Business 1.6 Flashcards
Advantages MNC
Expand customer base beyond the domestic market
Achieve greater economies of scale
Work around government barriers to imports
Access to cheaper or more abundant raw materials and labour
Spread risks in any one market through diversification
For host country
creates jobs
can boost gdp
introduces new skills and technologies
introduces competition
Disadvantage
Cultural diversity: on the one hand, different cultures can blend and learn from each other, but on the other hand it is difficult for businesses to fit in different cultures, because they have different understandings of the same thing, different tastes and traditions.
Level of competition: on the one hand, companies can enter a foreign market with lower competition, but on the other hand, companies will also face competition and “battle” for access to foreign markets with other MNCs.
Ability to meet customer expectations: on the one hand, people’s tastes and fashions tend to blend and become very similar, but on the other hand, people in different countries still have their own unique features, desires, needs and wants and businesses have to adjust to them.
Number of customers: on the one hand, the more countries, the more people to sell to, but on the other hand, it comes with a need to adjust to many different customer needs.
Economies of scale: on the one hand, businesses have great choices of location and may choose a place that allows for the highest efficiency, but on the other hand, global supply chain management is a serious and time consuming task that might result in diseconomies of scale if it’s not managed well.
External growth opportunities: on the one hand, companies have created opportunities for M&As on a global market, but on the other hand it means greater bureaucracy and having to deal with local governments and restrictions.
Sources of finance: similar to the previous point, greater opportunities on the one hand, accompanied by greater challenges on the other hand.
Hostcountry:
Profits are sent back to home country.
Can push local companies out of business causing unemployment.
Low CSR: exploits the country’s natural resources.
