Advantages Of Multinational Corporations

Background

Multinational corporations can be defined as enterprises operating in several countries but are managed from their home country. In general any company that takes in a quarter of its revenue from operations outside of its home country is considered to be a multinational corporation. Today the multinational corporations have a radical effect on the economic system all over the world. This is due to the growing in the international business of the multinationals, which has tremendous effect on the traditional forms of international trade and capital flows for economies at large. In the world economy they create a powerful force. The multinational corporations have shown enormous power in the areas of international trade and finance.

4. A transnational enterprise that combines the previous three approaches. It is basically a company that owns or controls production of goods or services in one or more countries other than their home country. Vodafone or Toyota are two of the biggest examples of transnational corporations in the world.

Advantages of Multinational Corporations:

• Cheap Labour

One of the advantages of multinational corporations is the opportunity to expand to countries where labour is less expensive. This is one of the benefits that smaller companies do not have at their leisure. Multinationals can distribute up their offices throughout several countries where demand for their services and products are high while cheaper labour is available.

• Broader Market Base

By opening business or offices in several countries, multinationals increase their chances of reaching out to customers on a global scale, a benefit which other companies like limited to regional offices and establishments do not have. The access to a greater value of consumers gives them more opportunities to develop and alter their products and services that will be appropriate to the needs of potential customers.

• Tax Cuts

Multinationals can enjoy lower tax rates in other countries for both

Disadvantages of Multinational Corporations:

• Potential Abuse of Workers

Multinational companies often invest in developing countries where they can take advantage of cheaper labour. Some multinational corporations prefer to put up branches in these parts of the world where there are no demanding policies in labour and where people need jobs because these multinationals can demand for cheaper labour and lower standard in healthcare benefits.

• Threat to Local Businesses

Another disadvantage of multinational corporations in other countries is that they have the potential to dominate the market. These giant corporations can dominate the markets they are in because they have the more renowned products and they can afford to even sell them at lower prices since they have the financial resources to buy in a much larger quantity. This can devour all the other small businesses offering the same goods and services. Most likely chances are, local businesses will suffer and maybe even worse, close down. • Loss of Jobs

With more companies transferring offices and basing operations in other countries, jobs for the people living in developed countries end up becoming threatened. Take the case of multinationals that create offices in