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Impact of MNCís on Indian Economy -
January 23rd, 2009
This project gives brief information on impact of multinational corporations in India. Information on FDI of India, who are the shining multinational corporation of India? How MNCs has affected our Indian economy. This project gives us detail on the imprint of multinationals on Indian industrial sector such as automobile, IT sector, food and beverages, telecommunication, finance, retail and many more sector.
After going through project you can say that India continues to be less risky than China as a business destination. India has been ranked 10th among 29 emerging markets in the latest country risk analysis by Economic Intelligence Unit (EIU), an information service arm of the Economist group.
With a score of 39 out of 100 in the risk scale, India has got 'B' risk rating and has outranked China (41), Saudi Arabia (41), South Africa (45), Mexico (45), Brazil (48) and Egypt (49), who have got 'C' rating.
However, Singapore (11, A rating), Hong Kong (21) continue to be the safest place for foreign investment, followed by Taiwan (25), Israel, Hungary and Poland (37), who have qualified for 'B' rating. Not surprisingly, Iraq is the most dangerous country to do business, with a score of 91 out of 100, followed by Argentina (76).
Till 1991, India was more or less a closed Economy. The rate of growth of the economy was limited. The contribution of the local industries to the countryís GDP was limited that were the main cause of shortage of funds for various development projects initiated by the government.
In an effort to revive the industries and to bring the country back on the right track, the government began to open various sectors such as Infrastructure, Automobile, Tourism, Information Technology, Food and Beverages, etc to the Multinational Corporations. The MNCs slowly but reluctantly began to pour capital investment, technology and other valuable resources in the country causing a surge in GDP and upliftment of the economy as a whole. This was the post 1991 era where the government began to invite and welcome giant MNCs into the country.
Opportunities for Developing Economies
The opportunities for developing economies are significant as well. Through the application of capital, technology, and a range of skills, multinational companies' overseas investments have created positive economic value in host countries, across different industries and within different policy regimes.
The single biggest effect evidenced was the improvement in the standards of living of the country's population, as consumers have directly benefited from lower prices, higher quality goods, and broader selection. Improved productivity and output in the sector and its suppliers indirectly contributed to increasing national income. And despite often-cited worries, the impact on employment was either neutral or positive in two-thirds of the cases.
Impact on Developing Economies & Policy Implications
Investments by multinational companies (MNC) allow developing economies to share in the considerable benefits of the global economy. Official incentives, trade barriers, and other regulatory policies, though, can result in inefficiency and waste.
Case studies reveal that in virtually all cases, MNC investment had a positive to very positive impact on the host country. Rather than leading to the exploitation of lower-wage workers, as some critics have charged, the investments fostered innovation, productivity, and an improved living standard. Therefore, government seeking those advantages would be advised to favor policies of openness, rather than regulation, when it comes to foreign direct investment.
In 2007, exports stood at US$145 billion and imports were around US$217 billion. Textiles, jewellery, engineering goods and software are major export commodities while crude oil, machineries, fertilizers, and chemicals are major imports. India's most important trading partners are the United States, the European Union, and China.
Gross Domestic Product (GDP)
India is the world's most-populous democracy and has one of the fastest economic growth rates in the world (8.9 percent GDP increase in 2007, the second-fastest major economy in the world after China).
India Inc. is flying high. Not only over the Indian sky. Many Indian firms have slowly and surely embarked on the global path and lead to the emergence of the Indian multinational companies. With each passing day, Indian businesses are acquiring companiesí abroad, becoming world-popular suppliers and are recruiting staff cutting across nationalities. While an Asian Paints is painting the world red, Tata is rolling out Indicas from Birmingham and Sundram Fasteners nails home the fact that the Indian company is an entity to be reckoned with.
Tata Motors sells its passenger-car Indica in the UK through a marketing alliance with Rover and has acquired a Daewoo Commercial Vehicles unit giving it access to markets in Korea and China.
Asian Paints is among the 10 largest decorative paints makers in the world and has manufacturing facilities across 24 countries.
About 80 percent of revenues for Tata Consultancy Services come from outside India. This month, it raised Rs 54.2 billion ($1.17 billion) in Asia's second-biggest tech IPO this year and India's largest IPO ever.
Infosys has 25,634 employees including 600 from 33 nationalities other than Indian. It has 30 marketing offices across the world and 26 global software development centers in the US, Canada, Australia, the UK and Japan.
