MULTI-NATIONALS A MNC is a business which owns or controls production or service facilities outside the country in which it is based. This means that they do not just export their products, but make them abroad. Usually have interests in at least 4 countries , but most operate in more than this.
Multinational Corporations no doubt, carryout business with the ultimate object of profit making like any other domestic company but MNC's directly and indirectly help both the home country and the host country.
Advantages of MNC's for the host country
1. MNCs give rise to employment in the country leading to economic development
2. The latest technology is transferred from home country to host country through MNC's.
3. Set of various other skills is transferred to host country.
5. MNC's break protectionalism, create competition in the market and curb local monopolies which directly leads to fall in costs and better quality products.
6. Research done by MNC can be used by host country.
7. The host country can reduce imports and increase exports due to goods produced by MNC's in the host country. This helps to improve balance of payment.
8. Level of industrial and economic development increases due to the growth of MNC's in the host country.
Disadvantages of MNC's for the host country
1. MNC's may transfer outdated technology from their hom country and reserve the latest one.
2. They do not operate under the purview of local govt. and they also make a lot of profit so they may pose a threat to economic sovereignty of nation.
3. There is always a threat of monpolising the host country's market.
4. In order to make profit, MNC's may use natural resources of the home country indiscriminately and cause depletion of the resources.
5. A large sums of money flows to foreign countries in terms of payments towards profits, dividends and royalty.
Advantages of MNC's for the home country
MNC's home country has the following advantages.
1. MNC's create opportunities for marketing the products produced in the home country throughout the world.
2. They create employment opportunities to the people of home country both at home and abroad.
3. It gives a boost to the industrial activities of home country.
4. MNC's help to maintain favourable balance of payment of the home country in the long run.
5. Home country can also get the benefit of foreign culture brought by MNC's.
Disadvantages of MNC's for the home country
1. MNC's transfer the capital from the home country to various host countries causing unfavourable balance of payment.
2. MNC's may not create employment opportunities to the people of home country if it adopts geocentric approach.
3. As investments in foreign countries is more profitable, MNC's may neglect the home countries industrial and economic development.
Related : Necessity of Globalisation
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