Business Studies XI Content
Defects of multinational companies
Defect of multinational companies:
- Outflow of foreign exchange: It uses local capital for their industrial development. They earn industrial development. They earn huge amount of dividend too. The foreign currencies from host countries also go out in the form of royalty and technical fees.
- Negative effect on local industries: Multinational companies have huge market in national as well as international market. This has negatively effected on local industries. They have increased competition on local industries and are slowly replaced by multinational companies.
- Economic exploitation: The main aim of multinational companies is to earn maximum profit. They use unused natural resources and labor, . They produce goods and services at lower cost but the market price is very high. They earn maximum profit by unfair exploitation of host country
- Exploitation of consumers: Multinational companies produce goods and services at lower costs by using cheap local resources and labor in the host country. Due to the high cost of royalties of these commodities they charge higher price to the local consumers. As a result, local consumers are exploited.
- Inequality of employment: There is distinction on employee between parent and host country. They provide minimum employment to local people. They provide minimum wages to the local people. They use advanced technology for the production of goods so that only highly skilled manpower which may not be available in the host countries are employed. They appoint low level employee from host countries and give low salary and high level employees from their own country and give high salary. This creates inequality in employment.