Unit 1 - 4

Question 1

How does an organisation become a multinational?

Answer 1

1. Establish production facilities in other countries
2. Buy an existing business in another country
3. Joint ventures with firms in other countries
4. Franchising

Question 2

Why do business become multi-nationals?

Answer 2

1. They may benefit from lower costs (cheaper labour, land)
2. Lenient legislations (no minimum wage)
3. To gain needed factors of production (oil)
4. Lower transport costs
5. Closer to the market actually selling the product
6. To avoid import restrictions

Question 3

What are the positive effects of a multinational organisation on the host country?

Answer 3

1. Increased employment - increased standards of living
2. Government gains more tax revenue as more tax taken from incomes
3. Imports will decrease and exports will increase - improving the balance of payments
4. Training opportunities
5. National Output will increase meaning that economic growth will increase

Question 4

What are the negative effects of multinationals on the host country?

Answer 4

1. They may exploit the natural resources
2. Exploit the labour - low wages, low working conditions, poor health and safety
3. Higher up working jobs may go to employers from home country
4. They may increase pollution, from their waste

Question 5

What are the negative effects of multinationals on the Home Country?

Answer 5

1. Loss of jobs

2. Negative effect on the BoP as now may import goods

Question 6

What are the problems of being a multinational company?

Answer 6

1. Diseconomies of Scale - CCIP
2. Technology breakdowns
3. Pressure groups - fear globalisation and feel MNC will exploit the poor

Question 7

What is Globalisation?

Answer 7

The process by which businesses or other organisations develop internationally or start operating on an international scale

Question 8

What is the effect of globalisation on the UK?

Answer 8

1. Most of the clothes that we buy are imported
2. Call centres in India
3. Foreigners buy financial and legal services from London

Question 9

What is globalisation leading to/lead to?

Answer 9

1. Increase trade in goods and services - WTO
2. Increased movement of labour
3. Increased movement of financial capital

Question 10

What are the reasons for globalisation?

Answer 10

1. Technological change - decreased cost of communication and data can be easily transferred
2. Transport costs are decreasing
3. Consumer Tastes

Question 11

What is a multinational?

Answer 11

An organisation that has production facilities in more than one country