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Business Environment and Law-Global Trends In Business And Management

Merits and Demerits of MNC - Global Trends In Business And Management

   Posted On :  06.05.2018 09:47 pm

Merits and Demerits of MNC - Global Trends In Business And Management

Merits Of MNC



The important arguments in favour of the mncs are mentioned below:


  • MNCs help to increase the investment level and thereby the income and employment in host country.
 
  • The transnational corporation has become vehicles for the transfer technology, especially to the developing countries.

  • They also kindle a managerial revolution in the host countries through professional management and the employment of highly sophisticated management techniques.

  • The MNCs enable the host countries to increase their exports and decrease their import requirements.

  • They work to equalize the cost of factors of production around the world.


  • MNC provide an efficient means of integrating national economies.

  • The enormous resources of the multinational enterprises enable them to have very efficient research and development systems. Thus, they make a commendable contribution to inventions and innovations.
  • MNC also stimulate domestic enterprise because to support their own operations, the mncs may encourage and assist domestic suppliers.

  • MNC help increase competition and break monopolies.


Demerits Of MNC



The various cases against mncs are:


  • The MNCs technology is designed for worldwide profit maximization, not the development needs of poor countries.

  • Through their power and flexibility, mncs can evade or undermine national economic autonomy and control, and their activities may be inimical to the national interests

  • MNCs may destroy competition and acquire monopoly powers.

  • The tremendous power of the global corporations poses the risk that they may threaten the sovereignty of the nations in which they do business.

  • MNCs retard growth of employment in the home country.

  • The transnational corporations cause fast depletion of some of the non-renewable natural resources in the host country. They have also been accused of the environmental problems.

  • The transfer pricing enables mncs to avoid taxes by manipulating prices on intra-company transactions
 
  • The MNC undermine local culture and traditions; change the consumption habits for their benefits against the long-term interests of the local community.


Prespective



Future holds out an enormous scope for the growth of MNCs. The changes in the economic environment in a large number of countries indicate this. A united nation’s report described several developments that points to a rapidly changing context for economic growth, along with a growing role transnational corporations in that process. These include:

  • Increasing emphasis on the market forces and a growing role for the private sector in nearly all developing countries.

  • Rapidly changing technologies that are transforming the nature of organization and location of international production.

  • The globalization of firms and industries.

  • The rise of services to constitute the largest single sector in the world economy and

  • Regional economic integration, which involves both the world’ largest economies as well as selected developing countries.


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