What are the advantages and disadvantages of multinational businesses?
Multinational Business The advantages of a multinational business to host countries are:
Transfer of technology,capital and entrepreneurship.
They increase the investment level and thus the income and employment in the host country.
Greater availabilty of products for local consumers.
Greater access to high quality managerial talentwhich tens to be scarce in host countries.
Increase in exports and decrease in imports,thereby improving the balance of payment of host countries.
Help in equalizing of cost of factors of production around the world.
They provide an efficient means of integrating economics.
Advantages to home countries
Acquisition of raw material from abroad,which is cheaper in cost.
Technology and management expertise accquired from competing in global markets.
Export of components and finished goods for assembly or distribution in foreign markets.
Inflow of income from overseas profits,royalities and management contracts.
Jobs and career opportunities at home and abroad in connection with overseas opportunities.
Disadvantages include:
Trade restrictions imposed at the government-level
Taxes or tariffs imposed on imports from other countries
Limited quantities (quotas) of imports
Effective management of a globally dispersed organization
Slow down in the growth of employment in home countries.
Destroy competition and acquire monopoly.
Technology designed for mnc's is for world wide profit maximization not for the social welfare or development of economy.
They could cause fast depletion of some of the non renewable natural resources in the host country.
In order to alley the fears of host countries they need to:
provide employment
train managers
provide products and services that raise the standard of living
introduce and develop new technical and managerial skills
increase productivity
