Wednesday, 10 February 2016

7 reasons why Developing Economies must encourage Investment from MNC's and Vice-Versa

A multinational corporation (MNC) refers to an organization which is having its headquarters in one country and carries out its business trade and operations in another country. The country with the headquarter is known as the home country and carries out business operations in a number of other foreign countries known as the host country. The U.N.O has defined multinational corporations as “Enterprises which own or control production or service facilities outside the country in which they are based.”

Multinational Companies have started about 25 years ago and have spread all over the world. They are giant sized companies carrying operations in several countries having a centralized control. Some popular MNC’s globally include Sony (Japan), Suzuki (Japan), Cadbury (U.K.), Proctor and Gamble (USA), Ponds (USA), Honda (Japan), Gillette (USA), Brook Bond (U.K.). Currently,USA has the largest number of MNC’s in the world.

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In the past few years, it has been observed that MNC’s are entering the developing countries to expand their business operations, liberalized economic environment of the developing countries has facilitated   the smoother entry of MNC’s. Some companies have started subsidiaries and some have made joint ventures while some are setting up various projects. The investments made by MNC’s in the developing countries provide many benefits to them. Few of them are listed below:

  1. Multinationals bring more and more capital into the country and is supplementing the efforts of developing economies.
  2. These Multinational Corporations are bringing better technology by entering into joint ventures. Developing countries have obsolete technologies which are getting replaced as the MNC’s are coming on the business front.
  3. It also develops a competition among various firms and industries which in turn improves the market and business conditions.
  4. Various job opportunities are available as the MNC’s start investing in developing countries.
  5. The infrastructure also gets improved as many MNC’s are setting up projects here. This would result in an infrastructural development which will gradually lead to economic growth.
  6. Due to the availability of resources and lack of ability to utilize those resources judiciously has attracted many MNC’s to set up a business here, this leads to proper utilization of resources.
  7. It helps in importing better technology and also enables expansion and diversification of production activities.
These MNC’s have a huge contribution to the development of the developing countries both on the socio-economic and the business fronts. They have helped the developing countries in various ways which are innumerable. They provide collective transfer of resources which takes place in the form of packages including the technical know-how, machinery, equipment and raw materials, management expertise etc. Thus, MNC’s get enormous access to the International markets as a result of vast resources and superior marketing skills.

Article by Anisha Dutta
She is a content evangelist who believes that the Science of today is the Technology of tomorrow.
She can be reached at

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