Capital and GLG Capital -- may continue but their stake will get diluted.
GTL Infra, added the people quoted above, is likely to divest 10-15 per cent in favour of a strategic investor who will also bring in the needed equity. Talks are on with a clutch of strategic investors such as Saudi Telecom and global private equity investors such as Blackstone. But, such a deal is still some time away.
"What is interesting is that an Ambani has decided to divest his business and continue as a strategic financial investor. That's unprecedented in Reliance history and it also shows how the outlook towards businesses are changing," a Hong Kong-based telecom analyst with a leading foreign brokerage firm said on condition of anonymity.
* Reliance Infratel to merge its 50,000 telecom towers with GTL Infra
* Deal size: Rs 50,000 crore; via cash, stock
* Rel Infratel to retain optical fibre network
* Global Group to be the single largest shareholder of the merged entity
* Anil Ambani to invest in personal capacity, to have 24-26% stake
* New strategic partners may pick up 12-20% stake
* Management control with GTL, merged tower firm to remain neutral and independent
How will Tirodkar and GTL Infra raise the cash? Sources said the initial cash payout for GTL will be Rs 15,000 crore. This will principally be towards picking up the Rs 18,000-crore tab of Reliance Infratel's debt. GTL Infra has approached SBI Caps to help it in debt financing of close to Rs 12,000 crore. GTL Infra's promoter will also infuse Rs 3,000 crore equity. The operating cash flow of the merged entity will be used as collateral to raise the debt.
The balance amount will be made through share swaps between GTL Infra's promoter and existing shareholders of RCom. A 10-12 per cent stake dilution to a strategic investor in the short term will also assist GTL minimise the debt burden.
Standard Chartered was the exclusive financial advisor of GTL in this transaction. Post the deal, Global Group is expected to cross revenues of $2.5 billion, a total balance sheet of $12 billion and earnings before interest, taxes, depreciation and amortisation of $1.2 billion.
G-20 Summit: 10,000 protestors run riot
Toronto: Thousands of protesters rampaged through Canada's largest city and its financial capital, unleashing an unprecedented fury of violence as world leaders, including Indian Prime Minister Manmohan Singh, gathered here for the G-20 summit Saturday.
A march for Indigenous rights and against the G8 and G20 Summits, moves through the streets of Toronto. AP
Four police cruisers were set on fire, storefronts smashed, windowpanes sprayed with anti-police and anti-G-20 slogans as more than 10,000 protesters came out on the streets to oppose the summit attended by leaders of the world's most important nations.
The rioters even didn't spare the city police headquarters as riot-geared security forces at many places battled protesters by using teargas. Banks and major stores in and around Yonge Street bore the brunt of the rioting even as 19,000 security personnel had been deployed to keep peace during the summit.
Demonstrators protesting against the G-20 global economic summit sit on the street during a march in downtown Toronto, Canada. AP
Toronto's Eaton Centre - its most famous mall and tourist attraction in downtown - was shut down as store keepers and shoppers ran for safety. Policemen on bicycles could be seen urging people via loudspeakers to run for safety from the rioters.
The Hudson's Bay Company, which is the world's oldest registered corporate, was also vandalised as was Scotiabank where protesters sprayed 'Class War'. As violence increased and smoke from the burning vehicles and smashed stores thickened, underground trains, street cars and the major Gardiner Expressway stopped operations.
Demonstrators protesting against the G-20 global economic summit march on the streets of downtown Toronto, Canada, late Saturday. AP
According to police, more than 150 people were arrested for rioting. Toronto police chief Bill Blair said: "It is very regrettable that such vandalism and violence could not be prevented. I want to assure you that the persons responsible will be held accountable."
Calling the rioters "thugs", city mayor David Miller said: "We have thousands of people peacefully asserting their democratic right to speak up, and a small, relatively small small group, probably a few hundreds, people who seem mostly to be not from Toronto, commit deliberate acts violence."
