Multinational corporations provide the developing countries around the world with the necessary financial infrastructure to achieve economic and social development. But though they bring about several benefits to such nations, they also come with ethical conducts that happen to exploit the neediness of these countries. So, are multinational corporations really good for both the country of origin and the country of operation? Let us take a closer look at their pros and cons.
List of Pros of Multinational Corporations
1. Their size benefits consumers.
The operational size and scale of these corporations can give them the chance of taking advantage of the economies of scale, which paves the way for lower average costs and prices for consumers. This is particularly important to industries that carry extremely high fixed costs, such as car manufacturers and airlines.
2. They can help a country in many ways.
Multinational corporations have the ability to bring advanced technology to poorer countries, while bringing low-cost products to the wealthier ones.
3. They are cost-effective.
By utilizing labor in parts of the world where the low cost of living does not require high wages for production, these companies can keep consumer costs down. As a result, many industries can also benefit.
4. They can create jobs and wealth.
These global companies’ inward investments offer the much needed foreign currency for developing economies, which in turn help with creating jobs and increasing expectations of things that will likely happen.
5. They help other companies.
Through merger and acquisition, multinational companies can help other commercial organizations with achieving economies of scale in distribution and marketing, allowing well-managed businesses to take over those that are poorly managed.
6. They adhere to the best brand standards.
This is one of the best qualities of these corporations. For example, McDonalds is still McDonalds wherever it is operating in the world. There is a standard that this restaurant chain is expected to adhere to. The same goes to the manufacturing sector, where standards are set and are expected to be adhered to. This builds trust and confidence among consumers, which is then converted to consumer loyalty.
7. They ensure minimum standards.
Somehow connected to the previous pro, the main reason for the success of multinationals is that consumers would usually purchase products and services on which they can go for minimum standards.
8. They help improve standard of living.
Multinational corporations have the capability to improve the world’s standard of living, providing people with access of quality products regardless of the place.
9. Their large profits are consumed for development and research.
Taking into consideration pharmaceutical companies, they can easily afford to pour millions of dollars into their research and development efforts. The same goes for automobile manufacturers and other large corporate entities. Without their global presence and large profit margins, they will not be able to do this. Another good example is oil exploration, which is both costly and risky. As such, only large firms can undertake it by using significant amount of money and other resources.
10. They allow for a wider market.
With these big businesses, huge markets have been created both domestically and internationally.
List of Cons of Multinational Corporations
1. They might unfavorably dominate the market.
Remember that the market dominance of multinational corporations would make it hard for smaller local companies to thrive and succeed. For example, arguments state that the larger supermarkets can squeeze out local corner stores’ notable margin, leading to lesser diversity.
2. They might exploit the workforce.
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. They are put into the spotlight for outsourcing to the lowest bidders and for skimping on quality. They are not known for having what smaller businesses have—the “human” touch. Many of them are even found exploiting workers and natural resources without considering the economic well- being of any country. In fact, some of them are criticized for using slave labor, where workers are paid with very small wages.
3. They take advantage of consumer expense.
Usually, companies are interested at consumers’ expense, but multinational companies, with more power, is taking this to another level.
4. They can push local firms out of business.
Giant multinationals use the scale of developing economies to push the local firms out of their business.
5. They are willing to gain ridiculous profits at any cost.
These companies are able to realize tremendous profits and do not share their wealth. 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.
6. They strive for a monopolized business.
Naturally, many of the largest corporations are monopolizing their industries. They are very powerful, which makes it very difficult, if not impossible, for start-ups and smaller businesses to compete. By monopolizing, they cut out the competition, which eventually stunts economic growth. Plus, authorities might put power in the hands of these global corporations, so they will be able to set the rules.
7. They a great environmental threat.
In the name of profit, multinational corporations commonly contribute to pollution and make use of non-renewable resources, which can pose a threat to the environment. They often abuse the environment and are typically not very careful when using their resources. Moreover, they are well known for leaving an environmental mess in their wake and even have a strong reputation for dumping waste and utilizing natural resources until they are depleted. In general, they are not being very good as keepers of the earth.
While it is a fact that multinational corporations bring a lot of benefits, we cannot also deny that they can cause of some major issues in the economy. On your end, do you think they are beneficial or a big threat in countries, based on the pros and cons listed above?
Brandon Miller has a B.A. from the University of Texas at Austin. He is a seasoned writer who has written over one hundred articles, which have been read by over 500,000 people. If you have any comments or concerns about this blog post, then please contact the Green Garage team here.