Multinational Corporations (MNC’s) Essay

IntroductionWhat is a Multinational Corporation (MNCs)?Multinational companies atomic number 18 firms with their blank space base in unmatched nation and operations in many an(prenominal) new(prenominal) nations. Most of these very ample firms nominate in ordinal word countries or developing countries where they could manufacture the same identical harvest-home for very low cost comp bed to establishing the same firm in the westerly countries producing that product.Although transnational corporations (TNCs) are commonly thought to be synonymous with MNCs they are infact different in several regards. The primary defining means is that they keep their financial headquarters offshore to protect them from taxes. Ideally MNCs are one which are global operating across b orderings with no single national emphasis. The first transnational, appearing in 1602, was the Dutch atomic number 99 India Company.A key concern with regards to MNCs is their mobile nature. Logically they est ablish subsidiaries in countries where conditions are most respectable to their business operations.Very queen-size-scale transnationals have budgets that exceed those of many countries. Countries often offer incentive to MNC, much(prenominal) as tax breaks or lax environmental standards, in order to attract MNC into their country. They tail be seen as a power in global politics.MNCs are important vehicle for the movement of prepare foreign investment. With Direct foreign investment, a firm in the country gains or expands a subsidiary in another through the drill of international capital flows.Companies such as Reebok, Nike, Mcdonalds, DeBeers, Enron, Coca-Cola, Pepsi, Toyota, Colgate, Cadbury are rough of the transnational companies.Text.Positive Aspects of Multinational Corporation in an Economy-Creating Competitive environment Competition is not destructive it has compelled multinational corporations to provide the field with an immense diversity of mettlesome- prop erty and low-priced products. Competition, given free trade, delivers mutually beneficial gains from flip-flop and sparks the col force backative effort of all nations to produce commodities efficiently. As a consequence, contr everywheresy improves world welfare term dampening the spirit of nationalism and, thus, promoting world peace.-Boasting the Economy There is evidence, which was supplied by World Bank and United Nations that multinational corporations are a key factor in the large receipts in welfare that has occurred in developing countries over the last cardinal years. These firms rent buildings and land, or both(prenominal)times buy them thus generating higher incomes for the owners. In 1998, 75% of foreign direct investment went to developed countries. Besides, labor costs alone do not determine where multinational corporations base their affiliates other variables-such as political stability, infrastructure, education levels, future market potential, taxes, and go vernmental regulations-are much decisive and a boaster in the thrift.-Help to reduce poverty They plunder bring money into a country through employment and investment. trio quarters of international investment in developing countries is from MNCs and private sources. They create jobs, raise labour standards as in their absence, the populate would have had few or much lower paying jobs. For instance in Bangladesh, Mexico, Shanghai, Indonesia, Vietnam, and elsewhere figures show that multinationals actually pay what economists call a wage premium, that is, an fair wage that exceeds the going rate in the area where they are located. Affiliates of some U.S. multinationals pay a premium over local wages that ranges from 40 to light speed percent.-Welfare Activities Carried Out MNC also organizes charitable funds for the welfare of the community of the countries where they are located. For example after the tsunami Schlumberger a well know MNC agree to support fourchildrens a ctivity centers that now are existence administered by the two charitable trusts. Each go away accommodate 50 to 100 children who will receive nutrition, counseling, and education.-Spillover This is a very good issuance on developing economies this refers to the fact that domestic firms learn productivity-enhancing techniques from foreign corporations with emend technology and management practices. Production workers often learn give out techniques while engaged by foreign firms. Managers whitethorn learn about better practices by observing, or by having previously worked at multinationals themselves. And increased aspiration pushes all companies in an area where multinationals are operating to become more productive.-Reliability & Awareness When a product is associated with an MNC it is considered to be a good quality product and genuine as these firms follow the same standards and procedures to manufacture it wherever they are, which goes with their goodwill and reputat ion all over the world. For instance a burger at Mcdonalds will taste the same in Paris or India. This reliableness helps the consumers to distinguish between the MNC product and local product thus creating awareness.