Impact on Indian Industrial Sectors
So far, we have analyzed the Indian Economy and the way in which multinational have added more value and increased the exports, GDP and productivity, resulting in all round development.
Further more, we have the actual analysis of the effect of MNCs on various Indian Industrial Sectors. Certain important sectors are considered and the actual effects of MNCs i.e. the practical way in which they are affected are studied viz.
4. Food and Beverages Industry
The present scenario is a highly transformed one. Multinational giants are vying with one other to launch their models. Big names of the vehicle industry like the Korean giant, Hyundai, General Motors, Mitsubishi etc. have already opened their account. In other vehicle segments too, Volvo, Mercedes Benz, Audi etc. have carved out their niche.
On the other hand, manufacturing in India has also come of age. The post liberation economical scenario has resulted in all the big names such as General Motors, Ford, Toyota, Honda, Suzuki, Mitsubishi, Mercedes-Benz, Fiat to come up with plants in India. The Indian automotive giants like Telco, Mahindra, Ashok Leyland, and Bajaj are revamping their production strategies and launching new models designed and developed indigenously. This has opened up numerous opportunities or employment in this sector for trained and skilled professionals who are well versed in the latest manufacturing process.
Sunny Days are here for the Indian automobile Industry as is corroborated by the latest report made public by Society of automobile Manufacturers. The report speaks of the growth of car sales by 22.42% in the month of September. The month saw the sales climb as high as to 94,734 units as opposed to 77,384 units in the same month last year. The growth spree seems to have spilled onto the sale of commercial vehicles as well; the segment experienced a growth rate of 33.54% in the month of September.
The only French presence in the Indian automobile market was the Peugeot 309, a boxy sedan that was manufactured by a joint venture, in which the Indian partner was already losing its hold on the passenger car market.
The Peugeot 309 was launched when multinational carmakers were just beginning to corner the Indian market. The car was too early for its times in terms of the demand in the segment it was being positioned and it quickly became dated in terms of design. It only had a small fan following, that is, among those that appreciated good engineering.
Renault, France's second-largest carmaker, formed a 125 million euro ($165 million) venture with Mahindra & Mahindra Ltd to make Logan sedans in India, tapping into Asia's fourth-largest car market.
Mahindra, India's biggest maker of sport-utility vehicles and tractors, will own 51% of the company, with Renault holding the remainder.
Renault, which announced details of the agreement last month, is entering India with the $6,000 Logan it began producing in September at its Dacia (Romania). Overseas carmakers are assessing the Indian market to expand their presence by introducing new models as rising incomes increased demand for cars in the world's second-most populous nation.
Mahindra Renault is also collaborating with Japan's Nissan Motor Co. in which the French auto maker holds 44 per cent stake building a bigger plant near the southern Indian city of Chennai.
The three companies are together investing about US$900 million in that plant, which will be completed in the second half of 2009 and will have capacity to manufacture 400,000 vehicles, including the Logan.
Strategy of Mahindra Renault:
India's car market is dominated by small hatchbacks, but rapidly growing middle class incomes has fueled demand for low-cost sedans.
The pricing, which the manufacturer described as ``aggressive'', places Logan in competition with mid-size sedans from South Korean car maker Hyundai Motor Co., homegrown Tata Motors Ltd. and the country's largest carmaker The Suzuki Motor Inc. controlled by Maruti Udyog Ltd.
The car is now being manufactured by M&M at its Nasik facility and delivers on its promise of good engineering, great value and low prices. But it still will have to face up to and get over a number of issues on the way before its Indian innings can be counted amongst its successes worldwide. This, despite the killer pricing and feature-rich package that is being offered with the India-made Logan.
Logan coming to India is stripped-down version of European Logan and will have very basic features only. It has very good space and comfort is good too. This car is expected to do good in rural areas where Mahindra has better reach. Size matters for Indians and the Logan offers enough of it in every department except the choice of engines, which is again very relevant for us given the buyer's fixation with fuel efficiency.
To compare the Renault Logan with the Toyota Corolla or the Mercedes Benz C-class sedan is like comparing a hard-boiled lick-lolly with a Godiva specialty truffle. But if you are a sweet tooth on a tight budget, the lick-lolly will be the automatic choice.
