Let us take a closer look at their pros and cons. What is a Multinational Corporation? Good quality products Because they use capital-intensive technology, they are able to produce top-of-the-line products. The existence of economics of scale means there are inherent costs advantages of being large. It is so because the growth of international transactions of the multinationals has affected the more traditional forms of capital flows and international trade for many economies. 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. Unlike the centralized model, the regionalized model includes subsidiaries and affiliates that all report to the headquarters. Once the products are sold, the corporation loses control over the way the product is marketed and utilized.
This is particularly important to industries that carry extremely high fixed costs, such as car manufacturers and airlines. This give a major leverage to financial status. The company suggests that by 2020, the rapid-growth economies will include 270 million new households, which will make investment in these countries even more attractive. A prime example would be Gillette, which has revolutionized the shaving systems industry. This is one of the best qualities of these corporations.
For example, Infosys originated in India but has offices in U. 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. However, these transnational companies are not spared from criticisms since they also have some negative aspects. This is sometimes a requirement of the host government. 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. It employs capital intensive technology in manufacturing and marketing.
It gives a boost to the industrial activities of home country. The foreign control may range anywhere between the minimum of 51 per cent to the full, 100 per cent. Multinational corporations have both advantages and disadvantages since it creates jobs but can also end up in the exploitation of workers, among other things. While it may be true that a license will take precautions to protect patent rights, it is equally true that it may be less conscientious than the original owner of the patent. .
They can afford to bear losses for a long while, in the hope of earning huge profits-once they have ended local competition and achieved monopoly. In the input based measure, the technical efficiency of the firm is evaluated by the extent to which all inputs could be proportionally reduced without reduction in output. Many of them are even found exploiting workers and natural resources without considering the economic well- being of any country. 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. Another good example is oil exploration, which is both costly and risky. Among the developing countries only India had an annual income twice that of General Motors, which is the biggest multinational corporation. Moreover, they are well known for leaving an environmental mess in their wake and even have a strong reputation for dumping waste and utilizing natural resources until they are depleted.
In a broad sense, Multinational Corporation refers to a corporate giant business firm having extended its productive activity in many nations besides its home country. Its management system also focuses on a global or regional outlook. For example, McDonalds is still McDonalds wherever it is operating in the world. Multinational corporations have both advantages and disadvantages since it creates jobs but can also end up in the exploitation of workers, among other things. Decisions on new investment and the local objectives are taken by the parent company.
Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance. In that year the U. They develop expertise understanding the culture, politics, economy and legal aspects of the country that they are planning to enter. Plus, authorities might put power in the hands of these global corporations, so they will be able to set the rules. As the influence of multinational corporations over public policy continues unabated, the key challenge for those campaigning for social and environmental justice is how to redistribute political power back into the hands of ordinary people.
The main level of efficiency is generated from technology transfer. By monopolizing, they cut out the competition, which eventually stunts economic growth. Loss of Jobs With more companies transferring offices and centering operations in other countries, jobs for the people living in developed countries are threatened. Employees were asked about workplace culture, and how much faith they have in their company. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.
The Pepsi Cola company of the U. They help improve standard of living. One ominous sign from the Indian point of view though there has been a profound progress in the performance of Indian Companies but this change has been made possible with linkages of foreign firms. Such corporations do not take much interest in the social welfare activities of the host country. The powers of the company were far reaching, since the Dutch had no real presence in Asia at the time. That said, more people are given employment opportunities especially in developing countries. For example, these organizations that have manufacturing plants in China, where wages are very low, do not increase worker salaries when actually they have very huge amounts of extra revenues.
Remember that the market dominance of multinational corporations would make it hard for smaller local companies to thrive and succeed. In this article Ray shows apart from technological transfers, domestic firm has not shown any remarkable progress. One major gains of the economic reforms phase has been that there has been increased element of competitiveness in the economy, which compels domestic firms to increase their competitive strength. Although this approach is considered low risk on account of its low investment costs, the way that the product is handled can hurt a corporation's image and potential for further business in foreign regions. The subsidiary companies are to operate under control and guidance of parent company. The characteristics of a multinational corporation include its engagement in exporting, joint ventures, global strategic partnerships and the use of license agreements.