1.6 multination companies Flashcards
Multination companies
a business that is registered in one country but has manufacturing operations/outlets in different countries . Multinaiton companies have intensified globolisation
Reasons to become an MNC
INCREASE CUSTOMER BASE: allows business to benefit from higher sales revenue by having more customer
CHEAPER PRODUCTION COSTS : by expending overseas as well inexpensive labour
ECONOMIES OF SCALE: locating overseas benefits from host countries infrastructure such as network roads, telecommunications and ports.
BRAND DEVELOPMENT AND VALUE: is enhanced by operating overseas. enhances usage global marketing strategy
PROTECTING POLOCIES: are avoided within certain countries
SPREAD RISK: unforarable market condition in one country might not damage the overall business it its spread internationally.
- don’t put all eggs into one basket
Posative impacts MNC on host countries
Host country is the country that allos MNC to set up in its country
JOB CREATION: it creates employment opportunities for shot country.
- typically mnc offer higher oay then local firms
HIGHER NATION INCOME: MNC help increase host countries GDP
- GDP boosts export earning for host country
KNOWLEDGE AND TECHNOLGY TRNASFER: MNC intrudece ew skills, and technologies in production process to hot countries
- raises efficiency of production in host country
= improves international cometinvenss of business in host country
INCRESE COMPETITON: MNC intensify competition in host country.
- should lead to greater efficiency gains to the benefit of domestic customer.
- without threat of mNC deimst firms don’t feel pressure to be creative and innovative in responding changes in economy.
Negative impacts MNC on host occuntry
JOB LOSSES: can cause unemplyment
- lcoal firms can’t compete with MNC and have to shut down
REPATRAITON OF PROFITS: profits of company are repatraited to home country.
- causes a negative impacts host country tax revenue and sie frequency of forgin direct investment as profit don’t stay in host country.
VULNERABILITY: MNC are not bound to specific location so they can hang at short notice for cost advantages
SOCIAL REPSONSILIBITES: Anti-globolisation groups are concerned about social responsibility of mNC in their attempt togrow and exploit planets scarce respruces.
- host countries can’t control action of large MNCs due to their sheer market power.
COMPETATIVE PRESSURE: due to completion, domestic firms have to reduceprices to remain competitive.
-knowedge and tech transfer can threat domestic firms BCS they might not have finaice/reosucre to compete with large MNCs
MULTINATION companies key concepts
change, ethics, creativity, and sustabiblity = central to any business strategy involving growing overseas.
-some MNC have to adjust to local laws, regulations, cusitmers and culture.
If companies don’t work due to resistance to change and cultural clashes, merger might occur.
Dmerger= company sells part of business, seprating business into 2 or more business entitites.
