As the name suggests, these are organizations that own or control the processes of production in more than one country. They set up offices or factories involved in production in regions where they are certain of cheap labor or because of the availability of other resources. These companies go for production in other countries because of the low cost of production which ensures high profits. They usually have their head offices or headquarters in the mother nations to minimize cost. A majority of the assets of the firms are owned by people from the mother country. This paper is going to deliberate on the advantages and disadvantages that are associated with these international companies.
Advantages of multinational corporations
One of the primary advantages that MCNs enjoy is the easy access to consumers as opposed to companies that are concentrated in one region. Making their products available to many people from many regions increases potential consumers hence enabling them to grow and expand at a higher rate compared to those operating in one country. Expanding production in other regions makes sure that the companies can reach new markets where they can their good and increase profits. Another advantage that they enjoy is cheap labor. A recently concluded research suggests that the reason most international corporations start production in foreign countries is that of the availability of cheap labor. The availability of cheap labor ensures that the companies record high profits because of the low cost of production. Another advantage associated with these companies comes in the provision of employment. When a company decides to expand it has to provide employment for the local population. This move has been considered by many as a form of corporate social responsibility, but in the real sense, the corporations help raise the standards of living for the local communities. Another advantage for the locals is CSR practiced by these organizations. Some go to the extent of providing educational scholarships for local students which are beneficial for the locals.
One of the disadvantages is the laws set in the country they are expanding to. Some countries have strict laws that they expect these corporations to work within. A recently concluded research suggests that multinational corporations are subjected to stricter laws compared to other companies operating the regions only. Another disadvantage appears in the potential abuse of workers. In India, several factories have burnt causing loss of lives for workers. At the same time, these companies may impose policies that do not favor the locals and subject them to maximum production for minimum pay. Some of these organizations take advantage of the relaxed laws in these countries and subject workers to harsh working conditions. Another disadvantage is the competition to small businesses. These firms offer big competition for local businesses and in some cases have led to the closure of some. This discourages entrepreneurship in the regions they occupy hence minimal innovation by the local population. Another one is associated with the loss of jobs in the mother country. Critics argue that once a country has moved its operations to another country, they are taking away the job opportunities that could have been offered to the people. This is disadvantageous to people from the mother nation since their opportunities will be awarded to people from the host nation. Some of these organizations have been condemned for neglecting their environmental role. Every organization has the responsibility to take care of the environment, and some of these firms are completely ignoring this responsibility may be because of the relaxed laws in the country. Some have gone ahead to commit pollution which has resulted in the loss of lives for instance companies that deal with the production of lead have been accused of lead poisoning the locals.