Question

Multinational Enterprises (MNEs) are controversial and often subject to heated debates in both their home countries as well as their host countries. Discuss pros and cons of MNEs as they apply to home country (e.g. U.S. for American multinationals). Then discuss an entirely different set of pros and cons as they apply to a host country (e.g. American multinationals in Chile).

Answer 1

Solution:-

The pros of MNES for their home countries are as below:-

·         These organizations help the home country to earn the valuable foreign currency and earn the revenue.

·         The revenue earned can be utilized in creating research and development in the home country

·         The bargaining power of the home country increases as these organization can have a larger influence on the host country

·         These organizations also help in providing the jobs to the home country’s citizens to other countries.

·         The customers can be benefitted by the cheaper cost of the products

·         It helps in increased export to other countries

·         Some important managerial and operational activities and processes can be learnt from other countries

However, the cons of these organizations for the home country are as below:-

·         Most of the jobs are outsourced to the other countries thus creating the issue of unemployment

·         The technologies which are developed after a lot of research can be passed to other countries

·         These firms can be involved in slave laboring in the home country

·         These firms can result in the capital outflow from the home country

·         These firms can offer lower wages to the workers of the home country as they can outsource the operations to other host countries where the cost of these activities is lower.

The pros of MNES for their host countries are as below:-

·         The capital inflow by these organization helps the host country to develop economically

·         These organizations create a lot of jobs in the host countries

·         The customers can receive world-class product at a lower price

·         It increases the competition in the local market which benefits the customers

·         The government can earn tariffs and taxes and thus increasing the GDP

However the cons of these organizations for the host country are as below:-

·         Due to high bargaining power, these organization can influence the political and economic policies of the host countries

·         Due to greater bargaining power, they can exploit the workforce

·         There can be the issue of excess utilization of natural resources and creation of pollution

·         The capital outflow from the host to home country can be a big drawback

·         These companies can eradicate the local competitors due to their financial strengths and thus hampering the local business and employment.