Advantages and disadvantages of multinational companies

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MULTINATIONAL COMPANIES is a company that is based in one country but operates factories, sales offices in other countries.

Example: BP Company, Total companies, Shoprite Checkers, Bata Shoe Company, coca colonial company they are also public limited companies

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Advantages

  • They have worldwide contacts which the host country can use to boost its export sales
  • They pay tax which boost the governments income
  • They provide jobs (Employment) around the world
  • They bring business knowledge, skills and technology with them
  • They bring foreign exchange by selling their goods abroad
  • They provide quality and services to private households as well as other companies

Disadvantages

  • They tend to exploit undeveloped economies thorough practices such as reducing the price lower than the local traders
  • They dominate most export market and forces the small local companies out of business or take over the local firms-
  • They usually bring their own expert instead of training the locals too participate in important decision making
  • They are able to pay high salaries and offer better conditions to attract most of the skilled locals people at the expense of the local industries
  • Remittance of their profits are taken bank home, hence draining the host countries foreign exchange reserves
  • They are centrally controlled and do not take into account the conditions in field in host countries when drawing up their policies.
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