MULTINATIONAL CORPORATION

Faisal Shehzad
M.com / M.Phill (PU)

FAISAL SHEHZAD M.Com / M.Phill (PU) 1

MULTINATIONAL
CORPORATION (MNC)
 DEFINITION:
 An enterprise that engage in foreign direct
investment (FDI) and owns or controls
value-adding activities in more than one
country.
 sometimes, the MNC is known as

 Multinational Enterprise (MNE)

 Global Corporation (GC)

FAISAL SHEHZAD M.Com / M.Phill (PU) 2

EXAMPLES
 INTEL CORPORATION:
 It employs over 140000 employees in hundred of facilities
in tens of countries around the globe.
 It controls and owns facilities in a variety of countries; each
is the part of INTEL’s value added chain.
 ERNST & YOUNG: (Global Accounting & Professional Firm)
 It employs about 120000 people in more than 100
countries.
 it operating as an international network of wholly owned
and associated professional firms.

FAISAL SHEHZAD M.Com / M.Phill (PU) 3

MERITS OF MNC
 MNCs help increase the investment level and
thereby the income and employment in host
country.
 The transnational corporations have become
vehicles for the transfer of technology,
especially to the developing countries.
 They also kindle a managerial revolution in the
host countries through professional
management and the employment of highly
sophisticated management techniques.
FAISAL SHEHZAD M.Com / M.Phill (PU) 4
MERITS OF MNC
 The MNCs enable the host countries to increase their
exports and decrease their import requirements.
 They work to equalize the cost of factors of
production around the world.
 MNCs provide an efficient means of integrating
national economics.
 The enormous resources of the multinational
enterprises enable them to have very efficient research
and development systems. Thus they make a
commendable contribution to inventions and
innovations.

FAISAL SHEHZAD M.Com / M.Phill (PU) 5

MERITS OF MNC
 MNCs also stimulate domestic enterprise
because to support their own operations, the MNCs may
encourage and assist domestic suppliers.
 MNCs help increase competition and break domestic
monopolies.

FAISAL SHEHZAD M.Com / M.Phill (PU) 6

DEMERITS OF MNC
 The MNCs technology is designed for world wide profit
maximization, not the development needs of poor
countries. The imported technologies are not adapted to
a. consumption needs
b. size of domestic markets
c. resource availabilities
d. stage of development of many of the LDCs.

FAISAL SHEHZAD M.Com / M.Phill (PU) 7

DEMERITS OF MNC
 Through their power and flexibility, MNCs can evade or
undermine national economic autonomy and control and
their activities may be inimical to the national interests of
particular countries.
 MNCs may destroy competition and acquire monopoly
powers.
 The tremendous power of the global corporations poses
the risk that they may threaten the sovereignty of the
nations in which they do business.

FAISAL SHEHZAD M.Com / M.Phill (PU) 8

DEMERITS OF MNC
 MNCs retard growth of employment in the home country.
 The transnational corporations cause fast depletion of
some of the non-renewable natural resources in the host
country.
 The transfer pricing enables MNCs to avoid taxes by
manipulating prices on intra-company transactions.

FAISAL SHEHZAD M.Com / M.Phill (PU) 9