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Meaning
WHAT IS MNC?
A multinational corporation (MNC) is often a sizable business with headquarters in one country that produces or markets products or services internationally.
Apple as an example (produces goods in China and other counties but operated or decisions via its home country America).
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ADVANTAGES
ADVANTAGES OF MNC
- Modern Technology
- Assure Quality Standards
- Growth of Industry
- Expand Exports
- Research and Development
Modern Technology – The introduction of new technology has a significant impact on lowering manufacturing costs, which results in lower product prices and the mass production of high-quality goods. These businesses import the most recent and advanced technologies. This aids in the technological advancement of developing nations.
Assure Quality Standards – Due to their often big size and greater influence, multinational corporations make greater efforts to give each consumer services of a higher caliber or level of expertise. These factors give clients the assurance that they are receiving high-quality goods even when they pay less.
Growth of Industry – Multinational companies are seasoned and characterized by rapid expansion. Additionally, these businesses present chances for the home industry to expand. By forming relationships and utilizing local businesses for the provision of raw materials to manufacture goods for the worldwide level market, MNCs support local manufacturers or domestic industries.
Expands Export – For a global market, multinational corporations develop products. It aids the export of goods by the host nation. This helps developing nations generate foreign currency and enhances the payment balance. When exports rise and imports fall, the balance of payments improves.
Research and Development – The host nation’s system for product research and development is aided by the resources and experience that multinational corporations have in the field of research. This aids the host nation in raising product quality while lowering costs.
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DISADVANTAGES
DISADVANTAGES OF MNC
- Environmental Damage
- Uncertainty in jobs
- Increases competition
- Reduces Tax Liability
- Pressurize Governments
Environmental Damage – Multinational firms need or prefer to produce items in large quantities because it is more effective and affordable. This might not always be the most eco-friendly course of action. These businesses occasionally make goods with low standards, which lowers prices but also harms the environment by, for example, causing air and water pollution. Poor nations trade environmental harm for more revenues.
Uncertainty in jobs – The MNC can quickly relocate its offices or production facility. The host nation experiences uncertainty as a result. More jobs for people living in these nations are at risk if more corporations relocate their headquarters and centralize activities.
Increases competition – Increased market competition is another drawback of multinational firms. Increasing competition is a capability of Mnc. Due to their superior products and lower pricing, these big businesses can easily dominate the market because they have the financial means to make mass purchases.
Reduces Tax Liability – International corporations work hard to keep their tax obligations to a minimum. Transfer pricing will be useful in achieving this. In nations with high tax rates, they want to pay less in taxes, while paying more in nations with low tax rates.
MNCs can accomplish this by trading parts and partially finished goods between many nations. The goods are transferred at a comparatively high price in countries with high tax rates to make the prices appear bigger. They pay less in taxes overall as a result.
Pressurize Governments – Investments made by multinational corporations can be highly significant for a nation, but they frequently have an imbalanced impact on the government and other institutions in the host nation. Because of the host nation’s economic importance, governments frequently agree to changes even though they may not be good for the long-term wellbeing of their citizens.
These are the primary MNC Advantages and Disadvantages.
