Did you know that 43.9 million workers are currently employed by multinational corporations? Despite this large number, there are still a lot of misconceptions about MNCs and the role they play in the global economy.
That’s why we made this article. In it, we’ll go over five facts that help define the role of a multination corporation in many countries.
That way, you can have a better understanding of the important part they play in both developed and developing countries. Let’s get started!
What Is a Multinational Corporation?
Before we dive into some of the facts that come with multinational corporations, it’s important to first understand exactly what they are.
In a nutshell, multinational corporations are massive organizations that have a variety of branches and subsidiaries spread across a large network that includes multiple countries.
The first indication of a multinational corporation is its size. It’s common for an MNC to make between $50 to $250 billion each year. You don’t make this amount unless your business is sprawling.
The second indication of an MNC is their international business being controlled by a single parent company. Take McDonald’s, for example. There are locations found all around the world.
But, their main base of operations is found in the United States. So, what are the benefits of an MNC? We’ll go into some of them in the next sections.
However, from the parent-company perspective, some of the benefits include things like increased annual sales, more specialized industrial capabilities, and lower taxes.
As we’ll see in these facts, there are also benefits for the overall global community.
1. MNCs Improve the Economy of Developing Countries
MNCs help improve the economies of the countries they’re operating out of in several ways. First, the governments they’re operating out of can tax any profits the MNC makes.
This can help fill in missing revenue gaps for many countries. They also help fill the savings gaps that many countries have between their investments and any mobilized savings they may have.
On top of that, any labor that’s employed by the MNC typically enjoys higher wages than local businesses.
2. MNCs Provide Needed Skills to Workers
Many workers in developing countries lack some of the necessary skills that can make them competitive candidates in both the local and international businesses.
This includes things like technological skills, management experience, and entrepreneurial instincts to succeed on their own. Luckily, many MNCs provide these skills to workers either through training programs or just learning on the job.
These desirable skills make local workers more effective at the MNC they’re hired at. It also sets them up for future success if they enjoy the line of work and want to pursue other job opportunities.
3. Consumers Benefit From MNCs Too
The people that work at a multinational business aren’t the only ones that benefit from the role of these corporations. The benefits are also passed on to consumers.
It doesn’t matter if they’re from the parent company’s country, or any of the countries they operate out of. All consumers get access to lower prices on their products and services.
What’s more, they also benefit from higher quality products due to the specialized industries that MNCs take advantage of.
4. MNCs Don’t Exist in a Bubble
Many people think that a multinational organization exists in a bubble between the parent company and whatever subsidiary or branch they’re operating out of. However, this simply isn’t true.
The reality is that when MNCs enter a country, they often rope in a variety of other industries and services. For example, let’s say an MNC wants to expand to the United Kingdom.
Recent Brexit laws have made this more complicated to do. So, a company might contact a PEO page and legal services to make sure that they’re following all the laws correctly in the country.
They’ll likely also hire contractors to work on their offices, warehouses, or whatever physical building they need. Plus, they’ll need cleaners and other specialized maintenance staff.
That’s a lot of economic activity on top of all of the staff and employees their hiring. So, it’s important to remember that expanding MNCs can provide a much-needed jolt to the local economy.
5. MNCs Reduce the Amount of Child Labor
Some critics of MNCs say they promote the use of child labor to save money on operations. However, in many cases, the opposite is true. Investigations reveal that child labor rates fall when a strong MNC is established.
There are several reasons for this. For one thing, large corporations like Nike, Walmart, and Reebok have been trying to distance themselves from child labor headlines.
To do this, they’ve implemented practices that outlaw the use of this type of labor amongst their suppliers. But what about the larger picture?
After all, if children are fired, and they still need money, then they’ll just look for other jobs that could provide even worse conditions. Well, many MNCs argue that their presence helps increase local wealth in communities.
This, in turn, frees many children from working prematurely. Multinational corporations are not a permanent fix for the child labor crisis.
That requires larger government and regulatory intervention. But, it’s clear that in many ways, their presence can be beneficial.
Appreciate Learning About Multinational Corporations? Keep Reading
We hope this article helped you learn more about the role of a multinational corporation in the global economy. It’s important to remember that not all multinational corporations are made the same.
While some may be interested in giving back to the communities they operate out of, this trait isn’t ubiquitous.
So, make sure to research the specific MNC to get more information on how they operate. Did you learn something from this article? Keep exploring to find hundreds of more articles just like it.
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