One of the issues that may not work in its favour is the Logan's unexciting, overly simplistic design. The design was conceived with a purpose ó to keep manufacturing and maintenance costs low ó especially in cost-sensitive markets such as India.
Overall, the Logan successfully conceals the fact that it is a product of frugal engineering or cost cutting, as we would call it in common parlance. But as you go up the price segment in the petrol sedan category, buyers are more demanding even in the design department. The Logan's pricing is what makes it even more attractive for those looking to purchase their next car from the premium hatch or the entry-level sedan segments.
Global automakers have been stepping up efforts to increase their presence in India, where the economy is growing close to nine per cent annually and demand for cars is strong, thanks to rising middle class incomes and easier access to loans.
Toyota to bring its hybrid sedan to India
Toyota motors has an answer to growing emission concerns and rising fuel costs in the form of its hybrid sedan Prius, which it plans to bring to India shortly. The Toyota Prius is sold in nearly 40 countries around the globe, and it is regarded as being the most fuel efficient midsize car in the United States.
One of the fastest growing sectors in the country, telecommunications has been growing at a feverish pace in the past few years. The speed of growth can be judged by the fact that in 2004, ten years after private telephony was introduced in India, the mobile subscriber base had crossed the number of fixed line connections.
The non-voice market (message and data services) for mobile operators has also registered tremendous growth in 2004. It had a growth of 139 per cent year on year in 2004. At present non-voice revenue contributes around 4.7 per cent to the total mobile services revenue, which is around Rs. 14,560 crore (US$ 3.3 billion). A study released by Ernst and Young says revenues from the sector could touch US$ 25 billion by 2007.
Indian companies going global
India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. As the sector has been performing well, the bulging bottom lines of Indian telecom companies are making them invest in assets.
Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in 1994 when its predecessor Hutchison Telecom acquired the cellular license for Mumbai. Vodafone Essar now has operations in 16 circles covering 86% of Indiaís mobile customer base, with over 34.1 million customers.
Over the years, Vodafone Essar, under the Hutch brand, has been named the 'Most Respected Telecom Company', the 'Best Mobile Service in the country' and the 'Most Creative and Most Effective Advertiser of the Year'. Vodafone is the world's leading international mobile communications company. It now has operations in 25 countries across 5 continents and 40 partner networks with over 200 million customers worldwide. Vodafone has partnered with the Essar Group as its principal joint venture partner for the Indian market. The Vodafone brand was launched in India on 21st September, 2007.
STP Analysis of Vodafone
Life of the service
Vodafone is adopting multi-segment approach. They are offering a series of differentiated products to their respective markets.
Home calling cards for the family of those professional who use to work abroad.
Rupees 10 recharge for small users.
Cheap SMS facility for the youths.
Facility for circle users.
ďWhere you go the network follows youĒ
Hutch, as a brand, always tried to connect customers in a simple, honest and real manner, while Vodafone is more young and fun brand.
The ĎPugí and Irfan khan will be always retained for the brand promotions.
They are talking about the exclusivity of the network and services they are offering to the customers.
Competitive growth of all telecom companies
Vodafone says that they want to be top mobile service provider in India at he end of the year 2010.
Vodafone has forecasted Indian wireless subscriber bass to reach 249.5 million by March 2008.
The average revenue per user is been falling now. So it is the objective of Vodafone to regain ARPU (from the level of Rs.438.29 for the July September quarter of 2005, the ARPU of Vodafone stood at Rs315.81 for the January March quarter of 2007).
India is one of the fastest growing aviation markets in the world. With the liberalization of the Indian aviation sector, the industry had witnessed a transformation with the entry of the privately owned full service airlines and low cost carriers. As of May 2006, private carriers accounted for around 75% share of the domestic aviation market. The sector has also seen a significant increase in number of domestic air travel passengers.
There are two kinds of expectations from aviation sector
2. Price factor
Let us see the two different companies from same sector but even then they both are very different from each other.
1. Air Deccan: "No Frills" - Always low prices
2. Kingfisher: "Experience" - Food, attendants etc
Strategies adopted by both the sectors
Kingfisher details/ strategy
Vijay Mallya is referred to as India's Richard Branson. A great part of the personality of the Kingfisher brand is based on Mallya's personality.
