Image source: gc2014.org
Transnational corporations (TNCs) operate in more than one country. The corporations always set up their manufacturing firm in areas where there is cheap labor to reduce their operating costs.
They offer products to the customers which they won’t have been able to get in the past. Their operations can benefit the nation and the profits gained from the corporations go to the overseas firms rather than local firms. Let’s take a look at the pros and cons of TNCs.
1. Development of Infrastructure: It helps in improving the country’s infrastructure means of transport, airports, and services.
2. Boost standards of living: TNC focus on developing the economy of the country which in turn can help raise the standards of living.
3. Wide choice: It enables consumers to have access to a wide choice of products and services and improve their standards of living.
4. Availability of goods: TNC enables consumers to access products and services from the international market which would otherwise be unavailable locally. The goods are also sold at lower prices.
5. Create jobs: TNC creates employment opportunities for citizens in the country although they pay low wages to the employees.
6. Political stability: Transnational corporations have brought political stability to the country through the operation of the business in different countries.
7. Economic growth: Transnational corporations boost business activities in a certain country and this contributes to the economic growth of the country. They pay taxes and also offer products which help improve the living standards of people.
8. Develop skills levels: Working with employees at different levels of education helps in improving education and the skills of the employees. Works will be able to interact with other workers from other nations and learn from them.
9. Stable income: TNCs offer reliable job opportunities and stable income to those working with the corporation.
10. Exploit natural resources: Transnational corporations can switch their operations to a country with a lot of natural resources to reduce their operation cost as well as benefit from cheap labor. This helps in the exploitation of the natural resource.
1. Labor exploitation: The minimum wage rate for the workers is very low compared to the work done and the amount of time spend.
2. The shift of operations: TNCs may decide to move its operation from one country to another where there are cheap labor and low production.
3. Environmental degradation: TNC is criticized for massive environmental degradation. Burning of Nike rubber may result in environmental pollution.
4. Poor services: TNCs offers poor services to the workforce. They offer low wage rates and not concerned with the health and safety of the workforce.
5. Division of wealth: TNCs are known for transferring profits in other countries hence their responsibility for global wealth division. They can choose the regions where to invest in.
6. Transfer of profits: The profits gained from the business do not remain in the same country where the products are manufactured.
7. Evade tax: TNCs operations in a certain country are transnational and this can make them evade paying full taxes in countries where they operate.
8. Cultural effects: TNCs products are consumed worldwide and this may affect the taste of locally produced goods and culture.
9. Lack of security: Low-operation cost may force the company to relocate its operation or invest in other country and this results in unemployment. This affects the future job security of workers.
10. Unfavorable dominate the market: The market dominance of the corporation makes it difficult for local small scale businesses to succeed.