Canadian police officers form a line to prevent demonstrators from near the fence that surrounds the G-20 global economic summit in downtown Toronto. AP
A spokesman for Prime Minister Stephen Harper, whose government has come under severe criticism for spending $1.2 billion on G-8/G-20 summits, said "the thugs that prompted violence earlier today represent in no way, shape or form the Canadian way of life".
US puts 6-yr-old of Indian origin in 'no fly' list
Washinton: The US homeland security department has put a six-year-old Indian origin American girl on the "no fly" list on the grounds of having suspected ties to terrorists.
Alyssa Thomas, 6, is under spotlight of the US government, and her family recently came to know that she is on the "no fly" list maintained by the US homeland security. During a recent trip from Cleveland to Minneapolis, the girl's father, Santhosh Thomas, and his wife were made aware of the listing.
The Thomas family was allowed to make their trip but they were told to contact the homeland security to clear up the matter. Alyssa received a letter from the government, notifying her that nothing will be changed and they won't confirm nor deny any information they have about her or someone else with the same name.
Later, Federal authorities acknowledged that Alyssa was indeed on the no-fly list. But citing `national security', the authorities refused to comment. They also did not give the names of others who are on this list and the reasons behind it. "The watch lists are an important layer of security to prevent individuals with known or suspected ties to terrorism from flying," an unnamed spokesman for the Transportation Security Administration told Fox News.
"She's been flying since she was two-months old, so that has not been an issue," Alyssa's dad said. "In fact, we had traveled to Mexico in February and there were no issues at that time."
That's likely because of a recent change by the Transportation Security Administration, which used to check only international passengers' names against the no-fly list, but since earlier this month has been checking domestic passengers as well.
The Thomases told CNN they plan on appealing Alyssa's status to the U.S. Department of Homeland Security again, and will be sure to leave plenty of extra time for check-in the next time they fly.
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Destination IndiaThe multinational companies in India represent a diversified portfolio of companies from different countries. Though the American companies - the majority of the MNC in India, account for about 37% of the turnover of the top 20 firms operating in India, but the scenario has changed a lot off late. More enterprises from European Union like Britain, France, Netherlands, Italy, Germany, Belgium and Finland have come to India or have outsourced their works to this country. Finnish mobile giant Nokia has their second largest base in this country. There are also MNCs like British Petroleum and Vodafone that represent Britain. India has a huge market for automobiles and hence a number of automobile giants have stepped in to this country to reap the market. One can easily find the showrooms of the multinational automobile companies like Fiat, Piaggio, and Ford Motors in India. French Heavy Engineering major Alstom and Pharma major Sanofi Aventis have also started their operations in this country. The later one is in fact one of the earliest entrants in the list of multinational companies in India, which is currently growing at a very enviable rate. There are also a number of oil companies and infrastructure builders from Middle East. Electronics giants like Samsung and LG Electronics from South Korea have already made a substantial impact on the Indian electronics market. Hyundai Motors has also done well in mid-segment car market in India.
Why are Multinational Companies in India?
There are a number of reasons why the multinational companies are coming down to India. India has got a huge market. It has also got one of the fastest growing economies in the world. Besides, the policy of the government towards FDI has also played a major role in attracting the multinational companies in India.
For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a result, there was lesser number of companies that showed interest in investing in Indian market. However, the scenario changed during the financial liberalization of the country, especially after 1991. Government, nowadays, makes continuous efforts to attract foreign investments by relaxing many of its policies. As a result, a number of multinational companies have shown interest in Indian market.
Following are the reasons why multinational companies consider India as a preferred destination for business:
- Huge market potential of the country
- FDI attractiveness
- Labor competitiveness
- Macro-economic stability
List of Multinational Companies in India
The list of multinational companies in India is ever-growing as a number of MNCs are coming down to this country now and then. Following are some of the major multinational companies operating their businesses in India:
MNCs and Corporates in India
The industrial setting in India has been going through a phenomenal phase due to its sudden recognition as the global business hub for MNCs and corporates alike. Most of the premier globally networked industrial enterprises and corporate identities are fastly locating their base in new age India for better growth prospect.