Co-branding partnerships with like-minded brands and an aggressive strategy to promote its guest loyalty programme, King Club, would be the major focus of UB Group's Kingfisher Airlines this year. The company is planning to spend close to Rs 40 crore on various media and below-the-line marketing activities for the year.
Running several guest loyalty programmes, already enrolled 20,000 within two months of launch.
Tying up with a number of restaurants and premium hotels like Park Hotel.
Talks with Goa Tourism to boost domestic traffic during monsoon.
Done promos with Malaysia Tourism to organize a golf tournament for CEOs in Delhi.
Running online contests to boost traffic.
Air Deccan details/ strategy
India's low-cost carrier launches an option of booking, payment and re-scheduling of flights through SMS.
Tied up with Reliance Web World to offer an option of booking air.
Tickets through a nationwide retail chain of 241 real broadband centers across 104 cities in India.
Advertisement generally is made from emotional angle rather than focusing on the quality.
The real secret behind the ties between Kingfisher and Air Deccan
Kingfisher has been trying too hard to come into the international market but because of the faulty Indian rules which says that any domestic civil aviation company who wants to fly international should have at least 5 years of domestic experience. Now Air Deccan had this experience and Vijay Mallya had to cash in this experience of Air Deccan. Hence because of this reason Mallya decided to tie up with Air Deccan.
Mallya made it clear that Kingfisher Airlines would not be positioned as a low cost carrier as passengers would attribute the features of low cost carriers like low quality of service, delayed flight timings, etc., to Kingfisher Airlines as well.
Hence, the airline was called a budget airline and not an LCC. Fares were above those of LCCs but lower than the economy class fares of Jet, Go Air, and Indian Airlines. Kingfisher Airlines also allowed multiple fare options and auctioning of tickets on all traffic routes.
Pricing of Air Deccan
Air Deccan is an LLC. The only thing that company focuses is on price. Itís for that class of people who dream to fly. Air Deccan focuses very little on the ultimate flying experience which the Kingfisher Airlines is famous for.
Aviation industry in India
With a growth rate of 18 per cent per annum, the Indian aviation industry is one of the fastest growing aviation industries in the world.
Indian carriers currently have a fleet size of 310 aircrafts, but have 480 aircrafts on order, scheduled for delivery by 2012.
India has jumped to 9th position in world's aviation market from 12th in 2006. The scheduled domestic air services are now available from 82 airports as against 75 in 2006.
By 2020, Indian airports are expected to handle more than 100 million passengers including 60 million domestic passengers and around 3.4 million tons of cargo per annum. Domestic air traffic is likely to more than double and touch 86.1 million passengers by 2010, up from 32.2 million passengers in 2007.
India's booming tourism sector and its rapidly growing Western-style fast food joints offer unlimited opportunities for foreign food and beverage exporters, as Indian food imports are likely to grow 6-7 per cent over the next few years, says a study.
Eyeing the over 250 million-strong middle class, a US department study says the prospects for investment in Indian markets could be gauged from the fact that total Hotel, Restaurant and Institutional (HRI) service sector sales of Foods and Beverages amounted to $ 8 billion during 2003-04.
An upswing in the Indian hotel industry since 2003 following turnaround of the global tourism industry, positive impact of 'Incredible India' tourism promotion campaign and the world's increasing interest in India's rapidly growing economy are some of the main reasons cited for growth.
The Indian middle-class, which some estimate is 250 million-strong and growing at 30-40 million a year, is the main drivers of the economy. The economy of the country is widely anticipated to double by 2010 to become the world's third largest by 2050.
In recent years, the Indian hospitality industry has benefitted from a steadily growing economy and a booming tourism sector. Foreign tourist arrivals into the country in 2004 crossed 3.36 million, a growth of 24 per cent over the previous year.
A rapidly growing Indian economy (6 per cent annually over the last decade) has increased incomes of the consuming class. By 2007, approximately 22 per cent of households (44 million) are expected to have an average annual income of $3,150 (USD 17,300 on purchasing power parity basis) compared to less than seven per cent in 1995.
Sixty-five million people are expected to enter the 20-34 year age group from 2001 to 2010 in India and the number of dual income households has been expanding rapidly in urban areas.
The eating-out culture is evolving fast in India, as more consumers seek variety in their food choices. Urban Indians are aware of international cuisines and an increasing number are willing to try new foods.
