Download MNC Merit and Demerit PDF

TitleMNC Merit and Demerit
TagsMultinational Corporation Tech Start Ups Venture Capital Taxes Stocks
File Size215.7 KB
Total Pages19
Table of Contents
                            What are MNCs
Advantages of MNCs
Disadvantages of MNCs for the Host Country
	List of Multinational Corporations:
Characteristics of Multinationals:
	(i) Mode of Transfer:
	(ii) Value for Money:
	(iii) Flexibility:
Strategic Approach to Multinationals:
	A. Innovation Based Multinationals:
	B. The Mature Multinationals:
	C. The Senescent Multinationals:
Reasons for the Growth of MNCs:
	(i) Non-Transferable Knowledge:
	(ii) Exploiting Reputations:
	(iii) Protecting Reputations:
	(iv) Protecting Secrecy:
	(v) Availability of Capital:
	(vi) Product Life Cycle Hypothesis:
	(vii) Avoiding Tariffs and Quotas:
	(viii) Strategic FDI:
	(ix) Symbiotic Relationships:
Country Risk:
Methods of Reducing Country Risk and Control:
	1. Controlling Crucial Elements of Corporate Operations:
	2. Programmed Stages of Planned Disinvestment:
	3. Joint Ventures:
Problems from the Growth of MNCs:
Multinational Corporations in India:
New Industrial Policy 1991 and Multinational Corporations:
Criticisms against MNCs in India:
Document Text Contents
Page 1

What are MNCs
 As the word very well suggests, MNC is a company that owns or controls production in more than

one nation.

 MNCs set up its offices and factories for production in regions where they can get cheap labor and
other resources.

 MNCs go for such multi nation location so as to avail low cost of production thus earning greater

A “multinational corporation” is also referred to as an international, transactional or global

corporation. For enlarging the business firm, multinational is a beginning step, as it helps

youbecome transnational thus leading you to go global.

Advantages of MNCs
 Access to Consumers – Access to consumers is one of the primary advantages that the MNCs

enjoy over companies with operations limited to smaller region. Increasing accessibility to wider
geographical regions allows the MNCs to have a larger pool of potential customers and help them in
expanding, growing at a faster pace as compared to others.

 Accesses to Labor – MNCs enjoy access to cheap labor, which is a great advantage over other
companies. A firm having operations spread across different geographical areas can have its
production unit set up in countries with cheap labor. Some of the countries where cheap labor is
available is China, India, Pakistan etc.

 Taxes and Other Costs – Taxes are one of the areas where every MNC can take advantage.
Many countries offer reduced taxes on exports and imports in order to increase their foreign exposure
and international trade. Also countries impose lower excise and custom duty which results in high
profit margin for MNCs. Thus taxes are one of the area of making money but it again depends on the
country of operation.

 Overall Development – The investment level, employment level, and income level of the
country increases due to the operation of MNC’s. Level of industrial and economic development
increases due to the growth of MNCs.

 Technology – The industry gets latest technology from foreign countries through MNCs which
help them improve on their technological parameter.

 R&D – MNCs help in improving the R&D for the economy.
 Exports & Imports – MNC operations also help in improving the Balance of payment. This can

be achieved by the increase in exports and decrease in the imports.
 MNCs help in breaking protectionalism and also helps in curbing local monopolies, if at all it

exists in the country.

Disadvantages of MNCs for the Host Country
 Laws – One of the major disadvantage is the strict and stringent laws applicable in the country.

MNCs are subject to more laws and regulations than other companies. It is seen that certain countries
do not allow companies to run its operations as it has been doing in other countries, which result in a
conflict within the country and results in problems in the organization.

 Intellectual Property – Multinational companies also face issues pertaining to the intellectual
property that is not always applicable in case of purely domestic firms

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