how are multinational companies important for the economic development of a nation
Answers
Role of MNC in developing countries
Multinational corporations They are a large firm that are involved in a country, but control, control or management of production and distribution facilities in many countries. So, these multinational corporations are also recognized as international corporations. They do business in a large number of countries and frequently work in varied business activities. The movement of private multinational capital is through these multinational corporations. Thus, multinational corporations are an important source of foreign direct investment (FDI).
Also, it is by the multinational corporations that allocations into modern high-tech developing countries. The significant problem about multinational corporations is why they be existent. Multinational corporations are present because they are highly skilled. Their ability to produce and distribute goods and services arises from internal activities, instead of contracting other firms. Managing a firm involves the production and distribution activities themselves, and which activities will be contracted with other firms and individuals.
Apart from this basic issue, a large firm can decide to set up and operate business units in other countries to benefit from the benefits of the space. For example, it has been found that large American and European firms have established production units in the Middle East countries to find and refine oil because oil is found there. Similarly, to take advantage of lower labor costs, and for tough environmental standards, multinational corporate firms have established production units in developing countries.
Alternative methods of foreign investment by multinationals:
To increase its profitability, it is necessary for many large firms to go for horizontal and vertical integration. For this purpose, they find profitable to set up their production or distribution units outside their home or country. Companies that sell products produced in the domestic country or abroad, companies selling abroad should decide how to manage and control their assets in other countries. In this regard, there are three ways of foreign investment by multinational companies, from which they choose which type of control they adopt on their properties.