Question

Merits and demerits of MNC..

Answer 1

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$\mathbb\blue{Merits\:of\:MNC}$

1. Cheap Labour

One of the advantages of multinational corporations is the opportunity to operate in countries where labor is not as expensive. This is one of the perks that smaller companies do not enjoy. Multinationals can set up their offices in several countries where demand for their services and products are high while cheaper labor is available.

2. Tax Cuts

Multinationals can enjoy lower taxes in other countries for exports and imports, an advantage that owners of international corporations can take at any given day. And although not all countries can have lower tariffs, there are those that give tax cuts to investors to attract more international companies to do business in these countries.

3.Job Creation

When international companies set up branches in other countries, employees and members of the team are locals. That said, more people are given employment opportunities especially in developing countries.


$\mathbb\blue{Demerits\:of\:MNC}$

1. Potential Abuse of Workers

Multinational companies often invest in developing countries where they can take advantage of cheaper labor. Some multinational corporations prefer to put up branches in these parts of the world where there are no stringent policies in labor and where people need jobs because these multinationals can demand for cheaper labor and lesser healthcare benefits.

2. Threat to Local Businesses

Another disadvantage of multinationals in other countries is their ability to dominate the marker. These giant corporations can dominate the industries they are in because they have better products and they can afford to even offer them at lower prices since they have the financial resources to buy in bulk. This can eat up all the other small businesses offering the same goods and services. Chances are, local businesses will suffer and worse, close down.



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Answer 2

Answer:

The merits of MNCs are as follows:

1. Economic Development

The Developing countries need both foreign capital and technology to make use of available resources for economic and industrial growth. MNCs can provide the required financial, technical and other resources to needy countries in exchange for economic gains.

2. Technology Gap

MNCs are the instruments of transfer of technology to the host country. Technology is necessary to bring down cost of production and produce quality goods on a large scale. The services of MNCs can be of great help to bridge the technological gab between developed and developing countries.

3. Industrial Growth

MNCs are dynamic and offer growth opportunities for domestic industries. MNCs assist local producers to enter the global markets through their well established international network of production and marketing. And there by ensure industrial growth.

4. Marketing Opportunities

MNCs have access to many markets in different countries. They have the necessary skills and expertise to market products at international level. For example, an Indian Company can enter into Joint Venture with a foreign company to sell its product in the international market.

5. Work Culture

MNCs introduces a work culture of excellence, professionalism and fairness in deals. The sole objective of Multinational is profit maximisation. To achieve this, the Multinationals use various strategies like product innovation, technology up gradation, professional management etc.

6. Export Promotion

MNCs assist developing countries in earnings foreign exchange. This can be done by promoting and developing export oriented and import substitute industries.6.      Export Promotion: - MNCs assist developing countries in earnings foreign exchange. This can be done by promoting and developing export oriented and import substitute industries.

7. Research and Development

The resources and experience of MNCs in the field of research enables the host country to establish efficient research and development system. It is a fact that many MNCs are now shifting their research units to countries like India to avail of monetary incentives and cheap labour.

The demerits of MNCs are as follows:

1. Problem of Technology

Technology developed by MNCs from developed countries does not fully fit in the needs of developing countries. This is because, such technology is mostly capital intensive.

2. Political Interference

The MNCs from developed countries are criticised for their interference in the political affairs of developing nations. Through their financial and other resources, they influence the decision-making process of the governments of developing nations.

3. Self-Interest

MNCs work towards their own self-interest rather than working for the development of host country. They are more interested in making profits at any cost.

4. Outflow of foreign Exchange

The working of MNC is a burden on the limited resources of developing countries. They charge high price in the form of commission and royalty paid by local subsidiary to its parent company. This leads to outflow of foreign exchange.

5. Exploitation

MNCs are criticised for exploiting the consumers and companies in the host country. MNCs are financially very strong and adopt aggressive marketing strategies to sell their products, adopt all means to eliminate competition and create monopoly in the market.

6. Investment

MNCs prefer to invest in areas of low risk and high profitability. Issues like social welfare, national priority do not find any place on the agenda of MNCs.

7. Artificial Demand

MNCs are criticised on the ground that they create artificial and unwarranted demand by making extensive use of the advertising and sales promotion techniques.