What are the advantages and disadvantages of Multinational Corporation?

A multinational corporation is an organisation doing business in more than one country. MNC’s have a world wide involvement and a global perspective in its management and decision making. MNC’s engage in international production and operate plants in a number of countries. MNC’s invest considerable portion of their assets internationally.

Advantages of Multinational Corporation

  1. The investment, employment and income level of the host country increases consequently due to operation of MNC’s in the host countries.
  2. Industrial and economic development increases.
  3. The host countries get latest technology from other countries through the MNC’s.
  4. Latest and sophisticated management techniques are made available.
  5. MNC’s break protectionalism, create competition among domestic companies and thus enhance their competitiveness.
  6. Domestic industry can make use of R and D outcomes of MNC’s.
  7. Host countries can reduce imports and increase exports.
  8. MNC’s create opportunities for marketing the products produced in the home country throughout the world.
  9. MNC’s create employment opportunities to the home country people.
  10. The industrial activities get fully activated.
  11. MNC’s contribute for favourable balance of payments of the home country in the long run.

Disadvantages of Multinational Corporation

  1. Technology developed by the MNC’s does not meet the needs of developing countries as it is mostly capital intensive.
  2. MNC’s do not operate within the national autonomy and soverginity.
  3. MNC’s kill the domestic industry by monopolizing the host country’s market.
  4. MNC’s may adopt ethnocentric approach in staffing and thereby cause unemployment in the host country.
  5. MNC’s use natural resources of the host country indiscriminately and cause fast depletion of the resources.
  6. MNC’s distort the economic structure of the host country.
  7. MNC’s interfere in the political decisions of the host country.
  8. MNC’s do not engage in R and D activities relevant to developing countries. Their R and D efforts are relevant to advanced countries.
  9. MNC’s transfer the capital from home country to various host country causing unfavourable balance of payment.
  10. MNC’s may neglect the home country’s industrial and economic development as it invests in more profitable countries.
  11. MNC’s does not create employment opportunities to the people of the home country, if it follows geocentric approach or polycentric approach.
  12. MNC’s may bring the culture from foreign countries which is determined to the interest of the home country.

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