Demerits of MNCs

Demerits of MNCs

1.      Profit Motive: MNC’s have only one objective – profit and only profit. All the actions of MNC’s are guided by single minded motive that is profit. They lack total respect to the growth and the welfare of the host nation. At times they are so obsessed with profit motive that it goes against the interest of the host nation.

2.      Creation of Monopoly: MNC’s are so strong and so large that it does not allow the domestic industry to grow and come up. They even buy out the smaller firms in domestic markets, thereby creating monopoly in host nation. They always have advantage of vast resources at their disposal, i.e capital, technology which can’t be matched by smaller firm in the domestic markets.

3.      Different ideology: The ideology of the host nation and the MNC may be quite different. MNC’s come with profit motive. Government has growth and protection of consumers in mind. There is most often than clash of interest.

4.      Obsolete Technology: Many MNC’s are criticized of delivery obsolete technology to the host nations and that to a very high price. Infact many a times MNC’s are blamed to force developing nation to pay for outdated technology. As noted above they are guided by the sole purpose of profit. They don’t have heart to think of welfare of the nation. Again many a times they even blamed to restrict domestic firm to grow and develop new technology.

5.      Politics: Many MNC’s are so large that can easily influence the government decision in host nations. They are believed to use arm twisting politics to improve there share in the domestic markets. Domestic government also face some pressure from the government of the home nation of such MNC’s. US is suppose to strongly support their MNC’s in quest for profit and larger trade share across the world.

6.      Investment in only profitable locations: MNC’s are, as noted above are profit motivated. They invest only in such areas and location which are profitable. Areas which require larger investment for the overall growth of the nation are often over looked. This leads to regional imbalance in the host nations.

7.      Brain Drain: MNC’s with their vast resources select the best talent available in the host nations. Often they base them in other countries, thereby leading to brain drain in the host nation.