Topic: MNCs and it’s impact on developing countries. (Read 433 times)

I have always thought this is the way forward but for some reason businesses do not want to adopt that approach, for example it is known that on the average office a minority of the employees do most of the work while the majority just do the minimum to get paid, why those two groups should be paid the same when they are not doing the same amount of work? The first group should earn a lot more as they are the ones actually doing the heavy lifting, and yet they are paid the same which forces the first group to either reduce the amount of work they do as it makes no sense to work as hard for the same amount of money or move to another company which pays them more for their work.

In my opinion, multinational corporations has a more negative impact on developing countries. There isn’t any doubt that these MNCs impact a lot on its host nation. They create job opportunities and help with infrastructural development as part of their corporate social responsibility.

Without these MNCs, there would still be competition in the market as local markets would still exist and thrive. MNCs, being already established with large financial assets is definitely not in a healthy competition with other local businesses.

They impact positively as well as negatively on its developing host country.

Multinational coporations have a more positive impact on developing countries than negative impact.  They help to create job opportunities for many people, helps to create growth opportunities and improvement in  standard of living Inn developing countries. It also create competition in market and that promotes and motivates local people to improve their standards.

MNCs set their targets on developing countries not only for the cheap labor and production sites. Like you said, there is potential markets in these countries as well.
We also cannot deny the presence of these MNCs also contribute in its own way to the growth of the host countries.

Totally agree with you. Multinational companies only target developing countries to be able to make them as cheap production sites and as potential markets. However, even so, we cannot deny that the presence of MNC's greatly helps the development of technology and economy in developing countries.

Yes, Developing countries are also urged to create their own manufacturing sector in order to increase employment, increase exports and reduce dependence on aid in the future. These programs have raised the middle class and encouraged economic growth, one of which is multinational companies (MNCs).

This has a positive impact on the economy but has various disadvantages such as unemployment, environmental damage, corruption, and labor exploitation. While the goal is to create sustainable growth for developing countries, it does not address the issue of providing better quality jobs for the millions of people in these countries.

Regardless of the company, they have two options for doing business in foreign markets. One, entered through a local partner and Two, did so by establishing a subsidiary. The first method is the easiest but my favorite is the second because this way the company can understand the market better and have control over its business.

And I think it's also a very common thing for all countries to do when they want to open up opportunities for cooperation through various things including through investment matters like you said. Because every country that wants to cooperate in any form will still take into account how much profit they can get and also how much time they can spend on it. Anyways I don't think any country wants to waste their time on cooperation without profit, it's all for their own sake and the other side can also benefit when there is an opportunity that can be mutually beneficial.

They do not provide capital into developing nations but into their assets and business. They provide investments and job opportunities. And they do all that purely in their interest first before any other reason. Besides, almost everything goes back to its home country
Like the OP said, they wouldn’t be there in the first place if they thought they couldn’t make profit.

One area corporations might improve in is to adopt the wage scaling structure from the book Moby Dick.

The pay scaling used in Moby Dick is entirely profit based. A cabin boy might receive 1/250 of net profit. While the captain might take home 1/10 of profit.

Profit based pay scaling motivates everyone to want to succeed. The more successful their venture is, the more they get paid. This motivates workers to work harder and do more to guarantee their mission does well. Also if their venture fails, they might not be paid much at all. It is a very meritocratic format. It contrasts from current day business where executives whose have enterprises fail might still receive significant bonuses and golden parachute deals.

Profit based wage structuring is also a good historical reference for tracking trends in business and economics. If a street sweeper in 1820 was paid 1/500 of profits and a street sweeper in 2022 is paid 1/450 in profits. That makes pay scaling much easier to put into perspective.

But those governments do not have too much of a choice, it has been demonstrated over and over again that an economy in which the government of the country is the one that generates the most jobs and owns most of the companies is incredibly inefficient, so they need the private sector to do this for them to generate jobs and taxes, and if they refuse to accept MNC then they are putting themselves at a disadvantage against the countries which accept them, so as we can see they do not really have a choice in this matter as they need those jobs and taxes.

Less capital? I am not sure with that. What about the traveling cost, the rent, and others? But they are not worried with it because they are hoping that they will recover it all and earn more if their plans became a success. They can't just create more products but they need to estimate its demand first if it's strong or not so that there will be a less waste.

In the competition part, this would depend on what is the type of business they are creating but I think each business now are all given. I mean there will always be competitors wherever country they are going. What can they only do is to create a unique product which design, features, etc are not seen yet in the other.

