MNCS Promote Globalization
MNCs on Globalization.
Globalization is the integration of different markets around the world. this integration increases the degree of connectedness between different national economies. According Cohn (2016), multinational corporations arise from this interconnectedness, since they utilize the connections that exist between these economies to carry their practices within a number of countries. operations of multinational corporation in these countries require a large investment, which is Oftenly referred to as foreign direct investment, which is considered as an injection into the economy of the host country. These flows which happen globally between different economies raise the interconnectedness and this leads to globalization of the economy of the world. production of good from one country and sale in another also aids in increasing the connections between economies and this is only achieved by the operations of multinational corporations. Multinational corporations have both good effects and bad effects on the economies of individual countries as well as in globalization.
Benefits of MNCs
Multinational corporations create wealth and jobs around the globe. When multinationals inwardly invest in a country, it creates a much needed foreign currency that aids in developing that particular economy. Through their operations, multinationals create jobs for the residents and helps in raising expectations of what can be possibly done.
Holmes et al., (2016), says that the size and scale of operations allows them to get benefits from economies of scale which gives them a chance of lowering the average costs and prices of their products to the customers. Companies with high fixed costs such as airlines and car manufacture apply this very much. When a multinational enters into a certain economy, it brings a lot of profits with it, these profits can be used for research and development. Exploration of oil is very expensive, a large multinational company with good profits and resource can be given this to run. Drug manufactures also need to take a great risk in developing of drugs and can use multinational corporations.
Ensuring minimum standard is another benefit of multinational corporations on globalization. Their success usually relies on the consumer’s intention to buy goods and services while relying on minimum standards. It is important that people are offered a security towards what they expect. Hirst et al., (2015) asserts that products that dominate globally also lead to globalization. They appeal globally and maintain a consumer preference by multinational corporations ensures good profits.
Foreign investment is benefit accrued from the engagement of multinationals in direct foreign investments. This allows the flow of capital to poor/developing countries. According to Banerjee & Venaik (2018), Sometimes wages for workers may be low depending on the standards of that country, but globally, it helps in gradual development of country while helping in raising of wages. Multinationals also outsource production by themselves. This ensures that there are lower prices and the disposable incomes of the households in the developed world is increased enabling them to buy more goods and services. This creates new employments while offsetting the lost jobs from outsourcing manufacturing jobs. This ensures that economies are interconnected and it enhances importation and exportation of goods between different production lines which Oftenly operates through different countries.
Outsourcing also represents the flow of physical goods between economies, flow of raw materials, food, energy consumption goods and parts. Information flow also is very important in connecting economies and promoting globalization. Effective and good communication between centers of operations in different nations is an important ingredient for any success in the multinational corporations. These kind of flows come together to form a global economic network which is made up of many national economies. (Rivas, 2015)
Criticism of MNCs
When multinationals and globalization are put together, then multinational will go to markets where they can access cheap Labour at cheap prices. Outsourcing and offshoring give the business the mandate to hire employees from foreign countries where the cost of Labour and real estate is lower considered to the home country of the business. These practices have a negative effect on the workers who look for full-time jobs. This will have an effect on the goodwill of globalization. This challenges the will of multinational corporation to promote globalization. (Hansen et al., 2016).