Chapter 10 (multinational)

Question 1

Why have many companies developed into multinationals?

Answer 1

Because large companies can exploit economics of scales and lower costs.

Question 2

What can multinationals do to suppliers?

Answer 2

They can put pressure on suppliers to lower their cost.

Question 3

What does multinational have access to?

Answer 3

They have access to cheap global resources such as labor, capital and commodities.

Question 4

How some firms become multinationals?

Answer 4

By relying on effective marketing

Question 5

What is it mean by becoming multinational by relying on effective marketing?

Answer 5

It mean company spend heavily on advertising and use innovative marketing to grow as multinational attract customers globally.

Question 6

What does multinationals have to take risks and diversify?

Answer 6

Sufficient resources

Question 7

What are benefits of multinationals?

Answer 7

Larger customer base
Higher profile
Lower cost
Lower taxation
Avoid trade barriers

Question 8

How can multinationals boost their sales revenues?

Answer 8

They can boost their sales revenues by selling more output to the global market which can help them to win larger market share and raise profit margins.

Question 9

How can multinationals reduce transportation costs?

Answer 9

They can reduce transportation costs and locating their factories in new countries which reduce the distance from production site to market place.

Question 10

What is the benefit to company if it has strong brand name and have high profile?

Answer 10

It encourage existing customers and attract new customers.

Question 11

How can multinational bypass trade barriers?

Answer 11

They can bypass trade barriers by establishing operation in the country that have trade barriers in place.

Question 12

How can multinational bypass trade barriers?

Answer 12

They can bypass trade barriers by establishing operation in the country that have trade barriers in place.

Question 13

How can multinationals reduce the amount of cooperation taxes?

Answer 13

By basing their head offices and premises in countries where tax rates are low.

Question 14

What are benefits of multinationals to a country or its economy?

Answer 14

Increase income and employment
Increase tax revenue
Increase exports
Transfer of technology
Improvement in quality of human capital
Enterprise development

Question 15

Multinationals do not provide jobs in countries?

Answer 15

False

Question 16

What does extra output and employment generated by multinationals do to country?

Answer 16

They will increase the country’s economics growth and raise the living standards of people in those countries.

Question 17

How do large number of taxes pay by the multinationals can be use?

Answer 17

They can be used to improve government’s services.

Question 18

How does increase in country’s export help country?

Answer 18

It helps country to increase their foreign currency reserve.

Question 19

What do multinationals provide for their workers?

Answer 19

They provide training and work experience for their workers.

Question 20

What does arrival of multinationals encourage more people to do?

Answer 20

It encourage more people to start business in less developed countries.

Question 21

What can countries do to attract multinationals?

Answer 21

They spend more on education to improve the quality of human capital to attract more multinationals.

Question 22

What can countries do to attract multinationals?

Answer 22

They spend more on education to improve the quality of human capital to attract more multinationals.

Question 23

What is currency reserve?

Answer 23

Money in foreign currency held by country and used to support its own currency and to pay for imports and foreign debts.

Question 24

What is human capital?

Answer 24

People and their skills

Question 25

What is enterprise?

Answer 25

Activity of starting and running a business.

Question 26

What are the possible drawbacks of multinationals to a country/economy?

Answer 26

Environmental damage
Exploitation of less developed countries
Lack of accountability
Repatriation of profit

Question 27

How multinationals might exploit nation?

Answer 27

• They may encourage country to rely on producing primary products
• They often pay low wages

-They employ child labors with poor working conditions

• Taxes paid to government is minimal
• As little as possible is put back to the country to increase their profit

Question 28

Why relying on one industry is bad?

Answer 28

Because it makes the country vulnerable.

Question 29

What is the result of the repatriations of profits of multinationals?

Answer 29

The host country left out.

Question 30

What is it mean by multinationals’ lack of accountability?

Answer 30

With their powerful influence they may be able to evade the law especially in countries where government is weak or corrupted.

Question 31

What is repatriation?

Answer 31

Where multinational return profits from oversea venture to the country it is based, typically from developing country to developed country.