Question

Multi-national enterprises (MNEs) have been criticised for having a "cash-cow" perspective of their host country's resources. Explain why this may be the case and provide examples in your response.

Answer 1

'Cash cows' is one of the four elements of the BCG Matrix. It represents a product, service or a business that provides with far more return than the market growth rate, having a huge market share in a mature growth industry (eg. Iphone by Apple). The investment requirements are minimal for cash cow products to thrive in the market.

Cash cow products and services may have a large number of benefits for the organisation but it might lead to exploitation of the society, especially to the inhabitants of the country. This is more detrimental in case of developing and under developed countries. It includes misues of the natural resources, leading to their depletion, exploitation of cheap labour, repatriation of profits, illegal movement of money into tax havens, dilution of local cultures and traditions etc. Society also faces cost of climate change and mitigation. Moreover, they block the entry of new products and innovation in the markets leading to monopoly of the MNC's and their products.

Examples in thi regard include: cocoa industry in Africa, merger of Maruti and Suzuki in India, energy companies, Pharameceutical companies, etc.

Extensive CSR policies and structural changes in companies could help curb these issues.