The corporate friendly industrial policy has attracted a large number of multi-national corporations (MNCs) in the last few years to India. These multinationals have come here to set up industries either themselves or through franchise as the upgraded industrial policy of India offers competitive advantages to foreign investors.
India offers certain unique opportunities for investment which makes it a favorable investment environment. Most of the reputed global companies prefer operating in India rather than in China because of Indians' expertise in the English language and lower wage costs. India has an enviable pool of high quality, talented professionals and the largest population of English speakers outside the US. These vital factors have attracted a large pool of foreign manufacturers to India, the world's most preferred manufacturing hub.
With the removal of restriction on entry, diversification and expansion of multinational corporations in the past decade, India has become a gateway for progressive investors. Foreign direct investment in India up to 100 per cent equity in a business venture is being allowed on a wide-range of products. In this extremely liberal investment atmosphere, the benefits for MNCs and corporates are very high.
India, the software super power, houses a large number of IT Parks, Business Centers and SEZs to offer an unparallel global corporate atmosphere to its investors in prominent cities such as Bangalore, Gurgaon, Noida, Hyderabad, Chennai, Chandigarh, Kolkata, Mumbai and Pune. These world class facilities make India the foremost choice for MNCs and Corporates.
Office-lease Trends in Tier II cities
As foreign investments in the IT and BPO sector keep flowing to India, there is a fair demand for office spaces which a chic international ambience. In Tier I cities like Delhi and Bangalore where developers have been catering to the demands for swanky office spaces the Tier II cities are no less comparable in design and quality.
And with FDI being relaxed in the construction sector, there is a healthy competition amongst developers for on quality and has brought inevitable acceleration
OK in construction activities. The concept of hard option where the first right to lease office space at a future time is given to an existing tenant is a major attraction for investors in The Tier I and II cities.
The cost advantages in the realty sector presently lies with the Tier II cities where the realty prices are less in comparison to the metros due to easy availability of land and the government's promotion of SEZs as more investors enter the market, the lease trends show an increase by 25% - 30% in Tier I & II cities over the next 3 years.
Foreign drug makers seek to dominate Indian market again
Multinational firms are seeking to make more acquisitions as part of this exercise, says Accenture's Rainey
Bangalore: As pressure mounts on the pharmaceutical industry to increase revenue, multinational companies (MNCs) are adopting various strategies to increase access to the Indian market, forcing it into a "back-to-the-future mode", according to global management consultancy and technology outsourcing firm Accenture.
Michael A. Rainey, global managing director of life sciences and a partner at the $21.58 billion (around Rs1 trillion) firm, was referring to a time when MNCs were dominant in the domestic market.
New strategies: Accenture's Michael A. Rainey sees consolidation in the Indian pharma indusrty. Hemant Mishra/Mint There will be more acquisitions such as the $3.7 billion purchase of Mumbai-based Piramal's healthcare solutions by US drug company Abbott Laboratories Ltd last month and "the industry will continue to consolidate", he said. While declining to name some of the large companies on the prowl in India, he said, "Some of the speculation is out there and that's appropriate."
Rainey, in Bangalore to celebrate "life sciences week" at Accenture India, is driving several innovative strategies to help clients, particularly global pharma, sell more effectively in India as well as other emerging markets. Accenture says it believes there's a whole new range of services, which can now be delivered offshore.
"Sales and marketing were traditionally not outsourced but we believe, with new technologies, we can deliver," said Rainey.
Towards that end, two of the new strategic areas of focus for the consulting firm are analytics and mobile technology; the former makes sense of large amounts of data arriving from diverse sources and the latter makes that data available to stakeholders in the field or in the hospital. Accenture believes this will bring about a churn in pharmaceutical sales and marketing, as its historical model has fallen apart with physicians globally finding little or no time to interact with sales representatives.
"Such innovation is needed not only in sales and marketing but even in distribution. A good amount of churn is required here... India has 60,000 distributors," said Sanjay Singh, associate director at the audit firm KPMG.
Accenture is also beefing up its resources to get into another new area—regulatory services outsourcing, something big pharma hasn't done so far but is preparing for.
