Multinational Companies

Multinational Companies

Definition

A multinational company is a one which produces goods and services outside its home country. It is called Multinational as it has its own production, sales and other revenue generating assets in a number of countries.

Advantages of forming Multinationals

ü It reduces transport costs

ü It helps to avoid import restrictions

ü It helps to enjoy government’s regional assistance

ü It helps to enjoy lower-wage labours

ü It helps to enjoy cheap raw materials

ü It gives advantage of health and safety regulations

ü It helps to avoid certain taxes

Advantages of hosting Multinationals

ü It increases employment opportunities in the host country

ü It brings an enormous increase in economic output of the host country

ü It brings in new technology and new approaches to management

ü It increases consumer choice

ü Increased competition brings better quality goods at lower prices

ü It increases foreign currency inflow due to its investment

Disadvantages of hosting Multinationals

û  It leads to outflow of foreign currency reserve due to repatriation of their profits

û  It exhausts the host country’s resources

û  It eliminates domestic producers

û  It influences the national economy of the host country