About 4.5 per cent of urban consumers eat outside their home at least once a week, and about 12 per cent eat out once a month, it said quoting a survey. There has been double-digit growth in the Western-style fast-food outlets and coffee shops, both multinational chains (McDonald, Pizza Hut, Dominos etc) and Indian chains (Nirula's, Pizza Corner, Barista, Cafe Coffee Day). It is believed that the multinational and domestic multi-unit restaurant segment will drive the future expansion of the Indian restaurant industry.
Most Indians still prefer Indian food, as regional cuisines offer many choices, it said, adding "vegetarianism" was still a widely popular culinary tradition in India. However, the younger urban population is increasingly shifting to Western-style fast food items, the study observed.
Coffee parlours are flourishing in urban India - not just for their aromatic beans and casual ambience, but also for the global lifestyle and culture they endorse. And the global players are avidly eyeing the Indian market. The organised coffee retail business in India is over Rs.8 billion and the potential for coffee retail outlets is 3,000. The retail brands, however, say the figure is between 4,000 and 5,000.There are three major players - Barista, Coffee Day and Costa Coffee. A few others are beginning to grow and India has a huge potential for the beverage sector. The good news also is that coffee consumption on the rise.
According to industry sources, coffee consumption has shot up from 55,000 tonnes to 80,000 tonnes since the liberalization of the economy in 1991.
Suita Sengupta, marketing head of Cafe Coffee Day, said: 'It is on the rise and with niche coffee parlours coming in, the figure is only likely to go up.' With the Indian middleclass ready to spend more and be a part of global lifestyle and culture, coffee parlours in the country are on an expansion spree.
'Between 2003 and 2005, domestic consumption went up by seven percent per annum and this has come after a long spell of stagnancy,' said Barista chief Partha Dattagupta. 'The company plans to invest Rs.400 million in expansion. By the end of this financial year we plan to open 100 outlets and expand to at least 40 cities.'
Likewise, Cafe Coffee Day, promoted by Amalgamated Bean Trading Company, plans to open 500 cafes by June 2007. Britain's Costa Coffee, promoted in India by the Rs.12 billion Ravi Jaipuria group's Devyani International, also plans to invest Rs.1.5 billion in the next four years.
'By 2010 we are confident of opening 290 outlets and we expect our growth to be much faster in the coming years,' said Virag Joshi, chief executive of Devyani International.
'At Barista we have factored in the entry of big players in our strategic plans. The arrival of international players like Starbucks will stimulate growth in the coffee and hangout culture,' Duttagupta said. He also believes that the impact on current players will actually be positive since the overall market will expand, and with a likely premium pricing and positioning of Starbucks, the current players will get a good 'price shelter'.
So why are the masses actually flocking to coffee parlours given the fact that India is primarily a tea-consuming nation.
Joshi of Costa Coffee said: 'This has changed over the last three-four years. We have seen the emergence of coffee as the lifestyle choice of the new generation.' Puja Talwar, 24, a civil service aspirant, said: 'These are cool places to hang out with family and friends. One can eat, read good books and listen to one's favourite music.'
The coffee parlours, however, are aiming to provide not just that favourite cuppa. Also on offer is a huge range of lip-smacking snacks to complement a cappuccino or an iced mocha. 'Sixty percent of our business comes from food,' said Sengupta.
Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP. Currently, the largest life insurance company in India is still owned by the government.
Insurance is a US$41-billion industry in India, and grew by 36% in 2006-07 over the previous year
Life Insurance - US$35 billion industry with US$24 billion accounting for First Year Premium (inclusive of Single Premium)
Non-Life Insurance - US$5.6-billion industry; motor and health segments account for 56% of total business.
Indian Insurance market was opened to private and foreign investment in 1999-2000. The Indian Insurance industry consists of a total of 34 players
Life: 1 public sector player; 16 private players
Non-life: 6 public sector players; 11 private players
Major international players like AIG, Aviva, MetLife, New York Life, Prudential, Allianz, Sun Life, Standard Life and Lombard are already present with minority stakes in joint ventures with Indian companies for both Life and Non-life segments. The Life Insurance market is still dominated by Life Insurance Corporation (LIC) - a public sector company which had 75% share of first year premium in 2006-07. In non-life, private sector companies (almost all are joint ventures with foreign insurers) accounted for 34% of the market in 2006-07. The Indian Insurance market is expected to be around US$52 billion by 2010.
