Advantages of multinational companies in developing countries. Multinational Corporations (MNCs): Meaning, Features and Advantages 2019-02-09

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Multinational Corporations (MNCs): Meaning, Features and Advantages

advantages of multinational companies in developing countries

For this, it hires skilled and technical employees and introduce modern system of management. The operational size and scale of these corporations can give them the chance of taking advantage of the economies of scale, which paves the way for lower average costs and prices for consumers. They find it costly and cumbersome to modify their products, services, and communications to suit local tastes, especially since the opportunities in developing countries tend to be relatively small and risky. Like American and European companies, they can raise money by, say, listing themselves on the New York Stock Exchange or on Nasdaq. This capital investment helps the economy develop and increase its productive capacity. Emerging giants tend to avoid head-to-head competition with foreign companies; they focus on niche opportunities that allow them to capitalize on their existing strengths.


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17 Main Pros and Cons of Multinational Corporations

advantages of multinational companies in developing countries

Competitive advantage of multinationals over domestic firms. Therefore there are advantages and disadvantages of unemployment in a country. Multinational corporations provide the developing countries around the world with the necessary financial infrastructure to achieve economic and social development. This is done to spread their products at the international level. For example, McDonalds is still McDonalds wherever it is operating in the world. All these factors have effect on the economy of rising countries. Some intermediaries enhance the credibility of the claims sellers make—for instance, accounting firms, quality-certification firms, and accreditation agencies.

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Impact of Multinational Companies (MNCs) on their…

advantages of multinational companies in developing countries

Social, Economic and Political conditions of the host country: Multinational companies provide many benefits to the host country by contributing to the economic growth of the country and increasing the profits of the country. Multinational corporations have both advantages and disadvantages since it creates jobs but can also end up in the exploitation of workers, among other things. It is always seen that multinational companies lack responsibility towards the host country Dyreng et al. The large scale production minimizes per unit cost and helps to face competition in the market. The ability to operate in multiple different companies builds in the ability to capitalize on cheap labor markets.

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Advantages & Disadvantages of Multinational Corporations

advantages of multinational companies in developing countries

However, it enjoys some independence from the parent company. Foreign Collaboration or Joint Ventures: The multinational corporations set up joint ventures with foreign firms to either produce its product jointly with local companies of foreign countries for sale of the product in the foreign markets. Efficient management Efficient management is one of the main reasons for the successful operation of a multinational company. It hands over only outdated or inappropriate technology to the host country. Over the past two-plus decades, waves of liberalization have all but washed away protectionist barriers in developing countries.


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The Advantages and Disadvantages of Multinational Companies

advantages of multinational companies in developing countries

Inappropriate technology Technology transfer to the host country is one of the parts of a multinational company. There are a wide array of companies that operate underneath this type of structure, and many receive criticism. When specialization takes place in a production, the production will become more efficient. Today, international relation and cooperation is based on financial assistance and economic development. Therefore, there is continuous threat to the host country for protection of their sovereignty and liberty.

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What are the Disadvantages for developing countries of multinationals

advantages of multinational companies in developing countries

Transfer pricing refers to the prices a vertically integrated multinational firm charges for its components or parts used for the production of the final commodity, say in India. However, others feel that foreign companies should be shut out and instead the government should help local companies to contribute to economic growth. Second, as factor markets at home become saturated and thus more expensive, these businesses look for other developing countries that offer similar resources. Also it should be noted that if the natural resources are destroyed for the settlement of hotels, it may be a disadvantage for everyone in the country. They purchased the best raw materials from local markets in the cheapest price, processed the raw material locally and delivered them in their home country for production of finished products.

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Multinational Company Advantages Disadvantages Types Characteristics

advantages of multinational companies in developing countries

But in practice, a multinational company hardly transfer advanced technology. Bunge charters approximately 100 ships; it leases warehouses and crushing plants all over the world; and it even takes equity positions in ports. They are called multinational corporations because these corporations operate in more than one country at a time. Mass qualitative products The main advantages of multinational company is that is produces goods at a larger scale. First, many intermediaries are people intensive, so running them requires familiarity with the local language and culture. The same goes to the manufacturing sector, where standards are set and are expected to be adhered to.


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Role of MNC’s in Developing Countries

advantages of multinational companies in developing countries

Deprived of a job meaning lacking of income, if the society is jobless eventually affects the healthy economy due to insufficient money to spend. The foreign investors find it cheaper to train unskilled labours needed by the enterprise. Jobs and career opportunities at home and abroad in connection with overseas opportunities. As a result, the Indian workers and engineers come to know of new superior technology and the way to use it. That infrastructure allows the company to respond quickly to changes in customer requirements and helps it cope with logistics problems, such as those caused by Hurricane Katrina in 2005. Acquisition of raw material from abroad,which is cheaper in cost.

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Advantages and Disadvantages Sample Essay

advantages of multinational companies in developing countries

Market seekers These are common types of present day multinational companies. Whenever, multinational firms set up their subsidiary production units or joint-venture units, they not only import new equipment and machinery embodying new technology but also skills and technical know-how to use the new equipment and machinery. Company-operated and runs their own private armies, utilizing military power and ultimately taking over administrative functions of India. This maximizes profit margins and can also deliver goods to markets at a lower cost. So its time for the countries which have been exploited to start making changes and amend their ways of doing business for the better and the sooner the better. They install plants in the countries where labor and energy cost is low. It also makes cellular telephones and portable music players for other multinational companies.

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