Characteristics of Government Company – Meaning, Advantages and Limitations of Multinational Companies

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Government Company

A Government Company has been defined by the Indian Companies Act 1956 as one of which not less than 51 per cent of the paid-up share capital is held by Government (Union or State) and includes subsidiaries of such companies. The audit of Government companies is done at the instance of the Comptroller and Auditor General of India (CAGI) and the reports presented before the Parliament.

Characteristic of a Government Company May be Listed as Follow

  • It has a separate legal existence.

  • Either the whole or at least 51 per cent of the total paid up share capital is held by the Government.

  • All the Directors or a majority of them are appointed by the company.

  • Its employees are other than civil servants.

Meaning of Multinational Companies

Company which carries on business not only in the country of its incorporation but also in one or more other countries. Such a company may produce goods or services in one or more countries and sell these in the same or other countries.

Advantages of Multinational Companies

Advantages of multinational companies

Advantages of Multinational Companies

Investment of Foreign Capital

It boosts up the company which is under developed. Direct investment of capital by Multinational Companies helps under-developed countries to speed up their economic development.

Generation of Employment

With the use of standard quality and distinguish in product Multinational Companies leads to creation of employment opportunities and raising the standard of living in host countries.

Use of Advanced Technology

With substantial resources Multinational Companies undertake Research and Development activities which contribute to improved methods and processes of production with high technology which increase the quality of products.

Growth of Ancillary Units

Suppliers of materials and services and ancillary (small scale units) industries often grow in host countries as a result of the operation of Multinational Companies.

Increase in Exports and Inflow of Foreign Exchange

Goods produced in the host countries are sometimes exported by Multinational Companies. Foreign exchange thus earned contributes to the foreign exchange reserves of host countries.

Healthy Competition

Efficient production of quality goods by Multinational Companies prompt the domestic producers to improve their performance in order to survive in the market.

Limitations of Multinational Companies

Limitations of Multinational Companies

Limitations of Multinational Companies

Least Concern for Priorities of Host Countries

Multinational Companies invest capital in the most profitable industries and do not take risk into account the priorities of developing basic industries and services in backward regions of the host country.

Adverse Effect on Domestic Enterprises

Multinational Companies are often able to dominate the markets in host countries and tend to acquire monopoly power due to large-scale operation and technological skills. Thus, many local enterprises are compelled to shut down their existing business.

Change in Tradition

Consumer goods, which are introduced by Multinational Companies in the host countries, do not follow the local cultural norms.

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