A multinational company owns and manages its business in two or more countries - MANAGEMENT

According to ILO report, the essential management of the multinational organizational lies in one
country and they carry out their business in number of other countries.

For example, Sony is a japan based company but operates in all parts of the world. - OPERATION

Multinational companies have large-scale assets and transactions. - CAPITAL

They operate their business at least in six countries. - OPERATION

They produce goods even in the countries where they operate their business. - OPERATION

They have a centralized control on the business from their head office. - MANAGEMENT

They have all the required facilities for production and marketing in several countries - MANAGEMENT

They provide technological facilities to the countries where they operate their business. -
MANAGEMENT

They play a vital role in international trade - OPERATION

ADVANTAGES FOR HOME COUNTRY

- Multinational companies prove beneficial to both, the home as well as the host countries
- They procure raw material from the host countries and thus help the home country in getting
foreign exchange. - CAPITAL
- Technological and administrative skills required for operation of multinational companies may
also be obtained from the host countries - MANPOWER
- They export raw materials as well as finished goods to the host countries thus increasing their
profits - OPERATION
- It Is even possible for them to earn profit and royalty through the administrative agreement
with host countries - MANAGEMENT
- The MNCs create more opportunities for employment in the home country - MANPOWER

ADV FOR HOST countries

- The host countries are benefited by increase in capital investments by the multinational
companies - CAPITAL
- If the host country is a developing country, the home country of an MNC provides technological
and administrative support which in turn revolutionizes the production - MANAGEMENT
- The host countries are also helped by exporting more and importing less - OPERATION
- MNCs make it possible to have standard quality products in all the host countries - OPERATION
- There is a remarkable increase in employment opportunities, new innovations and developed
skills in the host countries - MANPOWER
- MNCs help host countries in utilization of internal resources

DISADVANTAGES
 - The home country of the MNC gets the lion’s share of the profits
- MNCs create dominance in the host countries
- The competition in host countries may vanish and monopoly for MNCs may get established
- There is even a chance of reduction in natural resources of the host countries.
- Many a time they disrespect human rights and also follow corrupt methods to avoid paying
taxes
- They exploit the labor force in the host countries
- Sometimes, they even interfere in political affairs of the nation

Till recent times, the industrial policy of Indian government restricted the foreign investment in our
country

With the onset of economic liberalization policy of India in 1991, many MNCs have started their
operations in India

At the same time, many Indian companies have gone multinational like Wipro and Infosys
2ND VIDEO

Why do MNCs form and continue to grow?

- To avoid trade barriers – (ECONOMY ADVANTAGE)

- Incerase customer base and build loyalty
- Enjoy cheap costs and factors of production leading to lower average costs – (PRODUCTIVITY
ADVANTAGE)
-
- Build reputation and gain recognition – (MARKET ADVANTAGE)
- Increased brand awareness and product recognition – (MARKET ADVANTAGE)

Problems a mnc might face?

- Foreign government regulations (stricter business laws i.e. higher tax on imports/ exports, high
income tax, high operation costs (labor costs, machines), etc.
- Communication barriers – language time zones
- Cultural norms – some products may not appeal to a certain group or region of customers

Benefits of MNC to host country

- Bring new technology and knowledge – (MACHINERY ADVANTAGE)

- Generate employment opportunities – (ECONOMY ADVANTAGE)
- Provide high quality modern facilities and services – (MACHINERY ADVANTAGE)
- Help host countries improve relations with mnc’s home country – (PRODUCTIVITY ADVANTAGE)

Negatives of MNC to the host country

- Exploit labor and resources (LABOR’S SALARY

- Pushing local firms out of business – (LOCAL MARKET DISADVANTAGE)
- Threat to the environment – (ECONOMY DISADVANTAGE)
- Evade tax by practicing transfer pricing – (ECONOMY DISADVANTAGE)
- Transferring profits back to the mnc’s home country
- Dilute culture of the host country with the MNC’s home cultures (LOCAL MARKET
DISADVANTAGE)

BENEFITS OF THE MNC TO THE HOME COUNTRY

- Acquisiton of raw materials from abroad – (ECONOMY ADVANTAGE)

- Help MNC’s home county build relations with other countries
- Help promote home country’s culture and traditions – (MARKET ADVANTAGE)
- Technology and management expertise acquired from competing in global markets –
(MACHINERY ADVANTAGE)
 -  Better profit opportunities in host countries may cause the home country to neglect their
own industrial and economic development (PRICE COMPETITION DISADVANTAGE)
- Inflow of income from overseas profits, royalties and management contracts – (PROFITS
ADVANTAGE)

NEGATIVES OF MNC TO THE HOME COUNTRY

- Instead of providing employment in the home country, mnc focus on employing in host
countries – (ECONOMY DISADVANTAGE)
- Home countries may lose its monopoly on various strategic technologies and equipment to
mnc’s host – (QUALITY DISADVANTAGE)
- MNCs transfer capital from the home country to various host countries causing unfavorable
balance of payment – (LABOR’S SALARY DISADVANTAGE)
- Since investments in foreign countries are more profitable, MNCs may neglect the home
country’s industrial and economic development – (ECONOMY DISADVANTAGE)