But it's the Indian contract manufacturing industry that Rainey thinks is likely to gain the most, provided it makes the right investments and innovations. "There's immense excess capacity in manufacturing around the globe. It'll be interesting if MNCs work with Indian contract manufacturers, though the latter need to innovate to meet new demands as the industry moves from small molecule drugs to large molecule, biotechnology drugs." The small molecule business is chemistry-driven, whereas the large molecule drug is biology-centric.
How well the Indian contract manufacturers and service providers move up the chain remains to be seen, but big pharma is aggressively pursuing new strategies in India to differentiate itself from Indian generics-based companies.
"Many MNCs are recognizing that they are not just a products company. To their understanding of disease, they are now adding some services," Rainey said. Setting up a network of patients to build communities, creating a repository of new treatments and nutrition management are some of the services on offer. "Big companies are investing in wrap-around services and leveraging global scale, something an Indian company may not be able to invest in," he said.
Indian cloud computing market to grow 10-fold: Zinnov
By 2015, SaaS in India is likely to reach $650 million, while platform-as-a-service and infrastructure-as-a-service markets will cumulatively touch $434 million
E-governance projects will drive significant adoption of cloud computing across India
New Delhi, June 22
The market for cloud computing in India is expected to grow nearly ten times to $1,084 million by 2015 from the current $110 million, as large enterprises - banks, manufacturing and telecom companies – as well as SMBs look to drive IT efficiency with lower costs.
According to the latest report by consulting firm, Zinnov, the current domestic market for software-as-a-service (SaaS) is estimated to be $66 million, dominated by applications in the areas of collaboration, customer relationship management, enterprise resource planning and e-mail workloads.
The balance $44 million is platform-as-a-service (platform as subscription for writing applications) and infrastructure-as-a-service (infrastructure on pay-per-use model). "Indian SMBs lack budgets, want business improvement, lack management bandwidth required to manage internal IT and are looking for rapid growth in next few years. For all these, cloud computing is the answer," Mr Praveen Bhadada, Engagement Manager, Zinnov Management Consulting, said.
Giving segment-wise break-up of the market by 2015, Zinnov said that SaaS in India is likely to reach $650 million, while PaaS and IaaS markets will cumulatively touch $434 million.
Zinnov said that sectors such as BFSI, education, healthcare and retail will increasingly rely on cloud computing for a better reach. For instance, with healthcare expenditure increasing in the country, telemedicine, patient record management and hospital productivity will be the opportunity areas for cloud adoption.
Similarly, the retail market where an overwhelming majority of the players are the small 'mom and pop stores', the adoption of cloud-based applications (such as mobile-based CRM solutions) is likely to gather momentumAlso, Zinnov believes that e-governance projects will drive significant adoption of cloud computing, across India.
Already, MNCs and Indian vendors including the likes of Google, Microsoft, Salesforce.com, Webex and TCS are starting to sharpen their focus on the SaaS-based offering that cover a spectrum of IT needs of enterprises – mobile CRM, collaboration, e-mail and ERP. Also Indian start-ups- Sabrix and Impel - are leveraging cloud offerings to tap new customers.
However, while the flexibility with no upfront capital investment makes cloud offerings highly attractive for enterprises, issues related to data security, performance unpredictability and data lock-in are perceived as the key challenges for cloud in India, the report said.
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The men who 'framed' Bhopal tragedy for ever
"It is only in the night that the ghosts of the tragedy haunts you," says Raghu Rai.
An elderly survivor holds a poster as she waits for the verdict in the premises of Bhopal court in Bhopal, India, Monday, June 7, 2010. AP
If a picture is worth a thousand words, in the case of Bhopal, pictures are, perhaps, the only way to tell the entire story. Many photographers descended on Bhopal after December 3, 1984, but the work of Raghu Rai and Pablo Bartholomew define, for most people in India and the world, the unspeakable horrors of the 'worst industrial disaster ever'.
Their photograph of a lifeless infant, nothing but his face visible against the backdrop of a mass grave, has become the definitive image of Bhopal, used on posters and protest banners even today.
