❤️‍🔥 1.6 - Multinational companies (MNCs)

Gross domestic product (GDP)

Value of a country's annual output or national income.

Host country

Any nation that allows a multinational company to set up in its country.

Multinational company (MNC)

An organization that operates in two or more countries, with its head office usually based in the home country.

Protectionist policies

Measures imposed by a country to reduce the competitiveness of imports, such as tariffs (import taxes), quotas and restrictive trade practices.

Foreign direct investment (FDI)

This refers to cross-border investment in which a foreign company establishes an ongoing and significant stake (financial interest and degree of influence) in its operations in another economy.

Globalization

Refers to the process of greater integration and interdependence of businesses and economies throughout the world.

Synergy

This is a key benefit of growth through multinational companies and occurs when the whole is greater than the sum of the individual parts. A larger MNC, with synergy, perhaps through a merger or acquisition of another business located overseas, creates greater levels of output, and improved operational efficiency.

Main reasons why many businesses strive to become MNCs

• Increased customer base

• Cheaper production costs

• Economies of scale

• Brand development and brand value

• Avoidance of protectionist policies

• Spread risks

What positive impacts do multinational companies have on host countries?

• Employment opportunities

• Support for the workforce

• Support for local businesses

• Choice and quality

• Efficiency gains

• Tax revenues

What negative impacts do multinational companies have on host countries?

• Negative impacts on local businesses

• Repatriation of profits

• Exploitative business practices

• Loss of cultural identity