Multinational corporations

Question 1

What is a multinational corporation?

Answer 1

A business with facilities (=services) in at least one country other than home country

Question 2

What is a subsidiary?

Answer 2

It’s a business with affiliate (filiale)

Question 3

What word refers to the place where a company has its main offices?

Answer 3

Corporate headquarters

Question 4

What is the turnover of a company?

Answer 4

Total values of sells at the end of the years

Question 5

What does FDI mean?

Answer 5

Foreign Direct Investment: building, expending or acquiring.

Question 6

What is a transition economy?

Answer 6

An economy changes from a centrally planned (=under government control) economy to a market
economy (=companies are not control by government).

Question 7

Why do MNCs tend to invest more and more in developing countries?

Answer 7

Because: a numerous and cheap workforce (=labour cost is lower and therefore cost of production
are lower as well). And skilled labour (BRICs) for example India offers highly educated English
speaking soft where engineers. Or for the materials, good economic environment, political stability.

Question 8

How do MNCs vary from one another?

Answer 8

Vary from one to another in terms of size, business sector, production locations, and organizational
structures

Question 9

What is the largest MNC in the world?

Question 10

What factors determine the organisational structure of an MNC?

Answer 10

• The overall global strategy of the company
• The size of international operations compared to domestic operations
• The characteristics of the marketplace

Question 11

What types of organisational structures are used in MNCs?

Answer 11

International division, geographic area, global product division and global matrix

Question 12

What is the mission of an international division?

Answer 12

When companies begin to expand abroad foreign countries, international division manage the
international activities of the company. There is a separation between domestic and international
activities.

Question 13

What is the main advantage of global product division structure?

Answer 13

The head of the international division coordinates and manages all foreign activities One firms direct
the other.

Question 14

What is the main disadvantage of global product division structure?

Answer 14

The main disadvantage is the influence of foreign subsidiary managers less important than the
managers of domestic divisions

Question 15

In a matrix organisation, who do employees report to?

Answer 15

Employees report both geographical manager and produce manager. In matrix organisation instead of
choosing between organization staff along geographic or product lines, management has both

Question 16

What is the main disadvantage of a global matrix organisation?

Answer 16

The main disadvantages: multiple layers of management slow down decision speed + increase costs.

Question 17

Give reasons why companies may go multinational.

Question 18

Who developed the Eclectic Paradigm? What is it?

Answer 18

John Dunning developed the Electric Paradigm. It’s an organising framework; this framework explains
the pattern and growth of international production and it also identifies the gains to firms from being
multinational

Question 19

What do internalisation advantages refer to?

Answer 19

Its refers to benefits of setting up a subsidiary overseas are greater than the costs of arranging a
contrat with an external party you internalize production in that country