The following are the main advantages and disadvantages of multinational company are:
- Transfer capital and technology
Multinational companies play a vital role in transferring capital, technology, and managerial techniques to developing countries like Nepal by establishing their subsidiaries. Such resources are vital for the economic development of the country.
- Provide quality goods and services
Multinational companies produce and sell standard goods and services at competitive prices . The consumers of developing countries are able to consume goods and services.
- Create employment opportunities
Multinational companies need a large number of employees and workforces for performing their activities. They generally offer high pay scale and career development opportunities to their employment. People of both parent and host countries can enjoy from such employment opportunities. Some of these employment opportunities come to developing countries.
- Mobile resources
Due to the lack of capital and technology the adequate natural and human resources are lying unused. To utilize the adequate natural and human resources huge amount of capital, modern technology, and skilled management should be used properly.
- Increase government revenue
Since multinational companies operate in large scale in national and international markets, they are the major source of government revenues. Multinational companies produce and sell goods in large scale. They pay a large amount of different kinds of taxes to the government of host countries. These taxes are major sources of government.
Negative impacts are seen in the economic, social, and political environment of the host countries . Some disadvantages of multinational company are:
- Affect the local resources
Advantages of natural resources are taken by the multinational companies to operate in developing countries. Multinational companies produce high quality of goods and services because they are financially and technically strong companies so that they affect the local resources.
- Disregarded national priorities
The multinational company usually invest their capital in profitable sectors and developed regions of the host countries as they use capital-intensive technology for the production and distribution of goods and services. As a consequence, most of the developed sectors of their economy remain undeveloped despite the operations of multinational companies.
- Gain monopoly position
Multinational companies can establish their subsidiaries within the large business in the host countries. The economic power of the nation fully depends on multinational companies. Due to the huge financial resource, advanced technology, aggressive promotion etc try to secure monopoly power.
- Risk on national sovereignty
Multinational companies are mega organizations having huge financial resources and high economic power, they may have great influence on the particular parties and government of subsidiaries.
- Outflow of foreign currency
Multinational companies bring foreign capital for investment in the host countries. Therefore, a large of profits of their subsidiaries goes back to the parent company in the form of dividends in foreign countries.