Interestingly, both Rai and Bartholomew shot similar images, but it was the latter's, in colour, that won the World Press Photo Award in 1984. Rai's photographs of the time and later, showing the effects of the gas on those who lived, were compiled into a book, Exposure: Portrait of a Corporate Crime. A nexhibition of these marked the 20th anniversary of the tragedy in 2004, and travelled over India, the US and Europe.
In this Dec. 5, 1984 file photo, two men carry children blinded by the Union Carbide chemical pesticide leak to a hospital in Bhopal, India.
In 1984, Rai, then 42, was already wellknown -- he'd been awarded the Padmashree for his Bangladesh photos in 1971 and in 1977 Henri Cartier-Bresson had nominated him to Magnum Photos, the premier photo agency. As the star photographer of news magazine India Today ,Rai got the news within hours.
"It was a strange night. We couldn't sleep with the incessant phone calls and coordinating to catch the morning flight." Bartholomew, then 29, was working as a freelancer and in Sultanpur, on his way to Amethi to cover the election campaign, when he saw TV footage of bodies in handcarts. Both were on the same early morning Delhi-Bhopal flight that was ferrying several journalists to the disaster city.
Battle-hardened as they were -- Rai had covered cyclones besides the war and Bartholomew had a particularly eventful 1983-84 photographing the Nellie Massacre, the Khalsa movement in Punjab and the anti-Sikh riots in Delhi -- Bhopal was akin to an assault. What struck Rai was "the silence of death everywhere", while for Bartholomew the abiding memory is of the "smell of death", the acrid odour of hair burning.
In this Friday, Nov. 20, 2009 photograph, a physiotherapist holds the leg of a seven year old child at a clinic run by a non governmental organization to cater to victims of the gas tragedy in Bhopal. AP
The Hamidia hospital was their first port of call. There were dead bodies everywhere, and Rai recalls "we were going mad photographing...I felt very bad, we were like vultures looking for dead bodies". Rai decided to visit the children's ward.
"[I thought] the condition of children would be more photogenic, more touching...When you have so much in front of you, any sensitive person will try to decide what is most important. Especially as a photographer and a journalist you choose." For Bartholomew, sentiment or aesthetics didn't come in -- "you have to keep some distance, like a surgeon doing a heart operation".
The mass cremations and burials yielded many powerful images. The Hindus piled on large pyres," recalls Rai, "several bodies on one " and Muslims in "three-tier graves -- a body, then some mud, another body, more mud and then another body -- there was no time".
People affected by gas leak at the Union Carbide pesticide plant in Bhopal, India, as seen in this Dec. 4, 1984 file photo. AP
Rai stayed three days that first time, and Bartholomew a fortnight, photographing the scale of the devastation -- the dead animals bloated on the roadside, the man carrying his dead wife, the lawyers talking to victims...They went back again, every year for awhile, Bartholomew unable to attend his brother's wedding because it coincided with the first anniversary of Bhopal.
"It's as if," he says, "I was locked into the situation." Both tried to find the identity of the dead child in the image, visiting the mass grave where they'd photographed him. They didn't succeed, but Rai came back with another searing image, of a man pointing to a shallow grave, where the mud had eroded, exposing a few bones -- the remains of his child.
Given their long and intense association with Bhopal, both are bitter not just about the recent Bhopal High Court judgement, but far more at the government's neglect of the victims. "They were treated badly in government hospitals...private doctors would exploit them, drugging them with all sorts of crap. Given the sordid situation, you question the country and what it stands for," says Bartholomew. "We are a nation of dead, dying, fatigued minds," concludes Rai.
Success of MNCs in India: Market research, product localization and advertising
Prof. Masanori Kondo, International Christian University
(This is the second part of a series of articles, excerpted from an article contributed by Prof. Kondo, the original Japanese version of which was published in the Weekly Economist of July 15, 2006)
Introduction of products based on comprehensive market surveys
When attempting to enter an emerging market like India, the goal is to gain exclusive market share (or gain a dominant percentage of the market by gaining control of management operations of local companies through M & A. By looking at the examples of investment taking place in India until now, companies that have decided to leave most of the management and operation decisions completely up to the local subsidiary have found it very difficult to gain exclusive market share, while firms that do things such as deal with government negotiations directly and choosing their local staff themselves have a tendency to find much greater success. Observations on failed foreign investment in India lead us to conclude that the vast majority of the problems are located in the joint venture partners.
