Multinationals

Question 1

Define a Multinational

Answer 1

A business that has operations in more than one country. This could be worldwide retail outlets such as IKEA or just retail outlets in one country and a production facility in another.

Question 2

What are the advantages of operating as a multinational?

Answer 2

-Wages and raw materials costs are lower in host countries
-Business can avoid legislation in home country
-Grants can be issued by governments to locate in their country
-Businesses can avoid quotas and tariffs (on imports and exports) issued by their own governments
-Will allow the business to have access to a wider market
-Increased brand awareness

Question 3

What are the disadvantages of operating as a multinational?

Answer 3

-Language barriers can slow down communication
-Cultural differences can affect production eg siestas in spain

Question 4

What are the disadvantages of operating as a multinational?

Answer 4

-Language barriers can slow down communication
-Cultural differences can affect production eg siestas in Spain
- Exchange rates can affect purchasing and paying expenses in different countries
- Time differences can hinder communication between head office and branches around the world

Question 5

What are advantages of multinationals to the host country?

Answer 5

-Creates employment
-New management may be introduced which can be copied by other organisations
-Economic growth
-Availability of new products

Question 6

What are the disadvantages of multinationals to the host country?

Answer 6

-Jobs created may be low skilled
-Profits earned may be transferred back to shareholders in home country
-Multinationals may pressure the governments of host countries and threaten to withdraw if policies aren’t made in their favour