In June 2021, World Bank E Library Source published an article reconfirming that global multinational companies (MNCs) run by successful business people have expanded exponentially since the 1970s. They contributed 36% of global output in 2016, including around 66.66% of global exports and more than 50% of imports.
The data released reconfirmed that yes, global businesses run by global business people not only contribute to world development but also contribute towards betterments of all stakeholders/parties involved at local, national and international levels
Forbes also published the list of the most successful multinational companies of 2023, Top 50 Companies of this list contribute back to society to fulfil its corporate social responsibilities. Renowned individuals such as, Mark Zuckerberg, Andrew Carnegie, Warren Buffet, Ratan Tata, Bill Gates, Jeff Bezos and George Soros give back to the public by being philanthropic. With the data given here above, we can observe that when successful entrepreneurs make money, they invest and spend their money, ultimately making it advantageous to the external stakeholder groups.
Multinational Companies investments /spending have other following advantages :
Development of the infrastructure: As successful business people have their own companies, those companies may invest in improving the state of the developing countries, by introducing new facilities. These MNCs may introduce facilities like factories, training centres, educational institutions and so on. This way the developing countries can use them effectively and try to benefit the general public from these facilities.
Job creation: As MNCs wish to expand overseas, possible in a new country to try to exploit a new market or to increase market share, labour is warranted. The country in which the MNC is expanding, local residents will be benefiting from the increased job opportunities. More job opportunities can potentially increase employment and reduce unemployment, which can help in increasing residual incomes of the local citizens. If the company’s size is big enough, it may benefit from economies of scale that will help in driving down those average costs of production per unit. Lower average costs can help increase the profit margins of the business if the selling price increases or remains the same. Sometimes, businesses may even reduce prices as a result of reductions in average costs of production.
Technological advancements: Innovation and technology go hand in hand, once MNCs have expanded, they may bring in new technology with them. New technology can be beneficial to the country as a whole, as it can help in improving the lifestyles of the local people. In addition, introduction of new technology can be used for enhancing efficiency and productivity. For instance, the latest machinery and equipment that have various features can be used by a manufacturing company, to attempt to increase efficiency and productivity of the production process. Technical economies of scale are possible to utilise, reducing average cost of production, increasing profitability. Increased productivity also increases the level of output, meaning the same or even more output can be produced in a short span of time as compared to before. As a result, increased productivity can improve competitiveness in the businesses.
Consumers enjoy multi choice solutions : Consumers are more aware about competitor’s products than ever due to the abundance of data on the internet. MNCs may produce a wide variety of products and services that help increase the consumer choice for the local public. More variety leads to more informed decisions to be made by the people. They can compare prices, features, materials, date of manufacturing, etc, before making the final decision, which can help them make the right choice.
GDP Contribution: Successful businesses often contribute to the local GDP via improved productivity and technological advancements. Increase in the GDP will also help in improving the standard of living of the people. These businesses usually invest heavily in advanced machinery and equipment which assist in improving efficiency and productivity, leading to increased levels of output and reduced average cost per unit. The new technologies developed by these companies can help revolutionize new industries in terms of production, etc. Apple and Google are great examples of tech companies that have improved the quality of living alongside bringing in innovations to everyday products like phones, TVs and more.
Tax Payments : Taxes are also needed to be paid on the profits/revenues generated by businesses. With these taxes the government is able to finance education, healthcare and social security, which is essential for the general public. Hence, when successful people make money it’s beneficial in terms of economic development and growth. The successful companies that earn billions in revenue and profit, are usually charged a lot in the terms of corporate tax, this way the government can allocate the funds earned/generated from the tax revenue to building hospitals, schools, and other facilities.
Mackenzie & Company have also published a report specifying the advantages of corporate revenues flowing towards households reconfirming benefits enjoyed by the society, as and when successful business people make huge revenues from their Businesses
To reconfirm our stance, of successful business houses investments allow them to invest it back in the society, let’s explore some ways on how this can be achieved :
After generating millions and billions in profits, successful business people invest in a list of things. These 4 investments can have a positive impact on the general public:
- Research and Development (R&D) : Research and development is crucial when a business wants to introduce new products or wants to enhance the existing ones. MNCs that invest in R&D have a positive impact on its customer-base, given that the business will be able to cater to the consumer needs in accordance with the consumer demand. R&D will enable businesses to make informed decisions, which helps in reducing product failure and any faults in the product. This way qualitative customer service is maintained, making customers satisfied with the business’s products/services.
- Philanthropy: Entrepreneurs such as Bill Gates, Mark Zuckerberg, Ratan Tata and Warren Buffet are some philanthropists that have donated large sums of money to charities or established foundations. The money donated is going to the people in need, in order to impact their lives positively.
- Investments in Real Estate: Affluent business individuals often like to invest their retained earnings in property/real estate. They will have to buy real estate from other individuals, so naturally the seller will gain revenue on the sale of property, which becomes a capital receipt/income for the seller, and a capital expense for the business person who’s buying the property. This economical transaction can help boost the real estate market and the economy.
- Investments in stocks and bonds: Investing in stocks and bonds has always been a way for successful business people to diversify their overall portfolio. As individuals may see that markets of India & China give great returns, successful people may invest in order to have passive income besides their main source of income. It’s also advantageous because the business that issues these shares will gain huge sums of capital, if at nominal or par value will come under share capital, but if at a premium: Share premium, or can be used to invest in capital equipment to improve operations.
- Venture Capital Investments : Venture capitalists or business angels such as Mark Cuban, Kevin O’Leary are experienced entrepreneurs that invest capital in risky start-ups or small businesses, in exchange for equity or royalties. This way the businesses are provided with important capital to run the business, industrial contacts, expertise of the venture capitalist and good publicity/marketing to increase customer awareness. Being given this risk capital, it can help small businesses be encouraged to start operations and contribute to the overall output of the country. If enough small ventures open up and start their operations then it can improve overall economic development and the gross domestic product of the country. Naturally if the GDP increases the standard of living of its citizens will improve
In essence, it’s evident that if successful business people make money or spend their money, it will have an impact on the general public. Most of the impact tends to be positive, so successful business people should continue with these actions so it can benefit them as well as the general public.
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