Marketing Mixes in Insurance Sector
It is the need of the hour that the insurance organizations make their service internationally competitive. The formulation of product strategy should assign due weight age to the rural segment emerging as a big profitable segment especially in the 21st century. The policies and schemes should have rural orientation so that backward and neglected regions of the country get priority attention and the regional imbalance is minimized.
With the advent of private players in the insurance, companies resort to rampant promotion. Promotion mix for this sector is as follows:
Word of Mouth Promoting
World Wide Web
In the insurance business, the pricing decisions are concerned with the premium charged against the policies interest charged for defaulting the payment of premiums & credit facilities, commission charged for underwriting & consultancy services.
The price mix decisions are
Making possible cost of effectiveness.
Restructuring of premium.
Due priority to profit generating investments.
Assigning due weight age to the policies meant for the socially & economically backward classes.
Making the ways for maximizing profit.
Another important dimension to the Place Mix is related to the location of the insurance branches. While locating branches, the branch manager needs to consider a number of factors, such as smooth accessibility, availability of infrastructural facilities and the management of branch offices and premises. The management of offices makes it significant that the branch managers are particular to the office furnishing, civic amenities and facilities, parking facilities and interior office decoration.
People are most important component of marketing mix for the insurance industry. The front-line-staff as well as the branch managers are required to be given the training facilities so that they in position to make possible an effective use of the technologies. The insurance organizations bear the responsibility of developing the credentials of their employees.
6. Physical Evidence
Physical evidence includes facility design, equipment, signage, employee dress, tangibles, reports & statements.
1. Flow of activities
Since major activities are conducted through the agents, the agents are given training and refresher courses etc. There are branches of insurance organizations where these agents go for processing of proposals/claims etc.
The proposal/claim forms and other formalities are standardized in case of each branch of an organization. Standardization here implies procedural standardization. But the processing may differ from case to case in case of claims.
As stated earlier, each case has its own peculiarities. Hence amount of premium, proceedings of a claim etc. are quite subjective.
It is a companyís effort to identify a unique selling proposition. A good insurance companyís positioning statement answers 3 questions to public
a. Who are the customers?
b. What is the set of needs that the product fulfills?
c. Why is the product the best option to satisfy those needs?
The positioning statement is primarily directed to potential customers and has a guiding role in defining every element of marketing mix. Every company has to position its service in the market. It is very necessary to know where the service stands in the market.
E.g. ICICI Prudential Life Insurance has the tag line of ďJEETE RAHOĒ which means that the customerís life is well secured
Market Segmentation in Insurance Service
In Insurance Services, the task of formulating the overall marketing strategy cannot be performed satisfactorily till market segmentation. This is because the market is vast, the potential policyholders are in a large number and their needs and requirements are diverse. There are a number of similarities in the market segmentation of banking and insurance services. Insurance market segmentation is done on the basis of region. If the market segmentation is done in the right viz. Central, Eastern, Western and Northern Zone. If the market segmentation is done in the right way the marketer finds it convenient to identify the market. The main purpose of segmentation is to know the policyholder. It is natural that the needs and requirements of potential policyholders belonging to different zones or regions canít be uniform. Particularly in the Indian environment we find a large number of rural prospects. In order to transform them into actual policyholders, the establishment of a rural sector is felt. In the Indian perspective, we find the rural markets to be more profitable ones for both banks and insurance in the 21st century. Hence due weight age should be given to the rural segment.
Multinational companies are like double-edged sword. The sword can harm if not handled properly. Similarly the Multinational companies have their own pros and cons.
The extent of technology and management of know-how transfer by the MNCs depend to a large extent on their corporate strategy; for example, firms desiring to have a longer-term relationship with the suppliers (rather than those simply using the host country as a marketing/export base) will be more inclined to effect transfer technology.
As pointed out in the World Investment Report, 2000, MNCs may restrict the access of particular affiliates to technology in order to minimise inter-affiliate competition. It is noted that MNCs are more likely to license older technologies from which they have already derived significant rents than newer technologies on which there are still relying for market leadership. Further, they may hold back the upgrading of the affiliate technology or invest insufficiently in host-country training and R&D in accordance with their global corporate strategies. Therefore, arguing that FDI inflows and economic liberalization automatically facilitates technology transfer is being extremely naÔve.