The task of inventory management in the case of multinational” firms is more complex than that of domestic firms, particularly when reign subsidiaries encounter the following situations: (1) When a foreign subsidiary is located in a country having’ a high rate of inflation, t may be profitable, prim face, oi
accumulate more stocks than otherwise needed. However, carrying inventory involves costs, in articular, .interest costs; such costs tend to be high in countries experiencing inflation. Therefore; Mn Cs should undertake a cost-benefit analysis before taking the decision of carrying more stocks. This becomes a the more important if foreign subsidiaries ‘are located in politically unstable countries and run the threat frisk of expropriation of assets. When the foreign subsidiary is located far from the market supplying the goods, the consideration will have to be given to potential delays in getting the goods from central storage locations to user locations, all around the world. There is a’ need to maintain both working stocks and safety stocks at each user location as well as at the strategic storage centres. TIle problem gets compounded in case the foreign subsidiaries are imposed with property taxes on assets. including inventories. In such cases the tax is on the holdings, on specific days, say, 31st December ylsr March. Such rules then warrant that -the foreign subsidiary should nave a low inventory on these dates. To achieve that, it should hold safety stocks in..different· countries locations different times during the year19. Clearly, the problem of physical location of inventories is more acute in the case of foreign rums tlis a ts domestic fums, . (W) Finally he MNC and its subsidiaries are to deal with, inter-alia, adverse exchange rate fluctuation~, tariffs, non- tariff barriers, and other similar problems, generally when they are located ¥l less developed nations.
Indian corporates are permitted to raise finance through ECBs within the framework of the policies and procedures prescribed by the Government. ECBs include commercial bank loans., huy~rs’l suppliers’ credit, securitised instruments .such as Floating Rate NOles (fRIIs) and Fixed Rate Bonds (FRBs), credit rom-official export credit agencies and commercial borrowings from the private sector window of multilateral financial institutions such ;IS he IFC, ADB, AFlC, CDC and so on. While the ECB policy’ provides flexibility in borrowings consistent with maintenance of prudential ‘ts or total external borrowings, its guiding principles are to keep borrowing maturities long, low and encourage infrastructure core and export sectors financing, which are crucial for