Another reason for the success of Samsung and LG in India can be attributed to their success in making adaptations to meet the needs of Indian consumers with their latest products, even while in the early stages of entering the market.
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Japanese auto giant Toyota was also successful in this way by its focus on minivans (a segment with very little competition) which met the needs of large Indian families. This allowed Toyota to control the top share of automobiles in this area, and from there Toyota began to increase the variety of vehicles offered while carefully reading consumer response in order to gain the top spot in other consumer segments. While on the other hand, the now bankrupt Daewoo Motors used the same plan for investment which was supposed to be used in China, except for slight last minute modifications made for the Indian market. The disastrous result was the introduction of the wrong kinds of vehicles which led to Daewoo's failure.
In our study, a main topic investigated was why Japanese electronic devices and appliances failed to sell as well as their Korean counterparts. The study found that the most common problem was that aspects of Japanese products such as the size of refrigerators and air conditioners, sound quality of televisions and audio devices, and the features of mobile phones failed to meet the needs of Indian consumers. It was often said that, "While Korean products lacked the quality of Japanese products, the lower price of the Korean products allowed them to sell many more units in a developing market with many low income consumers." It seems Japanese companies failed to create a good balance between quality and price to make strong gains in market share.
Large scale advertisement campaigns
Next to creating products that meet the needs of Indian consumers, the second biggest factor for success is the implementation of aggressive and large scale advertisement campaigns. Since India's liberalization of the advertisement industry in 1991, it has ranked along with mass communication/media as one of India's highest level industries. LG and Samsung put forward a great deal of funding to implement an aggressive advertisement campaign that would appeal to Indians. The costs for these campaigns were carried by the corporate headquarters in Seoul, not by increasing the price for products in India. This strategy paid off great dividends for both LG and Samsung.
Recently, many Japanese companies have taken the position that since the movements toward free trade agreements in Asia are advancing, manufacturing in a country like Thailand removes the need to have local production in India. However, according to the interviews done by the Ministry study, many replies stated that it is not very unlikely for Japanese companies to satisfy Indian consumers by merely importing its products from other countries without enough marketing in India.
The relationship between the corporate office and its local subsidiary in India is also crucially important. In the instance of LG and Samsung, there was a great deal of support in various levels from the corporate office in order to aid the new Indian venture. Examples of this are the burden of advertisement campaign funding taken up by the corporate headquarters (as stated above), and the supply of inexpensive components and parts attained by price intervention from the corporate office in the home country. This continued until the local venture was able to evolve to take a greater command of its own operations. Another unique strategy undertaken by Korean firms was to provide the highest level of comfort to its expatriates living in India. Through the creation of "Korean Villages", special services such as Korean speaking maids who can cook Korean food were also dispatched from Korea to make life easier for its Korean expatriate employees. This allowed such employees to adapt easier to living in India and resulting in increased motivation and productivity.
Such support from the corporate headquarters was made possible by the decisive large scale commitment to the Indian market. This support was not limited just to the supply of funds, but a multi-headed strategy to develop the local venture into a profitable investment. Japanese companies are seen as falling behind their Korean rivals, as Samsung and LG have already begun to rotate their top management staff in their Indian operations.
Prof.Kondo, a well known specialist in Indian economics in Japan, is a member of Nihongo Bashi's Academic Advisory Board.
A multi-national corporation (MNC) is a business organisation which has its headquarters in one country but has operations in a range of different countries. There are numerous examples of such organisations, car manufacturers like Ford, Toyota, Honda and Volkswagen, oil companies like Shell, BP and Exxon Mobil, technology companies like Dell, Microsoft, Hewlett Packard and Canon and food and drink companies such as Coca Cola, Interbrew and McDonalds.
