Management expertise enters the host nation, which over the long term spreads as local people learn about it. MNCs create competition and break local monopolies. Economists say this makes local competitors try harder, which leads to superior products and services.
By producing more goods because the MNC operates there, the host country can export more and reduce imports — this improves its balance of payments. MNCs generally offer better pay than local employers in low-income and emerging nations. A Mexican worker employed in a BMW auto plant will earn more per hour and have better career prospects compared to working as a farm hand or other seeking employment with a domestic company.
The spread of multinationals across the planet is part of the rapid economic globalization which is taking place , i. Businesses and countries are becoming increasingly interdependent. What is a multinational company? Account Shopping cart Logout. Explore Business Business Search. Explore Blog Reference library Collections Shop. Share: Facebook Twitter Email Print page. A multinational company MNC is a business that has operations in more than one country. These reasons include: To Operate Closer to Target International Markets Producing closer to target markets has several potential advantages, including reduced transport costs which will be important for bulky goods and improved market information and intelligence.
Gaining access to lower costs of production Many MNCs have taken advantage of lower production costs from operating in developing economies. Avoiding Protectionism By producing in a host country, an MNC may be able to avoid restrictions on imports such as tariffs and import quotas..
MNCs are exposed to risks related to the different countries and regions in which they operate. These can include regulatory or legal risks, political instability, crime or violence, cultural sensitivities, as well as fluctuations in currency exchange rates. People in the home country may also resent an MNC outsourcing jobs abroad. The East India Company. Junius P. Hudson's Bay Company. United Nations Conference on Trade and Development.
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MNC can have a positive economic effect on the country where the business is taking place. The influx of Chinese manufacturing and less expensive Asian labor has pushed large and small companies to invest in operations and expansions overseas. This can take form in many different ways besides manufacturing.
Take McDonalds for example.
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