THE IMPACTS THAT MNC'S HAVE ON THE HOST COUNTRY

Fuga Nomura

An MNC is a company that operates in multiple countries, with a centralised management structure and ownership across national borders. MNCs typically have a significant presence in multiple countries, and they often have subsidiaries or affiliates in different regions of the world, which are used for enhancing their business strategies, including access to new markets, diversification and economic scale But in order for business to succeed, they need to take into account the impacts that the company has on the local community.

Advantages

One of the primary benefits of MNCs is their ability to bring in investment and create jobs This can lead to increased economic growth and development in the Home country For example, a MNC may build a new factory or office, hire local workers, and purchase goods and services from local businesses which therefore leads to increased employment and job opportunities as they use Direct Employment MNCs often establish subsidiaries or branches in different countries where they operate These entities require a local workforce to manage operations, production, sales, and administration. MNCs directly hire employees, thereby creating job opportunities for the local population. This can create a multiplier effect, as the money generated by the MNC and its employees circulates through the local economy.

In addition to the economic benefits, MNCs can have a positive social impact on the local community. They can bring in new technologies, ideas, and practices that can improve the quality of life for local residents For example, an MNC may invest in education or healthcare programs, promote diversity and inclusion, and support social causes such as human rights or environmental conservation

Disadvantages

However, MNCs can also have negative impacts on the local community. For example, they may contribute to environmental degradation, such as pollution or deforestation as MNCs are only considering their profits rather than the impact on the environment They may also cause social disruption, such as displacement of local communities or erosion of traditional cultures and values. In some cases, MNCs may engage in unethical practices, such as exploitation of workers or disregard for human rights.

The impact of MNCs on the local community depends on several factors, including the nature of the industry, the size of the MNC, and the level of government regulation For example, an MNC in the extractive sector (such as mining or oil drilling) may have a more significant impact on the environment than an MNC in the service sector. Similarly, a large MNC may have more resources to invest in social and environmental programs than a smaller one

Governmental interventions to solve negative impacts

To address the negative impacts of MNCs, governments can implement several interventions Here are some examples:

Regulatory Frameworks: Governments can establish and enforce strict regulations and laws to govern the activities of MNCs. These regulations can cover areas such as labor standards, environmental protection, human rights, and corporate social responsibility. By holding MNCs accountable for their actions, governments can mitigate negative impacts.

Labor Standards and Worker Protection: Governments can enforce strict labor standards to protect workers' rights and ensure fair working conditions within MNCs This can involve setting minimum wage laws, regulating working hours, ensuring workplace safety, and prohibiting child labor or forced labor Inspections and penalties for non-compliance can be implemented to enforce these standards

Overall it can be seen that there is both positive and negative feedback towards the local community. Although MNCs have positive economic and social impacts on the local community, they have environmental effects and social disruption consequences.But the level of impact can be altered through the size of the MNC, the nature of the industry and the level of government regulations

Bibliography

Bahar, Dany. “Do Multinational Corporations Play a Role in Entrepreneurship in Developing Countries?” Brookings, 3 Nov 2015, www brookings edu/blog/up-front/2015/11/03/do-multinational-corporationsplay-a-role-in-entrepreneurship-in-developing-countries/.

Chen, James “Multinational Corporation (MNC) ” Investopedia, 29 July 2022, www.investopedia.com/terms/m/multinationalcorporation.asp.

Doz, Yves, and C.K. Prahalad. “How MNCs Cope with Host Government Intervention.” Harvard Business Review, Aug 2014, hbr org/1980/03/how-mncs-cope-with-host-government-intervention

“Impact of Multinational Companies (MNCs) on Their Host Countries.” Www.tutor2u.net, www tutor2u net/business/reference/impact-of-multinational-companies-mncs-on-their-hostcountries#:~:text=Profits%20earned%20by%20MNCs%20may.

Toppr. “Toppr.com.” Toppr-Guides, 8 Aug. 2019, www.toppr.com/guides/business-environment/scales-ofbusiness/multinational-corporations-mnc/