Question

Advantages of multinationals to home countries are __________.

• A. ensure optimum utilisation of resources
• B. promote bilateral trade relations
• C. promote global Co-operations
• D. all of the above

Answer 1

Answer: (D)

Advantages of MNC's to Host Countries

• The companies bring much needed money into the country.
• The companies help the development of the country by bringing in technology and knowledge that the host country does not possess.
• Multinationals create jobs which boosts the local economy and more workers to tax.
• Multinationals are in a position to benefit from economies of scale. This means the cost per unit can be lowered through specialisation- with a large workforce work can be divided up and people can do their limited job expertly.
• The new companies often help to improve transport links around the area.
• The new multi-national companies act as growth poles for other similar companies. They encourage more companies to locate in the country once they see the benefits that it brings.
• The host country's business also gets management expertise from MNC's.
• The domestic traders and market intermediaries of the host country gets increased business from the operation of MNC's.
• The host country can reduce imports and increase exports due to goods produced by MNC's in the host country. This helps to improve balance of payment.
• Their size and scale of operation enables them to benefit from economies of scale enabling lower average costs and prices for consumers. This is particularly important in industries with very high fixed costs, such as car manufacture and airlines.