What are multinational firms and their roles

Updated: Feb 22

Multinational firms (MNCs) are large firms that operate in different countries


They usually originate from developed countries and are considered as foreign direct investments to developing economies. Being an MNC has manage advantages. They can


  1. Reach many consumers as they would export their products

  2. Better chance of raising capital for business expansion, research and development and recruiting high skilled workers.

  3. Minimize transportation cost as they are located in multiple countries around the world.

  4. Minimize wage cost as they may be located in developing countries where wages are low

  5. Benefit from economies of scale through large scale production

  6. Able to avoid trade barriers by operating in different countries in different regions.

Multinationals can benefit the country it operates in as they;

  1. Provide employment to locals

  2. Inject capital into the country through FDI

  3. Provide more variety of goods and services

  4. Increase demand for local businesses

  5. Transfer technology and improve the skills of local talent

  6. Contribute in taxes

  7. Improves balance of trade as output is exported


RELATED CONCEPTS


  1. Capital

  2. Investment

  3. Taxes

  4. Technology

  5. Balance of trade

  6. International business