Business Studies

Which of the following is/are advantage of MNC's?


ANSWER

MNC's help the most countries to reduce the imports and promote the exports by raising domestic production.


SOLUTION

Advantages of Multinational Corporations in developing countries.

  • Multinationals provide an inflow of capital into the developing country. E.g. the investment to build the factory is counted as a capital flow on the financial account of the balance of payments. This capital investment helps the economy develop and increase its productive capacity.
  • The model of growth suggests that this level of investment is important for determining the level of economic growth. 
  • The inflows of capital help to finance a current account deficit. (Basically, this means that foreign investment enables developing countries to buy imports)
  • Multinational corporations provide employment. Although wages seem very low by Western standards, people in developing countries often see these new jobs as preferable to working as a subsistence farmer with even lower income..
  • Multinational firms may help improve infrastructure in the economy. They may improve the skills of their workforce. Foreign investment may stimulate spending in infrastructure such as roads and transport.
  • Multinational firms help to diversify the economy away from relying on primary products and agriculture – which are often subject to volatile prices and supply.
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