Advantages and disadvantages of multinational companies. Advantages and Disadvantages of Transnational Strategy 2019-01-05

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What Are the Advantages of Multinational Companies?

advantages and disadvantages of multinational companies

Only large firms can undertake it with significant resources and profit. The same goes for automobile manufacturers and other large corporate entities. This results in capital outflow that harms the host country's economy in the long run. Taxes and Other Costs While multinational companies can take advantage of cheap labor, they might also be subject to higher taxes and have to pay more for other things such as transporting goods. Multinational businesses and non-profit organizations have numerous advantages.

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Advantages & Disadvantages of Multinational Corporations

advantages and disadvantages of multinational companies

Efficient management Efficient management is one of the main reasons for the successful operation of a multinational company. Multinational corporations provide the developing countries around the world with the necessary financial infrastructure to achieve economic and social development. However, some companies will have difficulties to keepus with that standard - maybe it will be expensive to be an ethicalbusiness. Thirdly, the growth of multinational companies in those countries will increase level of industrial and economic development. I will list in 2 separate sections the pros and cons that I have found thus far. For these things to take place, the government obviously needs to make use of more resources and due to this, natural reserves and parks may be demolished. The downside to the labor advantage is the potential for abusive labor practices.

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Advantages and Disadvantages of Multinational Companies

advantages and disadvantages of multinational companies

So, are multinational corporations really good for both the country of origin and the country of operation? Businesses that conduct operations and sell to customers in multiple countries are considered multinational firms. The money that they save is passed on to the customer, which is great for the economy. He holds a Master of Business Administration from Iowa State University. Somehow connected to the previous pro, the main reason for the success of multinationals is that consumers would usually purchase products and services on which they can go for minimum standards. Medium and small scale cottage industries of the host country are either displaced or they surrender to the multinational companies. As the world has become more globalized, more Americans work for multinational organizations.

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What are the Advantages and Disadvantages of Multinational Corporations?

advantages and disadvantages of multinational companies

The advanatages are the company willhave an increase in reputation, more employees wi … ll enroll in thecompany, employees feel more motivated to work, customers have moretrust in it. Ownership and control The ownership of multinational companies remains both with the parent company and the subsidiary company. The operational size and scale of these corporations can give them the chance of taking advantage of the economies of scale, which paves the way for lower average costs and prices for consumers. The disadvantages of unemployment are as clear as water to most people in the society even if they did not study economy. Therefore lack of understanding about the foreign markets is perhaps the biggest shortcoming when the company is adopting the transnational strategy. Research and investigation help discover new knowledge and ideas. Last but not the least, the staff from those companies are of different nationalities and culture, they can share different thinking make the company growing up better.

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Multinational Companies (MNCs)

advantages and disadvantages of multinational companies

Destruction of Local Industries Multinationals usually have more money in terms of capitalisation than local businesses. Next, high unemployment rate in a country not only bring disadvantage for those who suffered from unemployment and creates a big economy downturn. The poor section of the society cannot buy their products. Brought to you by Disadvantage: Preferential Treatment Over Local Industry By virtue of your economic importance, the foreign government may accord your corporation disproportionate leeway in your operations. Hence, there is a threat of nationwide opposition to multinational company. If that firm hires 10 immigrants to produce the same amount of shoes with the same amount of wages, the production of shoes actually increases without.

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Disadvantages Of Multinational Companies

advantages and disadvantages of multinational companies

Because of their many branch companies, they employ local people in those countries to work for the corporation. Isn't this what we are all looking for? Political, Legal and Operational Risk Another demerit of transnational strategy is that company is always exposed to political, legal and operational risk which are associated with operating in different countries and if company is not big enough to have resources, time and money at its disposal for handling this risk than the whole strategy of doing business in other countries may backfire resulting in loss for the company. He has been a college marketing professor since 2004. The main motive of such multinational companies is to expand their business at international level. Multinational business relies on its imports and exports around the world. The countries which cherish the services provided by the home country are known as host countries. They transmit huge profit to their parent country after the payment of necessary taxes.

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Advantages and Disadvantages of Multinational Companies

advantages and disadvantages of multinational companies

Multinational companies give importance to research and development. Advanced Technology Advancement in modern science and technology is one of the major features of a multinational company. This makes it possible to run independent arms of the business in areas with lower tax rates and tax shelters. Americans have several options on all products, where … some foreign lands do not. They are called multinational corporations because these corporations operate in more than one country at a time. Today, international relation and cooperation is based on financial assistance and economic development. This is one of the perks that smaller companies do not enjoy.

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The Advantages and Disadvantages of Multinational Companies

advantages and disadvantages of multinational companies

While global companies can certainly have a positive culture, building shared values becomes much more challenging with a workforce spread across multiple countries. The development of the free market economy concept at the international level helps large scale manufacturing to enter the international market without much hassles. Therefore, multinational companies contribute to resource mobilization and technology development for the economic prosperity of the host country. This can eat up all the other small businesses offering the same goods and services. In Location of International Business Activities pp. Career Opportunities Working for a larger company offers more job opportunities.

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