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

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