What is a Global Company?
Global enterprises are large industrial organisations that expand their industrial and commercial operations across many nations through a network of subsidiaries. Their financial resources, cutting-edge technology, and goodwill put them in a position to exert significant control over the global economy. Instead of focusing on just one or two products, they try to spread their branches throughout the country. These companies have a broad range of operations, produce a wide range of goods, and have a global business strategy. Their subsidiaries are also known as Majority Owned Foreign Affiliates (MOFA). Coca-cola is an example of a global company.
Characteristics of Global Enterprises
These firms stand out from other private sector businesses, public sector businesses, and public sector enterprises because of their distinctive characteristics. These are the following:
Large Capital Resources: These businesses are distinguished by vast financial resources and the capacity to raise capital from a variety of sources. They have access to funds from a variety of sources. They may provide public equity shares, debentures, or bonds. Additionally, they are able to borrow money from domestic and foreign banks. They have credibility in the financial sector. Local banks and investors are also eager to invest in them. They can endure any situation due to their strong financial position.
Foreign Collaboration: Global corporations typically enter into agreements with Indian firms about the sale of technology, the manufacture of items, the usage of brand names for final products, and so on. These MNCs could work with businesses in both the public and private sectors. The agreement often has a number of restrictive conditions that deal with things like price, dividend payments, tight management by foreign technicians, technology transfer, and more. Large industrial enterprises that wanted to diversify and develop realised the benefits of working with MNCs in terms of patents, resources, foreign exchange, and other things. However, these international collaborations have resulted in the creation of monopolies and the concentration of power in the hands of a few.
Advanced Technology: These businesses use technologically advanced production techniques. They have the ability to meet quality norms and international standards. This helps the nation where these firms are based advance industrially since they can best use the raw materials and resources there. The technological advances offered by MNCs have led to computerisation and other breakthroughs.
Product Innovation: These businesses have effective research and development teams working out of their own R & D facilities. The major objective is to produce new items and redesign current ones in order to satisfy consumer requests while also making them appear modern and appealing.
Marketing Strategies: Multinational firms' heavy investment in marketing and advertising is one of their most successful survival techniques. This is how they are able to market and sell every brand and product they produce.
Expansion of Market Territory: When these businesses' network of activities grows beyond their current physical borders, they increase their market territory. They operate through their branches and subsidiaries in host nations, where they hold strong positions in a number of markets.
Centralised Control: They maintain administrative control over all branches and subsidiaries of their home nation, where they also have their headquarters. This control is only applicable to the parent company's wide policy framework. There is no disruption to routine activities.
Characteristics of Global Business
International Business Services
They are doing the following instead of managing outsourcing suppliers on their own and running several shared service centres-
Implementing services for international business.
Integrating governance, locations, and business procedures across all shared services.
Enterprise-wide outsourcing of activities.
A global enterprise owns and controls operations in two or more countries. For example, Coca-Cola, Samsung, Volkswagen, Unilever Ltd., etc.
Case Study
Many global corporations operate in India, but the vast majority of them provide goods and services for the wealthy. The weaker members of society are least worried. In many situations, resources are being devoted to manufacturing dog food, while 26 million people in the country go to bed without eating. As a result, it would seem that manufacturing should be left in the hands of Indian businesses aware of Indian goals and appropriately deploying resources.
1. Discuss the benefits and drawbacks of multinational corporations in light of the aforementioned facts.
Some advantages of multinational corporations are:
The enormous scale of operations
Cutting-edge technology
Low production cost
New job opportunities in the established country.
However, there are disadvantages to MNCs. These are as follows:
It fails to consider national priorities
Significant capital expenditure
It results in the establishment of a monopoly.
It causes natural resource depletion.
It puts the country's sovereignty at risk.
Summary:
MNCs have been crucial to the Indian economy for the past decades. They are distinguished by their enormous size, numerous goods, cutting-edge technology, marketing tactics, and global network of activities. Therefore, global firms are enormous industrial organisations that expand their activities in marketing and manufacturing through a network of subsidiaries in many nations. These corporations stand out from other private sectors, public sector, and public sector enterprises due to their unique characteristics, including (i) large capital resources, (ii) foreign collaboration, (iii) advanced technology, (iv) innovative products, (v) marketing strategies, (vi) market territory expansion, and (vii) centralised control.
FAQs on Global Enterprises: Manufacturers from Around the World
1. What is a global enterprise in the context of business studies?
A global enterprise, often used interchangeably with a Multinational Corporation (MNC), is a large industrial organisation that operates in numerous countries. It maintains its headquarters in one home country while conducting business activities like production and sales through a network of branches, subsidiaries, or affiliates in various host countries.
2. What are the main characteristics of global enterprises?
Global enterprises are defined by several distinct features that facilitate their international operations. Key characteristics include:
Huge Capital Resources: They possess vast financial assets to fund large-scale operations and investments across the globe.
Advanced Technology: They use superior and capital-intensive technology to maintain a competitive edge and produce high-quality products.
International Operations: Their business activities, from sourcing raw materials to selling finished goods, are spread across multiple countries.
Centralised Control: While operations are global, strategic decisions and overall control are typically managed from the headquarters in the home country.
Product Innovation: They invest heavily in research and development to create innovative products and stay ahead in the market.
3. Why do companies choose to expand their operations globally?
Companies expand globally for several strategic reasons. Primarily, they aim to access new markets to grow their customer base and increase sales. Other significant drivers include the desire to benefit from lower production costs in other countries, gain access to specialised raw materials or talent, overcome trade barriers in foreign nations, and achieve greater economies of scale. Operating globally also enhances a company's brand image and prestige.
4. How do global enterprises positively influence a host country's economy?
Global enterprises can significantly boost a host country's economy by bringing in substantial foreign direct investment (FDI). This investment leads to the creation of employment opportunities, stimulates industrial growth, and introduces advanced technology and managerial skills. Furthermore, the presence of MNCs often encourages positive competition, forcing domestic companies to improve their own efficiency and product quality.
5. What is the strategic difference between a 'Multinational Corporation' (MNC) and a 'Global Company'?
While often used synonymously, there's a subtle strategic difference. A traditional MNC often decentralises its operations and adapts its products and marketing strategies to suit the local culture and demands of each host country (a multi-domestic approach). In contrast, a Global Company tends to be more centralised and offers a standardised product worldwide, focusing on efficiency and a unified brand image rather than local adaptation.
6. What are some major challenges that global enterprises face while operating internationally?
Operating on a global scale presents several complex challenges. These include navigating diverse and often conflicting political and legal systems, managing cultural and language differences, dealing with fluctuations in currency exchange rates, and coordinating complex international supply chains. Additionally, they may face high tariffs, import restrictions, and political instability in certain host countries.
7. How does a global enterprise decide between starting a joint venture versus a wholly-owned subsidiary in a new country?
The choice depends on the level of risk, control, and investment the enterprise is willing to undertake. A joint venture, which involves partnering with a local company, is often preferred when entering a complex or unfamiliar market. It allows the global enterprise to share costs and risks while gaining valuable local knowledge. A wholly-owned subsidiary offers complete control over operations and profits but involves a much higher investment and bears the full risk of failure.
8. Can you provide some examples of Indian companies that have become global enterprises?
Yes, several Indian companies have successfully expanded their operations globally. Prominent examples include Tata Group (with subsidiaries like Tata Motors, which owns Jaguar Land Rover), Infosys and Wipro (in IT services), and Reliance Industries. These companies have a significant presence in multiple countries through acquisitions, partnerships, and direct investments.
