Advantages and disadvantages of TNCs

  • Created by: Amita
  • Created on: 18-06-14 10:10

Advantages of TNCS on host country

- TNCs help develop mineral wealth in countries that might not otherwise be able to capitalise on local resources (economic) – also a disadvantage

- Positive multiplier effect usually means that the presence of TNCs in a country improves roads, airports and services (economic + social)

- TNCs invest in the economies of developing countries and can help to raise living standards (economic + social)

- TNCs seem to be central to economic growth in today’s world. Foreign Direct Investment (investment into a country when a TNC locates there) has helped China overtake the UK and France to become the world’s 2nd biggest economy (economic)

- TNCs can be responsible for the transfer of technology and managerial know-how from developed to developing nations (social + economic)

- TNCs can be seen as the architects of globalisation. They help build important bridges between nations. (economic)

- TNCs have brought political stability to countries in Eastern Europe and China (economic)

- TNCs are becoming increasingly environmentally aware. Because they have a global corporate image to uphold they can’t get away with the same type of environmental abuse of the past. Most TNCs are now trying to flat up their green credentials. (environmental + social)

- TNCS offer consumers a large degree of consumer choice and can in this way improve standards of living (social + economic)

- TNCs simply offer consumers the best deal. Consumers want the best value and big business is the vehicle that gives it to them. TNCs have allowed consumers in developing countries to buy consumer goods that they would never have been able to buy in the past. (social + economic)


 Disadvantages on host country

- Outsourcing (jobs going outside of place of origin of TNCs) means that TNCs exploit cheap labour. As a result, local workers are paid badly. (economic)

- Profits don’t generally remain within the country in which goods are manufactured (economic)

- TNCs are footloose and may move their operations out of a country at any point – in search of lower wages and cheaper production elsewhere creating economic uncertainty within host country (economic)

- Because they’re transnational TNCs can avoid paying full taxes


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