Multinational Firms

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  • Created by: jaaaz_v
  • Created on: 09-04-15 14:14

Multinational Firms

Advantages

  • MNE's can be a source of foreign investment, and can create employment for locals in the other countries.
  • They give the host countries access to foreign technology and working methods, which could benefit the foreign country.
  • The profits of the MNE could be a source of taxation revenue for the host countries govournment.
  • The business is likely to export goods from the host country to foreign markets. The revenue from these sales could imporve the host countries balance of payments.

Disadvantages

  • The jobs created by MNE's are often easy which allows the business to exploit the availability of cheap labour, making their staff work long hours for low wages, which is unfair.
  • It can cost the government money to host a MNE if the taxation revenue is less than expected.
  • The MNE would benefit from economies of scale, which could have a bad effect on local industries
  • They can cause environmental degradation in developing countries, which can last a very long time.

Evaluation

Becoming an MNE would enable a business to gain access to raw materials and cheap labour, which would benefit their finances. However, they may not end up being as successful as they'd planned, and setting up an MNE could ruin their business financially. A business would also need to consider how much money they'd need to spend on advisers and expert accountants to manage their business when it stretches over multiple countries. A business would also need to consider the ethics of becoming a multinational firm just to gain access to cheap labour and raw materials.

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