Question

write the merits and demerits of MNC'S.(both 5 marks question.)

Answer 1

The following are the benefits/merits of MNCs:


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 Maximation. 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.



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 manyMNCs are now shifting their research units to countries like India to avail of monetary incentives and cheap labour.


The following are the De-merits MNCs




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.
hope this may help u ....

Answer 2

An MNC is an abbreviation for Multi-National Corporation or Company, it is a corporate body that operates or controls the production of goods or services in at least one country other than its own nation. The following are the merits and demerits of MNCs:

Merits:

1. It has created a competition through which large varieties of a single good is available in the markets.

2. For the home country, it has lessened the dependence on imports and lead to economic development by providing new job opportunities.

Demerits:

1. In some host nations, the appearance of MNCs can regulate competition and may even create a monopoly.

2.  Workers in the MNCs are paid on an irregular basis and they are often laid off without any payment during the time of recession.