Business And The International Economy: Reasons For The Importance And Growth Of Multinational Companies (MNCs) (Copy)
Cheat Sheet: 6.3.2 Multinational Companies (MNCs)
Benefits to a Business of Becoming an MNC
| Benefit | Explanation | Example |
|---|---|---|
| Access to Larger Markets | Sell to customers worldwide | Coca-Cola sells in 200+ countries |
| Lower Production Costs | Locate in countries with cheaper labour/raw materials | Clothing firms manufacturing in Bangladesh |
| Economies of Scale | High output → lower average costs | Toyota mass production |
| Global Brand Power | Strong brand identity increases customer loyalty | Apple iPhone dominance |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Benefits to Host Countries
| Benefit | Explanation | Example |
|---|---|---|
| Job Creation | Employ local workers | Samsung factories in Vietnam |
| Exports & Foreign Exchange | Goods produced may be exported → boosts economy | Car exports from Mexico |
| Consumer Choice | Access to wider range of products | Global fast food chains in India |
| Investment & Technology Transfer | Brings new capital and expertise | Microsoft IT hubs in developing countries |
Drawbacks to Host Countries
| Drawback | Explanation | Example |
|---|---|---|
| Reduced Sales for Local Firms | MNCs may outcompete smaller businesses | Local shops lose to Walmart |
| Repatriation of Profits | Profits sent back to home country instead of reinvested | Shell sending oil profits abroad |
| Exploitation of Resources/Workers | Low wages, poor conditions, environmental harm | Sweatshop labour in textile industry |
| Cultural Influence | Local traditions replaced by global brands | McDonald’s dominating local food culture |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Impact on Stakeholders
| Stakeholder | Impact |
|---|---|
| Employees | Gain jobs but risk low pay/conditions |
| Consumers | More choice, possibly lower prices |
| Government | Gains tax revenue, investment, but loses profit if repatriated |
| Local Businesses | Risk losing customers to MNCs |
| Environment | May face pollution or overuse of resources |
Quick Revision Bullets
- MNCs = firms operating in more than one country
- Business benefits = markets, lower costs, EOS, brand power
- Host country benefits = jobs, exports, choice, investment
- Drawbacks = local firms suffer, profit repatriation, exploitation, cultural loss
- Stakeholders affected differently: employees, consumers, gov, environment
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course