A multinational organization has operations in more than one nation. Its management headquarters are in one country, known as the home country, and the organisation operates in several other countries, known as host countries. What is a Multinational?
Transfer of technology, capital and entrepreneurship. They increase the investment level and thus the income and employment in the host country. Greater availability of products for local consumers. Greater access to high quality managerial talent which tends to be scarce in host countries. Increase in exports and decrease in imports, thereby improving the balance of payment of host countries. Help in equalizing of cost of factors of production around the world. They provide an efficient means of integrating economics. Costs and benefits to host country:
Acquisition of raw material from abroad, which is cheaper in cost. Technology and management expertise acquired from competing in global markets. Export of components and finished goods for assembly or distribution in foreign markets. Inflow of income from overseas profits, royalties and management contracts. Jobs and career opportunities at home and abroad in connection with overseas opportunities. Helps modernise less developed countries Costs & benefits to home country:
Multinational businesses brings opportunities to those living in the host country. They gain more in wages than what the average wage in the country. Despite this being considerably lower than the US wage. This will allow them to have a better standard of living. MNEs may provide training and education for employees thus creating a higher skilled labour force. These skills may be transferred to other areas of the host country. Benefits to the workforce:
Utilizing factors of production from a number of countries. Cost advantage from cheap labour costs. Cheap raw material from different parts of the world. Influence on Government policies. Plays a key role in globalization Advantages of being a multinational