QS Study

Difficulties brought by Multinational Companies in Society

Multinational corporations no doubt, carry out business with the ultimate object of profit-making like any other domestic company. Multinational firms can bring a number of benefits that improve the quality of life for a host nation, particularly a less-developed nation

As in the case with many activities, there are potentially disadvantageous by-products that may accompany the benefits brought to host nations by multinational firms.

(a) Loss of national sovereignty: One significant political difficulty is that the host government may feel some loss of national sovereignty since it is not able to control all that a multinational company does.

(b) Loss of control: In any case, the host nation may experience some loss of control over its own economy because the multinational company’s actions are guided by worldwide rather than the internal need of the host nation.

(c) Exploitation of labor: Multinational Company pays higher wages in other nations to lead the host nation to a nagging feeling that as labor is being exploited.

(d) Objection: People to the home country of a multination company often object to some of its activities.

(e) Depriving Demand of Host Nation: Multinational Company can be fulfilling worldwide needs and demand but not host nation demand.

(f) No Short Run Benefit: The activities of a Multinational Company may have a long-run development, but it does not bring any development in short run for the host country.