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Class : 11
Unit : Business


Explain the disadvantages/ demerits of multinational company.

Ans : The disadvantage/ demerits of multinational company are explained below: i) Displacement of local industries:- Local industries cannot face competition with multinational companies because they produces goods and services at large scale and use modern technology. Therefore, local industries of host country are displaced by the multinational company. ii) Outflow of capital:- Multinational company produce goods and services in large quantity by using modern technology in host country and earn more and more profit. They pay various taxes like sales tax, vat, clearing charge etc. And remaining profit of host country transfer to mother country after payment of tax. iii) Economic exploitation:- The main motive is to earn maximum profit. In host country, it for this material in cheap price and conduct production process. Similarly, it pays less wages to employees as compared to the employees of parent company. But it charges high price to the finished product by using its own brand name. iv) Consumer exploitation:- Multinational companies have monopoly power in the market by using advanced technology and tools. They charge high price for the product and exploit to the customer. v) Inequality to staffs:- Multinational companies hires high level authority from parent country and their remuneration and other facilities are also high. Similarly, it appoints lower level employees from host country and pays less remuneration and facilities. So there is in equality to staffs. vi) Inappropriate technology:- Multinational company transfers outdated technology or ones which is used by the mother country. They do not transfer modern technology to the host country.
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