Multinationals

Tuesday, February 05, 2013

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
v  It reduces transport costs
v  It helps to avoid import restrictions
v  It helps to enjoy government’s regional assistance
v  It helps to enjoy lower-wage labours
v  It helps to enjoy cheap raw materials
v  It gives advantage of health and safety regulations
v  It helps to avoid certain taxes


Advantages of hosting Multinationals
v  It increases employment opportunities in the host country
v  It brings an enormous increase in economic output of the host country
v  It brings in new technology and new approaches to management
v  It increases consumer choice
v  Increased competition brings better quality goods at lower prices
v  It increases foreign currency inflow due to its investment

Disadvantages of hosting Multinationals
v  It leads to outflow of foreign currency reserve due to repatriation of their profits
v  It exhausts the host country’s resources
v  It eliminates domestic producers
v  It influences the national economy of the host country
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