multinationals Flashcards
what are multinationals?
A multinational organisation is a company which has its headquarters in one country but has assembly or production facilities in other countries.
why would a company want to become a multinational?
• to increase market share - companies may find they are at saturation point in the domestic market and need a new outlet. They may start by exporting to other countries but eventually they will want to being production overseas.
• to secure cheaper premises and labour - cost of land and labour will be cheaper in developing countries. Sweatshops in the Far East are an example of cheap labour, whereas production plants opening in the old Soviet Bloc nations like Poland, Bulgaria etc are examples of cheap factories
what are 7 advantages of multinationals?
• larger global market
• take advantage of the cheaper labour and premises
• access to raw materials
• economies of scale
• closer to raw materials
• increase market share
• introduce new management style
what are 8 disadvantages of multinationals?
• cultural variations
• language barriers
• exchange rate uncertainty
• difficult to control
• climate
• increased competition
• different accountina practises
• transport can be expensive
