Multinational Corporations

Can multinationals be controlled?

Features of MNCs

Following are the main features of MNCs:

• Location – MNCs have their headquarters in home countries and have their operational division spread across foreign countries to minimize the cost.
• Capital Assets – Major portion of the capital assets of the parent company is owned by the citizens of the company’s home country.
• Board of Directors – Majority of the members of the Board of Directors are citizens of the home country.
• MNCs are large-sized corporation and exercise a great degree of economic dominance.

We all are quite aware of the bottom line of any business. Every business has the ultimate goal of making profit. Businesses always seek to sell more products and services so as to bring in more revenue and generate profits for its owners.


SHOULD THEY BE CONTROLLED?


Are governments powerless to control multinationals?

Links to details about multinationals

List of Advantages of Multinational Corporations

1. Cheaper Labor
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. Broader Market Base
By opening establishments or offices in several countries, multinationals increase their chances of reaching out to customers on a global scale, a benefit which other companies limited to regional offices and establishments do not have. The access to more customers gives them more opportunities to develop and cater their products and services that will fit the needs of potential customers.
3. 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.
4. 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.

List of Disadvantages of Multinational Corporations

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.
3. Loss of Jobs
With more companies transferring offices and centering operations in other countries, jobs for the people living in developed countries are threatened. Take the case of multinationals that create offices in developing countries for their technical operations and manufacturing. The jobs given to the locals of the host country should be the jobs enjoyed by the people where the head office is located.
Multinational corporations have both advantages and disadvantages since it creates jobs but can also end up in the exploitation of workers, among other things. And since they are most likely to stay, it’s best to create policies to make globalization equitable.

Applicability to Businesses

MNCs are suitable for only a set of business categories. Following are some of the suitable cases where the MNC mode of operation could succeed:

• Businesses where the Government itself wants to avail foreign technology and foreign capital
• Where foreign management expertise is needed
• Where an increase in employment opportunities in the country can be seen as a national interest
• Where it is desirable to diversify activities into untapped areas which include core industries and infrastructure
• Pharmaceutical sector.

Following are the world’s Top 10 MNCs

• Microsoft 
• Nokia
• Toyota
• Intel
• Coca-Cola
• Sony
• IBM
• General Electric
• Nike
• Citigroup.

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