Limitations of multinational companie(MNC)s

Inspite of having many advantages the MNCs suffer from some serious limitations, which can be discussed from host countries as well as home countries point of view.



Limitations from host countries point of view: 
(a) Little care of  economic development of host countries: Basically MNCs are interested to earn profit. So, MNCs establish branches, factors and open subsidiaries in the host country to capture the advantage of the available labour and raw material of host countries. But MNCs do not pay any attention to develop the economic position of the host countries.

(b) Destroy the domestic market: MNCs do not hesitate to eliminate and break the domestic market of host countries for the interest of their profit. Ultimately MNCs destroy the traditional culture of the host countries market.

(c) Break the ethics and legal system: In most of the times MNCs break the ethics and legal systems of host countries. As for example in Asia, Africa and Europe etc countries, the MNCs pay a huge amount of bribes to influence the people of the host countries for the commercial interest of MNCs.

(d) Dummy trading: In order to maximise the profit of MNCs they sometimes establish dummy trading companies in low tax countries and in the name of coordinating trading activities of the companies in host countries, the MNCs manipulate transactions to gain commercial profit.

(e) Unconductive transfer of technology: It is often found that MNCs do not transfer such type of technology to the host countries, Which can help in the economic development of host countries.

Limitations from home countries point of view:
(a) Money outflows: Through MNCs the large amount of money of home country flow out in terms of payment of dividends, profit, royalties, technical expenditure, interest of foreign capital investment etc.

(b) Raising price: MNCs always try to impose their will on unfair technique of producting to maximise global profits through deceptive devices, which ultimately increase price of customers goods, decrease the income of firmers, destroy compition, acquire monopoly power, retard growth of employment in the home countries.

(c) Centralised economic power and wealth: The maximum economic power and wealth are centralised and reserved by the MNCs in the home country. As a result many business sectors and business men loss their market. 

(d) Destroy the traditional culture and indigenous production: MNCs produce verious goods and services, which do not concentrate on traditional design, fashion and taste. Thereby, the indigenous production system can loss demand and scope to increase their production. In fact, the increase of indigenous production system are handled by a large number of businessmen available in different places of home country. But their MNCs covers the entire market by providing their goods, the automatically, the economic power and wealth to centralised in thue hand of MNCs.


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