These corporations are not well-known for treating people fairly and are instead known for ignoring rules and regulations, as well as turning a blind eye to injustice in the workplace. Minutes are legal documents that are used as a proof for referring back to in the future. The same goes to the manufacturing sector, where standards are set and are expected to be adhered to. Certain countries do not allow a company to run its business the way it operates in other countries, and each country has different labor and business laws. Development of new product leads to diversification of products. On your end, do you think they are beneficial or a big threat in countries, based on the pros and cons listed above? Many multinationals set up companies in countries with the lowest tax rate.
For example: in 2011, Google had £2. That allows them to access better goods, create more opportunities, and eventually raise the standard of living for everyone. Chances are, local businesses will suffer and worse, close down. Payments for intellectual property use or raw materials help move dollars from one country to another. Expenses on the research and development areas are important for the promotion of technology.
Per the Internal Revenue Service Code, these employees have to pay income tax on their compensation. Multinationals are incredibly diverse, which gives them added strength because of this necessity. Regardless of the different laws, money that has been made as profit by multinationals ends up being repatriated to the country where they are headquartered. The extraction of raw materials can cause environmental externalities — polluted rivers, loss of natural landscape. They are meant to benefit their home countries not the host countries. Because in a foreign country, Since consumers are willing to spend their money on only the best products, the multination companies need to keep the strong competitive then they must to produce good goods. When local firms hire these labours, their cost of production reduces, assuming that each labour has the same efficiency.
They produce goods and services of a specific nature both in the parent company and the subsidiary companies in various countries. List of Cons of Multinational Corporations 1. Maintain balance in trade Multinational companies contribute to maintaining balance in international trade of the host country. They provide competition to domestic countries and this makes them gain monopoly power. Multinational corporations remove jobs from their home country.
The present multinational companies involves in raw material dealing are crude oil, gas and mining companies. Inequality to staff A multinational company appoints staff both from the parent country and the host country. A large component of multinational investment in developing economies is seeking out raw materials — oil, diamonds, rubber and precious metals. Advantages of Multinational companies on Host country: Multinational companies are companies who have huge business operations and they operate in more than one country. They often abuse the environment and are typically not very careful when using their resources.
Multinationals engage in Foreign direct investment. John Stith Pemberton is pharmacist who invented formula for the most popular product Coca-Cola in 1886 in Columbus, Georgia. These innovations and discoveries help in introducing new products, services, and knowledge. A corporation is a relatively complex and expensive business organization compared to other business forms and is often subject to double taxation. Mass qualitative products The main advantages of multinational company is that is produces goods at a larger scale. This results in an increase in the National Income of the host country.
Therefore, a multinational company treats the local employees as second grade citizens by providing minimum remuneration and allowances. Another disadvantage of Samsung Multinational Corporations in the host country is that they are not liable to paying of taxes in the country, thus the host countries are disadvantaged as they do not gain from the corporations through taxing them as required Asakawa, Kazuhiro, and Westney, 15. Inward investment by multinationals creates much needed foreign currency for developing economies. Elimination of trade barriers Multinational companies play important roles in eliminating trade barriers and obstructions in international trade. For example, these organizations that have manufacturing plants in China, where wages are very low, do not increase worker salaries when actually they have very huge amounts of extra revenues. Taxes owed to your home country may be lessened through the use of intercompany transactions.
The jobs given to the locals of the host country should be the jobs enjoyed by the people where the head office is located. Expanding overseas helps companies to reach new markets, in turn enabling growth and sales. This is one of the reasons as to why the Multinational Corporations are highly required to keep the best standards possible as required; since, this will be a good way of winning their customers and ensuring that they retain their new customers in their host country. This helps minimize import from foreign countries and can save foreign currencies. They transmit huge profit to their parent country after the payment of necessary taxes. Many of these multinational companies seek take advantage the political system by pressuring because they have such a strong impact on the economy.
The large scale production minimizes per unit cost and helps to face competition in the market. For these things to take place, the government obviously needs to make use of more resources and due to this, natural reserves and parks may be demolished. However, an economist is looking at unemployment is a necessity to maintain a balance economy. List of Pros of Multinational Corporations 1. Also, small businesses do not benefit from this as they are dominated by the. One of the great advantages of a corporation is that it's easy to transfer ownership interests in a corporation. Minimum cost of production The huge investment and mass production helps to minimize per unit cost of products because the fixed cost remains constant at any level of output.
These businesses often reduce the costs of producing goods and make products cheaper for consumers. The multinational companies may afford a low salary to their labor force, because in some developing. Instead, they have decided to look for investors. Capital Outflow Various countries have different laws regarding the movement of money from foreign businesses that operate in their jurisdiction. They own a small business that is starting to grow rapidly.