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
- The investment, employment and income level of the host country increases consequently due to operation of MNC’s in the host countries.
- Industrial and economic development increases.
- The host countries get latest technology from other countries through the MNC’s.
- Latest and sophisticated management techniques are made available.
- MNC’s break protectionalism, create competition among domestic companies and thus enhance their competitiveness.
- Domestic industry can make use of R and D outcomes of MNC’s.
- Host countries can reduce imports and increase exports.
- MNC’s create opportunities for marketing the products produced in the home country throughout the world.
- MNC’s create employment opportunities to the home country people.
- The industrial activities get fully activated.
- MNC’s contribute for favourable balance of payments of the home country in the long run.
Disadvantages of Multinational Corporation
- Technology developed by the MNC’s does not meet the needs of developing countries as it is mostly capital intensive.
- MNC’s do not operate within the national autonomy and soverginity.
- MNC’s kill the domestic industry by monopolizing the host country’s market.
- MNC’s may adopt ethnocentric approach in staffing and thereby cause unemployment in the host country.
- MNC’s use natural resources of the host country indiscriminately and cause fast depletion of the resources.
- MNC’s distort the economic structure of the host country.
- MNC’s interfere in the political decisions of the host country.
- MNC’s do not engage in R and D activities relevant to developing countries. Their R and D efforts are relevant to advanced countries.
- MNC’s transfer the capital from home country to various host country causing unfavourable balance of payment.
- MNC’s may neglect the home country’s industrial and economic development as it invests in more profitable countries.
- MNC’s does not create employment opportunities to the people of the home country, if it follows geocentric approach or polycentric approach.
- MNC’s may bring the culture from foreign countries which is determined to the interest of the home country.