From the available report from the post above here I think the disadvantage are coming more in the area that host countries are not enjoying as they should for the provision of land space for the multi national corporation business. This is not good to know because if foreign companies establish business in the region far from their own country they suppose to put some benefit measure for the host to enjoy when they are extracting what they have on the soil. I think the government should review what they are doing with the local community.

Also keep in mind that multinational corporations provides capital into developing nations. For instance, on the financial account of the balance of payments, the investment made to construct the plant is counted as a capital flow. This capital expenditure aids in the growth and expansion of the economy's productive capacity.

This degree of investment is really crucial for determining the rate of economic growth, according to the Harrod-Domar model of growth. Increasing the influx of foreign money is one of the best strategies to boost the rate of economic growth.

Though they have exploited abilities for the various processes and resources I think MNC is very important part of that country. Let us not forget they also have to pay the taxes of state and central governments, they have to do CSR activities and keep the local areas developed infra wise. Many governments will also impose strict rules regarding plantation, man lake formation, which can directly or indirectly help the nature to prosper back. The system is always in place.

Yes I agree that sometimes it’s not as planned sometimes it could be imperfect but they do take care of everything from employment to nature and various social engagement activities. Otherwise how would you think nation runs?

Because it is considered a very good land for the development of multinational companies so that the company continues to look at such countries to get more profits with less capital. And actually it is part of a very good business strategy because the target of each company itself is to market as many products as possible and get the largest possible profit with very simple capital. This is a very mature calculation because when the company has no competition with local companies there, then at least they can dominate the market a bit for this.

In all that you've stated in OP, it could be seen from am overview that, the demerits out weights the merit of having an MNC stationed in a developing nation.
In all, the developing nation gets very little and are not given what there service and resources are worth. Even the needed technologies shared in course of the operations are mainly outdated once in the parent nations though lacking or new to the developing world.

Still, it's creates a platform for some growth phase in the developing world and isn't a chance most nations with economic crisis won't take to build or heal there economy.

The economies of most developing countries would collapse without the activities of multinational cooperations. From experience, the governments of most emerging nations are not good businessmen, which has resulted in the failure of most public corporations. Most public corporations are mismanaged and killed by corruption and embezzlement of funds. That's why most government businesses in my country have been privatized and sold to MNCs. Multinationals are the only hope for the citizens to get basic goods and services and also enjoy certain privileges like social responsibilities and employment opportunities.

All the demerits of MNCs OP outlined prevail in most countries because of a lack of government policies or failure to implement these policies. Politicians prefer to collect bribes from these companies instead of ensuring they do the right thing. The developed world also has these multinationals but they are closely policed by different regulatory bodies to ensure that they don't cause more harm than good.

In order to achieve their evil plans of exploiting and colonizing these developing nations, MNCs dabble in the local politics of their host nations. They also ensure that only politicians or the military that would promote their interests grab political power. They sometimes sponsor elections, coups, and even conflicts because of their desperate aim of reaping the people.   
 

It's profitable to them as the cheap labor, cheap accomodations and cheap expenses for their whole operatio is what makes them go for those developing countries.

The impact of it on that country is huge.

They're onboarding their people to these companies and giving them jobs and that's adding to the GDP of that country. And these companies are like predicting what the government of that country what they can freely do or else, they'll pull out which is a threat.

MNCs look to developing countries as their 'feeding ground' because we know that most developing countries are hungry for that product that they can flex to their peers any time they wanted to. Heck, it's even becoming a status symbol to a lot of them and I'm not sure as to why this is the case. This is happening evidently here in the Philippines wherein products from a multinational company will always be preferred more than local brands even if it's more expensive and offers less compared to its local counterpart. Lots of local businesses are affected by this economic infestation, and may even be the reason why there aren't a lot of successful local brands here that can topple the market share of its foreign counterpart.

One thing that is often abused by multinational companies is the perks and benefits offered by host countries. The very largest of these companies can often have huge departments that are somewhat dedicated to strategic planning and extracting value for the sake of the company - not out of some benevolent. Governments in some desperate countries can sometimes be too generous in what they offer to attract them, even paying too much and negating any economic value they might actually bring. Sure they can offer jobs, but if the government pays far more upfront to secure those jobs then it might have been better to foster local companies who might return more success and taxes in future.

I guess these social responsibilities done by the multinational corporations in its host country could be classified as an advantage. It think I briefly mentioned it in the original post when I talked about growth.

These corporations help with infrastructural development amongst others as part of its social responsibilities. In my opinion, these social responsibilities aren’t mandatory but are done to win the goodwill of the local populace and enable them conduct business smoothly.

Multi-national companies use developing countries as their base ground for manufacturers or we can say for labor forces. Cheap labor, cheap land, and cost-effective transportation are some key points that make developing countries a hot cake for multinational companies. All the telecom companies in Bangladesh are owned by foreign companies. 

