Advantages of a Multinational Corporation on the Host Country
Advantages of a multinational corporation on the host country
The merits of a multinational corporation may be enumerated as follows:
(1) Research and development activities: Developing countries lack in research and development areas. Expenditure on research and development is essential for the promotion of technology. Multinational corporations have greater capability for research and development activities in comparison to national companies. Multinationals survive in the international market through their advanced research and development activities.
(2) Far-reaching effects on the economic, social and political conditions of the host country: Multinational corporations provide a number of benefits to the host country in the form of
(a) Economic growth;
(b) increased profits ;
(c) Developing of new products;
(d) Reduced operational costs;
(e) Reduced labour costs;
(f) Changing social and political structure, etc. Thus, it helps in the exploitation of resources of host countries for their own economic advancement.
(3) Product innovation: Multinational corporations have research and development departments engaged in the task of developing new products, diversification in the product line, etc. Their production opportunities are far greater as compared to national companies.
(4) Marketing superiority: Multinational corporations enjoy market reputations and face less difficulties in selling their products by adopting effective advertising and sales-promotion techniques.
(5) Financial superiority: Multinational corporations generate funds in one country and use such funds in another country. They have huge financial resources at their disposal as compared to national companies. Moreover, multinational corporations have easier access to external capital markets.
(6) Technological superiority: Multinational corporations can participate in the industrial development programmes of underdeveloped countries because of their technological superiority. They can produce goods having international standards and quality specifications by adopting the latest technology. Generally, multinationals transfers technology through joint venture projects.
(7) Potential source of capital and advanced technology: Economically backward countries invite multinational corporations as a potential source of capital and advanced technology to generate economic growth and to create employment opportunities.
(8) Expansion of market territory: Multinational corporations enjoy extension of activities beyond the geographical boundaries of their countries. Multinational corporations can enhance their international image by expanding their operations activities.
(9) Creating employment opportunities: Increase in the scale of operations results in more job opportunities. The entry of multinational corporations helps in creating employment opportunities in production and marketing activities.
(10) Lower cost of production: Multinational corporations carry on operations on a large-scale, which ensure economics in material, labour and overhead costs.
Multinational companies can help their host companies in numerous ways, plus help their bottom line when it comes to taxes. The host company usually has different and lower tax rates than the United States, which helps the company. Lower overhead costs of course help the company, but by employing local employees, this helps everyone in the community of the host company.
Becoming multinational also expands a company’s footprint globally. And this sure helps any company become globally known and cause their brand to become known worldwide.
There are disadvantages also, as in United States consumers getting angry that these multinational companies avoiding United States taxes and this has become a real issue. Business continues to evolve in the political climate and as we become more global, it will be interesting to watch as this plays out.