What are the advantages and disadvantages of multinational businesses?

Answer 1

Multinational BusinessThe 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