The following is a quote from the Ford Web site which highlights the idea perfectly:
|Ford has manufacturing operations in six continents - in Europe alone there are around thirty-five sites in nine separate countries. These include assembly plants, stamping plants, engine plants, and casting, forging and aluminium plants. |
Source: Ford Motors.
Dell and Microsoft - two businesses operating in the high tech industry and who are both good examples of multi-national companies. Copyright: Keran McKenzie and Sam Disegno, both from stock.xchng.
These firms, by their very nature, are large organisations. Their size means they often have considerable power and influence and as a result have come in for some criticism of their actions. One of the most famous of such cases was the problem faced by Nestlé in marketing its baby milk in Africa. Critics pointed out that Nestlé was pushing the product on people when it was likely to cause harm to babies. A code of conduct on marketing the product to countries in Africa was being ignored according to a study in the British Medical Journal in 2003. In addition, events like the Bhopal chemical explosion in 1984 has attracted much criticism and, sometimes, an assumption that MNCs are of necessity a 'bad' thing.
Nike - not always had the best of publicity about its manufacturing relationships with factories in less developed countries. Copyright: Simon Cataudo, from stock.xchng.
It is also assumed that MNCs tend to locate operations in poor countries only. This, of course, is not the case. Honda and Nissan have both invested heavily in production facilities in the UK but are Japanese companies. Many European countries provide a home for MNC operations of different sorts. It must also be remembered that many MNCs have interests in a country but not necessarily production facilities. Nike, for example, does not own factories that make training shoes and clothes. Instead, they make agreements with local producers to manufacture a particular range of products for them. This might bring different problems to light given that the immediate control of production is not in the hands of Nike. Of course, it could be argued that this does not absolve any corporation of any responsibility for the actions of the factories that they use to outsource production.
These notes will explore the advantages and disadvantages of MNCs. When answering questions on this area of a syllabus, it is important that you remember to avoid bringing in personal prejudice into the argument and look to try and find some evidence to support the points you are trying to make. In reality, the truth of the matter is likely to be somewhere in between the two extremes of whether MNCs are 'good' or 'bad'.
Why the drive to MNCs?
For many companies, the following might be some or all of the reasons to expand into different countries:
- Reduce transport and distribution costs
- Avoid trade barriers
- Meet different rules and regulations (avoid non-tariff barriers)
- Secure supplies of raw materials or markets
- Cost advantages - for example low labour costs
The advantages of MNCs
Economic Growth and Employment
The essence of a MNC is that they bring inward investment to countries that are not their home base. If they choose to expand by building production facilities they will be bringing in inward investment into the country. This investment is likely to provide a boost, not only to the local economy but also the national economy.
Building a new plant requires resources - land, labour and capital. Labour has to be found to help construct the plant and all the equipment that goes into it and some firm somewhere will be hired to build the machinery and equipment, provide the bricks, steel, cement, glass etc. that go into the building. If it is announced that Company X from Germany are to build a new distribution centre in the UK at a cost of £10 million, this effectively means that a whole host of firms will be getting additional work to the value of £10 million.
Let us assume that a firm manufactures and supplies cable for electrical work. To this firm, the contract to supply the cabling for the new plant might be worth £350,000. If the plant was not built then the firm would not generate that order and not receive that work. For workers in the cabling plant, the order helps to maintain the flow of orders and can keep them in employment.
It can also be expected that the additional income will find its way through the local economy. If additional people are hired, they will receive an income which they spend. For existing workers, increased orders might equate to job security and they too might feel more confident in spending on new items - furniture, house extension, new white goods, holidays and so on. Inward investment therefore can act as a trigger to generating wealth in the local economy. If a MNC is attracted to an area then this might also lead to other smaller firms in the supply chain deciding to locate in those areas. Other firms providing services to these firms are then attracted to the area and so on.
Honda located a factory in Swindon, Wiltshire, a town known for its railway industry. Now the town is synonymous with car manufacturing. The Honda plant was an investment of over £1.3 billion. It is one of 120 Honda manufacturing facilities in 29 different countries. Copyright: Niels Laan, from stock.xchng.
