Mention any four features of Multinational Corporations.
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Answer:
Features of Multinational Corporations (MNCs):
Following are the salient features of MNCs:
(i) Huge Assets and Turnover:
Because of operations on a global basis, MNCs have huge physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than national economies of several countries.
(ii) International Operations Through a Network of Branches:
(ii) Repatriation of Profits:
(Repatriation of profits means sending profits to their country).
MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount of foreign exchange goes out of the host country.
(iii) No Benefit to Poor People:
MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries do not get, generally, any benefit, out of MNCs.
(iv) Danger to Independence:
Initially MNCs help the Government of the host country, in a number of ways; and then gradually start interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, in the long-run.
(v) Disregard of the National Interests of the Host Country:
MNCs invest in most profitable sectors; and disregard the national goals and priorities of the host country. They do not care for the development of backward regions; and never care to solve chronic problems of the host country like unemployment and poverty.
(vi) Misuse of Mighty Status:
MNCs are powerful economic entities. They can afford to bear losses for a long while, in the hope of earning huge profits-once they have ended local competition and achieved monopoly. This may be the dirties strategy of MNCs to wipe off local competitors from the host country.
(vii) Careless Exploitation of Natural Resources:
MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. In this way, MNCs cause a permanent damage to the economic development of the host country.
(viii) Selfish Promotion of Alien Culture:
MNCs tend to promote alien culture in host country to sell their products. They make people forget about their own cultural heritage. In India, e.g. MNCs have created a taste for synthetic food, soft drinks etc. This promotion of foreign culture by MNCs is injurious to the health of people also.
(ix) Exploitation of People, in a Systematic Manner:
MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.
Advantage and Limitation of MNCs -at a Glance
Advantages from the Viewpoint of the Home Country:
Some of the advantages of the MNCs from the viewpoint of the home country are:
(i) MNCs usually get raw-materials and labour supplies from host countries at lower prices; specially when host countries are backward or developing economies.
(ii) MNCs can widen their market for goods by selling in host countries; and increase their profits. They usually have good earnings by way of dividends earned from operations in host countries.
(iii) Through operating in many countries and providing quality services, MNCs add to their international goodwill on which they can capitalize, in the long-run.
Following are main Features of MNC :
Huge Assets and Turnover: Due to their worldwide activities, MNCs have enormous financial and physical assets. MNCs experience enormous turnover (sales) as a result of this. In reality, several MNCs are larger than the national economies of numerous nations in terms of assets and turnover.
(ii) International Activities Through a Network of Branches: MNCs operate internationally through a network of branches, subsidiaries, and affiliates in the host countries where they have manufacturing and marketing operations.
(iii) Unity of Control: This attribute is present in MNCs. MNCs have a head office in the home nation that oversees the operations of their subsidiaries abroad. Branch management functions within the parent company's set of policies.
(iv) Higher Product Quality: A MNC competes on a global scale. Therefore, It pays close attention to the quality of its goods.