It is good that you mentioned this and it is important to note it that corporations or multinationals exploit the host countries resources for the advantage of parent company in their home and as you mentioned again in your last paragraph that they are not charity organizations, this means that no matter how it is painted that they recruit locals (which sometimes are underpaid), their sole aim is profit taking because they are not charitable but profit oriented.

However, there is something that is suppose to be the responsibility of these multinationals that I have not seen in your list and that is that they are suppose to perform some social responsibilities to the host countries which is apart from employment of locals. So I don't know if this should fall under advantages.

Multinationals corporations are suppose to perform social responsibilities to host countries that they exploit their resources and degrade there environment. The first reference is Nigeria where her Naija Delta have been badly degraded by the oil companies, excavating, rig and drilling activities that have changed the suppose natural blessing to gnashing of teeth because of the neglect through the Nigerian government. The region that is laying the "golden egg" for country have been neglected and this has caused droughts and food insecurity because their soil have all been bastardised because of oil drilling activities . The soil degradation that has caused them their agricultural products losses is not only the challenge there, their waters also have been polluted because of the oil drilling activities and acquatic lives is suffering as the people are predominantly farmers and fisher men, they also suffer regular floods.

Consequently, the oil companies or multinationals should do well to be perform their MOU with the communities of their hosts and perform social responsibilities to communities where they are like build good road networks, award scholarship to the youths, clear up oil mess in the region, support them in aspect of need since they have taken away their environment with them, employment is not enough.

There's a drawback yo both that hasn't been mentioned here which is the money that's also taken away from the local economy and the country. A company generally moves into somewhere because it intends to make a profit (some just do it for exposure and market share too but mostly it's about profit). These companies then find ways to avoid paying taxes on these profits by exporting them to another country with 0% or low tax rates. If the government of a country then tries to recoup this loss by adding licensing fees or other fees (such as import tax) they'll risk losing further investments from larger companies (and this is problematic if there aren't many companies wanting to invest to begin with).

MNC: Multinational corporations.

Multinational corporations can be said to be a business organization that deals and operate in two or more countries; having its headquarters mainly in its home country.
Simply put, it’s a business that operates and has offices in more than one country.

What makes a corporation multinational?
It must have operations and should maintain offices and assets in countries other than it’s home country.

These are some features of a multinational corporations;
1. They operate and conduct business internationally and keeps branches in other countries
2. They have and keep huge and large assets; both physical and financial
3. It must have a coordinated network of branches
4. The parent company should have indirect control on the activities of the branches
5. Being a large corporation, they’ve got access to new and top notch technology
6. They employ the best trained managers with the right skill best suited for the job

It’s impact on developing countries.

Multinational corporation would argue that with their presence in developing countries, they’re actively enabling investment opportunities and economic development in these countries hereby greatly creating employment opportunities.
There are merits and demerits of MNCs opening shop in a developing country. Here are some;

Merits
1. Employment opportunities: This is an undeniable fact that MNCs bring with them job employment for the host country, employing about 70% of its workforce from the local populace

2. New tech, ideas and innovation: Being a large and already established corporation, thy would have the best of technology and new innovations that they would bring and ultimately pass down to smaller local businesses

3. Growth: With its massive investments that would include infrastructure development among others, the host country would grow economically.

Demerits
1. Exploitation of cheap labor: MNCs, being attracted by the cheap labor they could get at the developing country make sure to exploit the Human Resources and pay little wages.

2. Pollution to the environment: MNCs discard their waste materials improperly, polluting the environment. Without the regulations and/enforcement on proper waste management, MNCs mostly get a pass or the government turns a blind eye to the pollution and improper waste management practices employed by the MNCs.

3. Threat to local small businesses: MNCs, being large and already established is a viable threat to small businesses as they’ve got the capital and assets. And if unchecked, they could monopolize the economy and ruin other small and upcoming businesses.

4. Exploitation of natural resources: These large corporations massively exploit both human and natural resources as most of the profit generated from doing business in the host country goes directly back to the parent country

5. It can get difficult for a healthy competition as small business obviously can’t compete and overtime, dependency on the goods produced and services rendered by the  MNCs would grow leaving no room for small local businesses.


Whatever perks multinational corporations bring to its host country, we shouldn’t forget in a hurry that these corporations aren’t a charitable organization, with its primary aim is profit making and returns to its shareholders.
With grants and/low tax rates given by the host government to attract these corporations, coupled with the idea of low wages and a higher profit motive, these corporations wouldn’t be there if they thought they couldn’t make profit.