'Advantages That Multinations Have Over Domestically Focused Companies\r'

'In this age of globalization, companies ar proveing to fan out seames across borders and consequently there are more and more internationalistic companies. A multinational corporation is i that is found in one country art object maintaining manufacturing facilities or operations offices in different countries and markets its products or go on an external basis. A multinational corporation is fitting to take advantage of special economically advantageous opportunities that exist in the countries where it ope strides, such(prenominal) as a low compass cost or favorable rate of currency exchange.They also enjoy entranceway to a diversified workforce that gives them great creative competitive edge. The reasons why companies seek to expand across borders are: to turn over revolutionary markets or to hold onto live ones; to avoid tariffs or other occupation restrictions; to tap new sources of raw materials and bucolic production; and to take advantage of bargain- priced foreign labor. The well-nigh signifi screwingt panorama of multinational corporations is that they enjoy major assess and investment advantages. Tax Advantages: Business revenue income varies from country to country.While there are towering evaluate countries like the United States, spectacular Britain and the Peoples Republic of China (PRC), there are low tax countries like Belize, the caiman Islands and the Bahamas. A multinational corporation can pick its tax jurisdiction and olibanum limit its tax obligations. Doing so translates immediately into greater profits. On the contrary, any home(prenominal) alliance will be render to taxation on its profits in that country and there is no perplexity of choice (Kate, 2006). Lowering Taxes:Most multinational corporations look for tax holidays when seeking a foreign base for their manufacturing plant. However the tax holiday extend is gistless in the US and Singapore as companies in these places companies are taxed on their global income. transnational companies enjoy the advantage of having the choice to circumvent the best combination of location, labor market, and brass integrated benefits. Funding opportunities: multinational corporations devour regular approaching to funding opportunities untouchable to domestic companies.The money provided by the regime in return for creating jobs reduces the multinational corporations over mountain pass, diminishes business risk and increases profits. It has been found that any federation with an established export market immaterial of the manufacturing countrys domestic market can receive most †almost 50-75% †of the expenditure in manipulateting up a new plant. This is mainly because of the support of the government (Kate, 2006). Tariffs keister Be Circumvented: multinational corporations can gadget tariffs by proper planning.If a MNC wants vociferous free trade access to twain the EU and the USA, it will start manufacturing in Israel. If there is a low-tech product that needs free trade access to the EU, it is best to make it in Senegal, since they shake a free trade pact with France. The list of bypasses around tariffs is long and grows as NAFTA and the EU expand (Kate, 2006). Accounting advantages: Multinational pooling arrangement is an agreement between the head office of a multinational company and an insurance network, which allows †at an accounting floor †the consolidation of the worldwide experience.This network allows: kick downstairs management of the worldwide risk and better reporting; up-front local savings collectable to economies of scale and potential international dividends; alter local terms & conditions collectable to network leverage; easier shipping of employees in spite of appearance the entity and reinsurance protection against individual peaks or ruinous events (DF, 2006). Advantage of Transfer Pricing: When one part of a multinational composition in on e country take outs goods, services or know-how to another part in another country, the price charged for these goods or services is called ‘transfer price.This may be a purely arbitrary figure, meaning by this that it may be uncorrelated to costs incurred, may be unrelated to operations carried out or to added value. The transfer price can be set at a level which reduces or even cancels out the total tax which has to be paid by the multinational. In other words it is possible for a multinational company to minimize its obligation for corporation tax by transfer pricing (Davidmann, 2006). According to the US law, multinational corporations, whether American- or foreign-owned, are supposed to be taxes on the profits they earn in the United States.However, in reality, foreign-owned corporations doing business in the United States, typically pay further less in U. S. income taxes than domestic companies. plane U. S. -owned multinationals utilize such tax avoidance loophole s. Companies try to set their â€Å"transfer prices” to vary income away from the United States and shift allowable expenses into the United States (CTJ, 2006). Asset Protection: Multinational companies often use offshore centers to reconstitute their ownership of assets. Through trusts, foundations or by means of an existing corporation company wealth ownership can be transferred from tidy sum to other legal entities. some an(prenominal) companies which are touch on about lawsuits or lenders foreclosing on salient(ip) debts choose to transfer a persona of their assets to an entity that holds it outside of their home country. By qualification these ownership transfers, these companies can escape raptus or other domestic troubles (Investopedia, 2006) . Confidentiality: Many offshore jurisdictions offer multinational companies the added advantage of seclusion legislation. These countries have enacted laws establishing strict corporate and banking confidentiality.If th is confidentiality is breached, there are serious consequences for the offend party. An example of a breach of banking confidentiality is divulging node identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions. To a multinational company, this secrecy of personal information can offer significant financial and legal advantage. Because nations are not required to accept the laws of a foreign government, offshore jurisdictions are, in most cases, immune to the laws that may apply where the investment funds company resides (Investopedia, 2006).Diversification of Businesses: Domestic companies have to catch local government regulations that restrict its international investment opportunities. Multinational companies have unlimited access to international markets and to all major exchanges. There are also many a(prenominal) opportunities in developing nations, especially in those that are beginning to privatize sectors that were erst under government control. Conclusion: gum olibanum we find that multinational companies enjoy many advantages compared to local domestic companies.\r\n'