Describe some of the positive and negative roles played by Multinational Corporations (MNC's) in the contemporary world economy?

Essay by Vandana1University, Bachelor'sB-, September 2005

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What is a Multinational Corporation (MNC's)?

Multinational companies are firms with their home base in one country and operations in many other nations. Most of these very immense firms establish in third word countries or developing countries where they could manufacture the same identical product for very low costs compared to establishing the same firm in the western countries producing that product.

Although transnational corporations (TNC's) are commonly thought to be synonymous with MNC's they are infact different in several regards. The primary defining factor is that they keep their financial headquarters offshore to protect them from taxes. Ideally MNC's are one which are global operating across borders with no single national emphasis. The first multinational, appearing in 1602, was the Dutch East India Company.

A key concern with regards to MNC's is their mobile nature. Logically they establish subsidiaries in countries where conditions are most favorable to their business operations.

Very large multinationals have budgets that exceed those of many countries. Countries often offer incentive to MNC, such as tax breaks or lax environmental standards, in order to attract MNC into their country. They can be seen as a power in global politics.

MNC's are important vehicle for the movement of direct foreign investment. With Direct foreign investment, a firm in the country creates or expands a subsidiary in another through the use of international capital flows.

Companies such as Reebok, Nike, Mcdonalds, DeBeers, Enron, Coca-Cola, Pepsi, Toyota, Colgate, Cadbury are some of the multinational companies.


Positive Aspects of Multinational Corporation in an Economy

-Creating Competitive Environment - Competition is not destructive; it has compelled multinational corporations to provide the world with an immense diversity of high-quality and low-priced products. Competition, given free trade, delivers mutually beneficial gains from exchange and sparks the collaborative effort of...