-No function to external Debts for Developing Countries If the investment does not do well, the multinational corporations may lose their investment and the developing country does not receive the aforesaid(prenominal) benefits, but the developing country owes no restitution. As a result, multinational corporation investments do not contribute to the external debt problems of developing countries. damaging Aspects of Multinational Corporation in an Economy.Incidents such as the improper wasting disease in the Third World of baby milk formula manufacture by Nestle, the gas leak from a Union Carbide plant in Bhopal, India, and the alleged involvement of foreign firms in the overthrow of President Allende of chile have been used to perpetuate the ugly image of MNCs. Th e fact that some MNCs command assets worth more than the nationalincome of their host countries also reinforces their majestic image. And indeed, there is evidence that some MNCs have paid bribes to government officials in order to get around obstacles erected against internetable operations of their enterprises. Here are some negative contacts on the economy-Exploitation of Labor This can be proved by examples like companies like Reebok, Nike have exploited the labor in Indonesia. Workers live in deteriorating, leaky, mosquito infested apartments and only earn a guiltless 39$ a month for producing thousands of products worth well over 100$ each.They encourage child labor as in poor countries where nation is rising poverty is everywhere and children cannot afford to study are employed by these big firms thus jeopardizing their health and future. For instance in India one of the gem cutting industries DeBeers employed cardinal-year-old children at work on vulnerable polishin g wheels, people living and sleeping at their workplaces, and trash, human faeces and industry waste clogging the open sewers that run between the rabbit warren of gemstone workshops. In one factory almost half the workers were under-age. As diamonds are ground, fine dust enters and infects the lungs. Diamond cutting is among the top 10 hazardous and the employment of children under 15 is banned. However, the number of children employed in recent years has been rapidly expanding.-Polluting the Environment Some MNCs are also responsible for polluting the environment like throwing industrial waste in rivers, polluting the air etc. We had a very serious case in India the Bhopal Gas Tragedy where in over 40 tons of destructive methyl isocyanate, hydrogen cyanide and other gases leaked from a hazardously knowing pesticide factory in Bhopal owned by US based multinational Union Carbide Corporation. Over 500,000 men, women and children were exposed to the poison clouds and at least six thousand people died within the first week of the disaster. The current finale toll is well over 16,000. Hundreds of thousands of survivors continue to suffer from multi-systemic injuries.-Harming Domestic coronation By pumping in foreign investments itdiscourages domestic investments it is like the big look for eats the small fish in the ocean. Local products suffers and this intern discourages domestic investments-Monopolistic Power Due to a large share in the economy they can exploit the countries on the basis of this like causing problems in aspects of human rights, economic fragility, corruption etc.-Human Rights Violations Due to having substantial pith of power it allows them to easily find cheap labor in large quantities as a result the workers are exposed to hazardous conditions, over exertion and overall are subject to abuse of capital -owners.-Corruption MNC can easily get their work done like acquiring a licence for manufacturing products which may cause damages to the environment or people by Bribing the officials and also exploit the government due to their stake in the economy thus encouraging corruption. Like the Enron go through raised inclination for a number of reasons there was no competitive bidding for the project. The project costs and power tariffs were higher than other power projects and the cost of electricity from Enron would be higher than before. The Maharashtra Electricity Board promised to buy all the high priced power produced by Enron even if cheaper power was available. No environmental impact assessment has been done. Natural gas is 90% methane, which is 20 times more damaging to the global climate than CO2. Each well produces thousands of tons of harmful drilling mud that contains arsenic, lead, and radium that severely affects the health of people.Conclusion.Determining the positions (in favor or against) of nation-states towards MNCs is a bit complicated and not always logical. more often than not developed countries usually favor MNCs as it allows firms to make more profit with cheaper labor.With developing countries the stance is not very clear usually they will favor this in order to boost the economy and infrastructure. Thus delegates mustiness consider many complex economic factors that would help explain whether it is in their favor to support or oppose multinational corporations based on whether that particular developing nation has comparative advantage or not.