7 Advantages and Disadvantages of Multinational Corporations
Multinational corporations are enterprises that operate in several countries worldwide. These organizations have assets and goods or services being offered in more than one country. International corporations can range from car manufacturers to food chains that exist, a result of globalization, with consumers and profit in mind. However, these transnational companies are not spared from criticisms since they also have some negative aspects. Let’s take a look at the benefits and setbacks of multinational corporations.
List of Advantages of Multinational Corporations
1. Cheaper Labor
One of the advantages of multinational corporations is the opportunity to operate in countries where labor is not as expensive. This is one of the perks that smaller companies do not enjoy. Multinationals can set up their offices in several countries where demand for their services and products are high while cheaper labor is available.
2. Broader Market Base
By opening establishments or offices in several countries, multinationals increase their chances of reaching out to customers on a global scale, a benefit which other companies limited to regional offices and establishments do not have. The access to more customers gives them more opportunities to develop and cater their products and services that will fit the needs of potential customers.
3. Tax Cuts
Multinationals can enjoy lower taxes in other countries for exports and imports, an advantage that owners of international corporations can take at any given day. And although not all countries can have lower tariffs, there are those that give tax cuts to investors to attract more international companies to do business in these countries.
4. Job Creation
When international companies set up branches in other countries, employees and members of the team are locals. That said, more people are given employment opportunities especially in developing countries.
List of Disadvantages of Multinational Corporations
1. Potential Abuse of Workers
Multinational companies often invest in developing countries where they can take advantage of cheaper labor. Some multinational corporations prefer to put up branches in these parts of the world where there are no stringent policies in labor and where people need jobs because these multinationals can demand for cheaper labor and lesser healthcare benefits.
2. Threat to Local Businesses
Another disadvantage of multinationals in other countries is their ability to dominate the marker. These giant corporations can dominate the industries they are in because they have better products and they can afford to even offer them at lower prices since they have the financial resources to buy in bulk. This can eat up all the other small businesses offering the same goods and services. Chances are, local businesses will suffer and worse, close down.
3. Loss of Jobs
With more companies transferring offices and centering operations in other countries, jobs for the people living in developed countries are threatened. Take the case of multinationals that create offices in developing countries for their technical operations and manufacturing. The jobs given to the locals of the host country should be the jobs enjoyed by the people where the head office is located.
Multinational corporations have both advantages and disadvantages since it creates jobs but can also end up in the exploitation of workers, among other things. And since they are most likely to stay, it’s best to create policies to make globalization equitable.