Advantages & disadvantages of multinational businesses

Written by steve jonathan
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Multinational businesses (also called MNCs, or multinational corporations) are large companies that are located and/or operate in several countries. While an MNC can be very beneficial to its home country and host country, it can also include drawbacks. The topic of the advantages and disadvantages of MNCs has been an ongoing debate in business circles.

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MNCs increase the productivity of labour by supplying foreign technology and employing better training methods. The negative aspect of this is that unemployment will increase due to labour-saving technology used by these MNCs. Wages also are often higher than average jobs, but the jobs generated and goods produced often benefit only the richest portions of society, thereby increasing income inequality.


MNCs have large amounts of capital; they indulge in huge amounts of research and develop new technologies. At the same time, the transfer of technology to host countries limits the technical knowledge of local subsidiaries. Though domestic industries in the host countries are developed, they rarely know the technical aspects of the technology they are using, which creates a handicap.

Tax Benefit

In the host countries in which these MNCs operate, they end up paying taxes; this can lead to the MNCs being favoured by the government. The MNCs use this government leverage to receive subsidies and tax benefits; they can also evade taxes by increasing the price of imports and decreasing the price of exports of the products they manufacture. Though they increase the employment and revenue in the host countries, their unfair influence with government can stifle other local businesses.


MNCs promote growth in the field of their specialisation; they make exports profitable and markets competitive. This increases the national income and the profits of the MNCs. Many MNCs have several fields of operation in which they promote development and research. The disadvantage of this is that the growth is concentrated as the investment in small- and medium-sized industries is often neglected. The MNCs can also promote the growth of local businesses and enhance competition, but their local subsidiaries end up purchasing goods from the parent company at higher prices, thereby increasing the prices in the local markets.

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