Becoming a full fledged MNC in one’s own right is no doubt the most difficult and the most rewarding of all strategies of globalization. For Indian companies, efforts in this direction have obviously to start from scratch, as currently there is no Indian MNC in the international business scene. Nor is there any Indian brand that can claim international presence and recognition. Moreover, past efforts by Indian companies in acquiring MNC connections through joint ventures in India have seldom enabled them to become MNCs. The connections, in fact, benefited the MNCs more than the Indian partners. The Indian firms must travel the arduous route, which existing MNCs of the world have traveled in becoming global enterprises. They have to build the product clout, technology clout and brand clout, which are the essential conditions for playing the MNC game.
Characteristics features of a Global Firm:
The attributes of a global firm are:
When we consider these features, it is evident that it is not easy to become an MNC. Some quantum of exports alone cannot make a multinational. Globalization implies the ability to produce/procure in the most cost effective way possible, from any part of the world and the competence to market it globally.
Competing globally puts many non-conventional demands on the firms. Usually resources of a high order needed for global operations. Sometimes major investments may have to be made with zero or even negative ROI. Products may have to be heavily under priced in some national markets, seeking compensation from others. For example, Honda invested heavily in its motorcycle venture in Europe and waited for seven years for profits. It financed the effort from cash flows earned from home and the US markets. In several instance construction of production facilities in high labor cost countries may have to be undertaken, quite contrary to the common perception that MNCs always operate from low cost bases. It is staying power that is hallmark of an MNC.
No shortcut to the MNC mantle:
Indian companies must venture out on their own into world markets with select products and brands, putting up their own Production/ Marketing bases across countries. They can certainly take help they spot along their route, from local firms or MNCs as the case may be. But it is obvious that only those with relatively larger resources, larger capabilities and greater ambition can move in this direction.
No shortcut to the MNC Mantle:
Indian companies must venture out on their own into world markets wilt select products ad bands, putting up their own production/ marketing bases across countries. They can certainly take help they spot along their route, from local firms or MNCs as the case may be. But it is obvious that only with relatively larger resources larger capabilities and greater ambition can move in this direction.
In fact, manufacturing / marketing bases across world markets become essential for a global corporation for a number of reasons. In the case of most products, such dispersal of manufacturing facilities is essential for timely and cost-effective supply to the various world markets. Dispersal also is essential for manufacturing the products with market specific features and adaptations. In the context of increasing protectionism practiced by several countries/trade blocs establishment of production bases within the country/trade bloc will help overcome this hurdles. For example, the EU has emerged not only as the largest trade bloc in the world, but also and the market with unique protectionism. The context demand that foreign companies should set up production bases within the EU countries if they want to do business there. In fact, the main competitors of the EU, Japan and the US have already resorted to this route. They have bought up existing companies within the EU member states, so that any future protectionist regulations can be countered effectively. Same is the case with the Japanese market. The import laws of Japan are among the most stringent in the world. The best way get into the Japanese market is to set up plants within Japan. They do not raise much objection to other countries setting shop in Japan; their resistance is concentrated on the actual entry of goods into their country from outside.