The ultimate goal of every for-profit business is to sell more products and services to bring in more revenue and generate more income for the owners. Small businesses often start by opening operations in a certain town, state or country, but as a business grows, managers might decide to start doing business in other countries. Businesses that conduct operations and sell to customers in multiple countries are considered multinational firms. Access to Consumers One of the primary advantages that multinational companies enjoy over companies that limit their operations to smaller geographical regions is that they have a larger pool of potential customers.
There are various levels and forms of foreign direct investment, depending on the type of companies involved and the reasons for investment. A foreign direct investor might purchase a company in the target country by means of a merger or acquisition, setting up a new venture or expanding the operations of an existing one.
Other forms of FDI include the acquisition of shares in an associated enterprise, the incorporation of a wholly owned company or subsidiary and participation in an equity joint venture across international boundaries. If you are planning to engage in this kind of venture, you should determine first if it provides you and the society with maximum benefits.
One good way to do this is evaluating its advantages and disadvantages. List of Advantages of Foreign Direct Investment 1. Commonly, a country has its own import tariff, and this is one of the reasons why trading with it is quite difficult.
Also, there are industries that usually require their presence in the international markets to ensure their sales and goals will be completely met. With FDI, all these will be made easier. Employment and Economic Boost. Foreign direct investment creates new jobs, as investors build new companies in the target country, create new opportunities.
This leads to an increase in income and more buying power to the people, which in turn leads to an economic boost. Development of Human Capital Resources. One big advantage brought about by FDI is the development of human capital resources, which is also often understated as it is not immediately apparent.
Human capital is the competence and knowledge of those able to perform labor, more known to us as the workforce. The attributes gained by training and sharing experience would increase the education and overall human capital of a country.
Its resource is not a tangible asset that is owned by companies, but instead something that is on loan. With this in mind, a country with FDI can benefit greatly by developing its human resources while maintaining ownership. Parent enterprises would also provide foreign direct investment to get additional expertise, technology and products.
As the foreign investor, you can receive tax incentives that will be highly useful in your selected field of business. Foreign direct investment will allow resource transfer and other exchanges of knowledge, where various countries are given access to new technologies and skills.
Reduced Disparity Between Revenues and Costs. Foreign direct investment can reduce the disparity between revenues and costs. With such, countries will be able to make sure that production costs will be the same and can be sold easily. With more jobs and higher wages, the national income normally increases.
As a result, economic growth is spurred.Advantages and Disadvantages of Multinational Companies. Advantages and Disadvantages of Multinational Companies. Delta is a local example of an MNC.
Image credit ashio-midori.com ZIMSEC O Level Commerce Notes: Business Organisations: Advantages and Disadvantages Multinational Companies. 7 Advantages and Disadvantages of Multinational Corporations Multinational corporations are enterprises that operate in several countries worldwide.
These organizations have assets and goods or services being offered in more than one country. Advantages & Disadvantages of Expanding Your Business Advantages & Disadvantages of Publicly Held Corporations Advantages and Disadvantages of a Multicultural Workforce.
Advantages & Disadvantages of Multinational Corporations by Jack Gordon - Updated June 28, A multinational corporation is an enterprise that has operations in one or more countries other than the home country where it's headquartered or managed.
What are the Advantages and Disadvantages of Multinational Corporations? Shyam Soni Advantages of MNC's for the host country. Disadvantages of MNC's for the host country. 1. MNC's may transfer technology which has become outdated in the home country.
2. As MNC's do not operate within the national autonomy, they may pose a . MNC's directly and indirectly help both the home country and the host country. Advantages of MNC's for the host country.
MNC's help the host country in the following ways. 1. The investment level, employment level, and income level of the host country increases due to the operation of MNC's. 2.