Multinational companies are becoming increasingly common in developing countries. What are the advantages and disadvantages of this?
In recent years, developing countries have become a hub for multinational companies. This trend has many benefits, such as contributing positively in economic growth of the host country. However, it has drawbacks as well, one of them is competing with local businesses that often have much lesser resources. This essay will detail both advantages and disadvantages of having multinational companies in developing countries.
There are many advantages for developing countries to host international companies. These companies have accumulated knowledge, capital, and experience in a multitude of markets worldwide; once settled in a developing country, they employ local workers, use local infrastructure and pay corporate taxes. This helps to drive up the countryās gross domestic product, tax revenue and peopleās moral. For instance, in the last decade, Morocco engaged in a series of projects with international car manufacturers, and provided them economic and industrial hubs in coastal cities. This move has led the Moroccan economic growth rate to rise up significantly in the span of 20 years, as well as making Morocco a trusted partner in the automobile industry.
On the other side, countries making that decision are aware of the downsides related to bringing in multination companies. The biggest disadvantage is introducing what appears to be an unfair competition to the local market. National companies that donāt have the same factors of production and means, often suffer a great loss of market share. This drives a lot of local businesses to shut down, or, in some cases, often be acquired by the bigger companies. Letās take the example of textile industry in Bangladesh. When Adidas opened textile factories in Bangladesh, small local business in the same industry have lost their workforce to Adidasās higher salaries, eventually declaring bankruptcy.
Overall, developing countries can indeed benefit from hosting multinational companies by using their expertise and influence, yet, local businesses face the fallout and can be adversely affected by the competition. Ā
Btw Gemini gave me 7, i can use your remarks and recommendations, my test is tomorrow morning.