What are Multinational Companies; Pros and Cons

A multinational is a company that operates in more than one country. Their headquarters are often in one country (the mother country).

Multinationals are often large firms such as Coca Cola, Google, fuel companies such as Shell, Exxon etc

Multinationals often being with them benefits such as the provision of employment for the locals. However, they also pose undesirable effects to the countries they operate in such as pollution.

Why companies become Multinationals

Firms may want to become multinational for several reasons. They may want to exploit the resources in a particular country such as oil.

In addition, they may want to reduce transportation costs both for imports and or exports of finished goods. They also have better market information by being close to local consumers.

Moreover, being an MNC increases the brand image and customer loyalty. They may want to benefit from or exploit cheap labour in the host country

Advantages of MNCs to the Host Country

• Creates jobs for the locals
• Can develop the areas they operate in by constructing roads, infrastructure etc
• Can boost a countries GDP.
• Brings in foreign currency and from exports
• Local firms can benefit by becomimg suppliers of these
• Brings new ideas and technology to the host country
• Reduce imports as goods will be produced in the local country

Disadvantage

• Most multinationals retain profits for their mother country. This can starve the host country and reduce GDP.
• Pollutes areas they operate in. Oil leaks by oil firms often occur in areas such as the Niger Delta in Nigeria. Many MNCs don't care about the environment they operate in. They can exploit local people by giving them low wages, forcing them to work long hours etc.
• Can become competitors for local small firms and kick them out of operation
• Can manipulate product prices for them to look cheaper in the local country but worth more in others
• Can relocate or ditch the host country at any time leaving problems such as environmental degradation in the host country unsolved
• May influence local culture through advertisements leading to culture deterioration