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MULTINATIONAL CORPORATIONS (MNC'S)
MNC: A corporation that has its facilities and other assets in at least one country other than
its home country. Such companies have offices and/or factories in different countries and
usually have a centralized head office where they co-ordinate global management. Very large
multinationals have budgets that exceed those of many small countries.
FDI: Foreign Direct Investment is the flows of private capital from one country to another,
normally funding for business ventures.
Advantages of MNC's
Availability of capital and foreign investment
Availability of foreign exchange
Promotion of small scale industries
Foreign trade and integration of markets
Disadvantages of MNC's
Harmful for host country
Harmful for domestic producers
Harmful for economic equality
Can take advantage for cheap labour
Labor - MNCs increase the productivity of labor by supplying foreign technology and
employing better training methods. The negative aspect of this is that
unemployment will increase due to labor-saving technology used by these MNCs.
Wages also are often higher than average jobs, but the jobs generated and goods
produced often benefit only the richest portions of society, thereby increasing
Technology - MNCs have large amounts of capital; they indulge in huge amounts of
research and develop new technologies. At the same time, the transfer of
technology to host countries limits the technical knowledge of local subsidiaries.
Though domestic industries in the host countries are developed, they rarely know
the technical aspects of the technology they are using, which creates a handicap.
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Tax Benefit - In the host countries, in which these MNCs operate, they end up paying
taxes; this can lead to the MNCs being favored by the government. The MNCs use
this government leverage to receive subsidies and tax benefits; they can also evade
taxes by increasing the price of imports and decreasing the price of exports of the
products they manufacture. Though they increase the employment and revenue in
the host countries, their unfair influence with government can stifle other local