1.6 Multinational Companies (MNCs)

MNCs are businesses that operate in two or more countries. The business has its headquarters in one country and its operations in other countries.

Impacts of MNCs on host countries

Advantages

• Create job opportunities
• Introduces new skills and technology
• Offer competitive wages in comparison to local businesses
• MNCs may use services and products provided by local businesses
• Intensifies competition: increases productivity and efficiency

Disadvantages

• MNCs may exploit workforce if local working regulations aren't enforced or are weak
• Reduced supply of workforce for local businesses
• Poses a threat to local businesses by making them less competitive: businesses may go out of business and cause unemployment
• Host country may begin depending heavily on MNC
• Tend to establish facilities where labor costs are low: low wages
• MNCs may damage local environment during and after the production process if laws aren't enforced properly
• Usually bad working conditions