The importance and growth of multinationals

Question 1

What is a multinational company

Answer 1

A business that operates in multiple countries but has its headquarters in one country.

Question 2

What are the benefits of a business becoming a multinational?

Answer 2

+ Larger customer base – More sales and profits.
+ Lower costs – Can source cheaper materials and labor.
+ Economies of scale – Bulk buying reduces costs.
+ Brand recognition – Becomes a well-known global brand.
+ Access to new markets – Expands beyond domestic sales.

Question 3

What are the drawbacks of a business becoming a multinational?

Answer 3

• Cultural differences – Different customer needs in each country.
• Legal & tax issues – Different regulations across countries.
• High operating costs – Managing businesses worldwide is expensive.
• Exchange rate risks – Currency fluctuations affect profits.
• Negative public image – Accusations of exploiting workers or harming local businesses.

Question 4

What are the benefits to a country where an MNC is located?

Answer 4

+ Job creation – More employment opportunities.
+ Investment in infrastructure – MNCs may improve transport and services.
+ Technology transfer – Brings new skills and innovations.
+ Economic growth – Increases tax revenue and trade.
+ Improved standards – Encourages better business practices.

Question 5

What are the drawbacks to a country where an MNC is located?

Answer 5

• Exploitation of workers – May pay low wages and have poor working conditions.
• Environmental damage – Pollution and resource depletion.
• Local businesses suffer – Hard to compete with big MNCs.
• Profit leakage – Profits may be sent back to the MNC’s home country.
• Political influence – MNCs may pressure governments for favorable policies.