Benefits and Challenges of Multinational Companies (MNCs)

Multinational companies (MNCs) are not without benefits, which may be to the government, the economy, and the people or even to itself. Cole (1996) stated that the size of multinational organization is enormous; many of them have total sales well in excess of the GND of many of the world’s nations. Cole also stated that World Bank statistics of comparison between multinational companies and national GNPs shows, for example, that large oil firms such as Exxon and Shell are large in economic terms that nations such as South Africa, Australia and Argentina are substantially greater than nations such as Greece, Bulgaria and Egypt.

Other large multinational companies include General Motors, British Petroleum, Ford and International Business Machine (IBM). Some of the benefits of multinational companies are:

1. There is usually huge capital investment in major economic activities

2. The country enjoys varieties of products, services and facilities, brought to their door steps

3. There is creation of more jobs for the populace

4. The nation’s pool of skills are best utilized and put to use effectively and efficiently

5. There is advancement in technology as these companies bring in state-of-the-art-technology for their businesses

6. The demand for training and retraining and advancement in the people’s education becomes absolutely necessary. This will in turn help strengthen the economy of the nation

7. The living standard of the people is boosted

8. Friendliness between and among nations in trade i.e. it strengthen international relation

9. The balance of payments of nations in trade are improved on

In the words of Cole (1996), he stated that the sheer size (and wealth) of multinationals means that they can have a significant effect on host country. To Cole, most of the effects are beneficial and include some of the above or all. The Electronic Library of Scientific Literature (1996) explained the benefits of MNCs under a theory known as ‚The Theory of Externalities‘. The theory considers the benefits of MNCs from the point of view of those who maintain the importance of Foreign Direct Investment (FDI) as part of the engine necessary for growth. In the contribution of Davies (1989), he gave some theories on the benefits/advantages of multinational. Davies (1989:260) tagged this ‚Economic Theory‘ and the multinational where he took a comprehensive and critical look at the benefits of MNCs.

More benefits came along with these people’s theories and some are:

1. There is significant injection into the local economy in respect to investment

2. Best utilization of the country’s natural resources

3. They help in strengthening domestic competition

4. They are good source of technological expertise

5. Expansion of market in the host country


There is no company without problems it is facing. Whether an organization is big or small, there will certainly be some sort of problems or negative factor/influence militating against its survival or continuity. Weihrich and Koontz (1994) states that the operation of multinational companies needs to be weighed against the environmental challenges and most of the challenges being faced by multinational companies are:

1. There is usually acute shortage of manpower – people with lack of managerial and technical skills

2. The challenge of unfriendly business environment

3. There is usually the problem of conflicting interest among the three parties – the government, the MNC and the general public

4. There may be huge cost of labour in the host country, at least to get the expatriate managers from home country or somewhere else

Conclusively, the above mentioned authors have given all round and comprehensive note on the benefits of MNCs to the host country where they operate and as well highlighted the derivable benefits to the MNCs themselves from the host country. Likewise, in spite of the challenges and the problems being faced by these MNCs, they still continue to survival and waxing stronger.

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Source by Oluwanisola Seun