Multinational cooperations (MNCs)

Multinational co-operations (MNCs)

Meaning: MNCs are huge industrial organisation which extends their industrial and marketing operations through a network of their branches.Instead of aiming for maximization of their profit from one or two products ,these operate in number of fields and from this point of view,their buisness stategy extends over number of countries.

Features

a)These are giant in size. Their sales run into billions of dollars and thus makes super normal profits.

b)They operate all over the world  where these have effective control and supervision.

c)They have been comprised of Oligopoly structure.

d)These usually grow in a spontaneous and unconscious manner.

e)An MNCs facilitates multilateral transfer of resources includes equipment, machinery, raw material, finished products etc.

f)The various countries have their share in total capital of corporation.

g)They have multi national management.

h)Large part of capital assets of parent company is owned by the citizen of company's home Country.

Role Of MNCs

a) Backward countries -MNCs have offered a great boom to technologically backward countries by providing improved skills, technological know-how.

b)Industrialization-MNCs in India presents an environment for rapid industrialization by filling up gap between savings and investments, by transferring latest techniques of production.

c) International market - MNCs produce goods and services in huge quantity that captures not only domestic but also international market. Exports of India have been rising with the help of MNCs 

d)Large scale employment - MNCs helps in creating large scale employment opportunities by setting up their branches and subsidies in host countries.

e) Domestic resources - MNCs' latest technology of research and management have enable to exploit and utilise the domestic resources to the fullest.

f)Debt trap -MNCs creates private investment which helps in earning foreign exchange resources without adding anything to the debt burden of the country.

g)Foreign capital - MNCs have helped developing countries to secure foreign capital from developed countries. Thus ,they transfer the capital from the countries where these are abundant to those countries where these are scarce.

h)Linkage network - MNCs through their vast international network, marketing, finance produces linkage between parent country and the country where they are operating their activities. Thus they promote international trade.

I)HRD - MNCs helps to build up knowledge base and thus serve development of human resource. They serve as carriers of knowledge , expertise, training of Indian personal, education etc.

Against or favour 

a)Resource drain - The MNCs' basic objective is profit maximization of host country's resources.Thus ,utilises the resources completely .

b)Scarce foreign exchange reserves - After sometimes, the country has to repay the amount to the foreign currency in the form of profits, dividend, interests, fees etc which can create crisis.

c)Obsolute transfer of technology - Technology supplied by the MNCs is capital intensive which may not suit the labour surplus countries .

d)Brain drain - These are accused of cheating brain drainage in the Less developed countries.

e) Influence on culture - These cause destruction of orginal culture of the country by bringing in the customs of other countries.

f) High profit orientation - These minimise overall cost of production and take advantage of national and international market imperfections to maximize their profits.

g) Exploitation of poor consumers - These exploits poor consumer by charging high cost  . They suppresses domestic entrepreneurs and thus harms host country.

h) Insignificant employment - Their investment creates relatively few jobs and thus fails to create employment . These fails to eradicate two chronic problem in less developed countries that is unemployment and poverty .

I) These creates monopoly in the domestic country and thus removes local competitors.