This type of wealth generation has been witnessed in many UK regions. The siting of the car manufacturing plants in Sunderland, Swindon and Derby has done much to help those regions experience a boost to the local economy. In the case of Sunderland and Derby, the investment has partly helped to offset the decline in other industries that caused unemployment. For less developed countries, inward investment can again act as a catalyst for other forms of investment. The effects of the investment might be less dramatic but nevertheless, it can be something that is seen as essential for helping a country escape from poverty.
Skills, production techniques and improvements in the quality of human capital
It can be argued that MNCs bring with them new ideas and new techniques that can help to improve the quality of production and help boost the quality of human capital in the host country. Many will not only look to employ local labour but also provide them with training and new skills to help them improve productivity and efficiency.
In Sunderland, one of Europe's most productive car manufacturing plants, the workers have had to get used to different ways of working and different expectations than many might have been used to if working for other British firms. In some cases this can prove a challenge but in others it can lead to improvements in motivation and productivity. The skills that workers build up can then be passed on to other workers and this improves the supply of skilled labour in the area. This makes the area even more attractive to new industry as it helps to reduce the costs of training and skilling of workers.
Availability of quality goods and services in the host country:
In some cases, production in a host country may be primarily aimed at the export market. However, in other cases, the inward investment might have been made to gain access to the host country market to circumvent trade barriers. In the case of many Japanese car manufacturers the investment made into UK production has enabled them to get a foothold in the EU and to avoid tariff barriers. The UK has had access to high quality vehicles at cheaper prices and the competition this has created has also led to improvements in working practices, prices and quality in other related industries.
The location of businesses in different countries might mean the availability of high quality and relatively cheap products being available to the home market. Copyright: Jannes, from stock.xchng.
For the host country, there is a likelihood that the MNC will have to be subject to the tax regime in that country. As a result, many MNCs pay large sums in taxes to the host government. In less developed countries the problem might be that there is a large amount of corruption and bad governance and as a result MNCs might not contribute the tax revenue they could and even if they do it might not find its way through to the government itself.
Improvements in Infrastructure
In addition to the investment in a country in production or distribution facilities, a company might also invest in additional infrastructure facilities like road, rail, port and communications facilities. This can provide benefits for the whole country.
The Costs of Multinationals
The costs can be summarised in the points below - for the most part, the costs are closely linked to the benefits but it will depend on the extent of the benefits that might arise as a result of the activity of the MNC.
- Employment might not be as extensive as hoped - many jobs might go to skilled workers from other countries rather than to domestic workers.
- There might be a limit in the effect on the local economy - it will depend on how big the investment into the local economy actually is.
- Some MNCs may be 'footloose'; this means that they might locate in a country to gain the tax or grant advantages but then move away when these run out. As a result there might not be a long term benefit to the country.
- How many new jobs are created depends on the type of investment. Investment into capital intensive production facilities might not bring as many jobs to an area as hoped.
- The size and power of multinationals can be used, it is argued, to exploit weak or corrupt governments to get better deals for the MNC. Mittal, for example, a major steel producer, negotiated a $900 million deal to secure rights to mine iron ore in Liberia. The government that negotiated the deal was not elected. When a new, elected government came to power, they re-negotiated the deal and took the investment to well over $1 billion.
- Pollution and environmental damage. Some countries may have less rigorous regulatory authorities that monitor the environmental impact of MNC activities. This can cause long term problems. In India, Coca-Cola has been accused of using up water supplies in its bottling plant in Kerala in Southern India and also of dumping waste products onto land and claiming it was useful as fertiliser when it appeared to have no such beneficial properties.
Production can cause problems - in any country - but in some countries the rules may be less rigorously enforced. Copyright: Sean Carpenter, from stock.xchng.
- De-merit goods. Some companies might be producing goods that are not beneficial. Examples might include tobacco products and baby milk - mentioned earlier.
- Repatriation of profits. Profits might go back to the headquarters of the MNC rather than staying in the host country - the benefits, therefore, might not be as great.
| Back to Economics Notes Index | http://www.bized.co.uk/learn/economics/notes/multi.htm
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