1.6 Multinational Companies

What is a multinational company (MNC)?

an organization that operates in two or more countries

What is a transnational corporation?

head offices in other countries

Why have MNCs grown considerably over time?

benefits of being such super-sized businesses

Why do businesses become MNCs?

• increased customer base

• cheaper production costs (inexpensive labor)

• economies of scale

• brand development and brand value

• avoid protectionist policies

• spread risks

What is a host country?

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

Positive impacts of MNCs on host countries:

• Job creation

• Higher national income

• Knowledge and technology transfer

• Increased competition to incentivize local firms to be more efficient

Negative impacts of MNCs on host countries:

• Job losses

• Repatriation of profits

• Vulnerability

• Social responsibilities

• Competitive pressures

What are trade protectionist policies?

promotes/boosts domestic products in the country + imposes tariffs/limits on foreign goods + services in the marketplace

What is gross domestic product (GDP)?

total monetary/market value of all the finished goods + services produced within a country’s borders in a specific time period