1.6 Multinational Companies

Globalization

Actions or processes that involve the entire world and result in making something worldwide in scope.

Impact of Globalization

Increased competition;
Greater brand awareness;
Skill transfer;
Closer collaboration

Multinational corporation (MNC)

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

Advantages to host country

Job creation
Economic growth,
Knowledge and technology transfer
Greater choice of products,
Increased competition, and
Short-term infrastructure projects.

Disadvantages for host countries

Profits being repatriated,
Loss of cultural identity,
Job losses
Brain drain,
Social responsibilities
Loss of market share,
Competitive pressures, and
Vulnerability/Short-term plans.

Gross domestic product (GDP)

the 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

Protectionist policies

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

Transnational corporation

has regional head offices rather than a single international base

Reasons of becoming a MNC

- increased customer base
- cheaper production costs
- economies of scale
- Brand development and brand value
- avoid any protectionist policies
- spread risks

Demerger

happens when a company sells off a part of its business, thereby separating into two or more business entities. It usually happens due to cultural conflicts, inefficiencies and incompatibilities

Brand acquisition

An alternative strategy to a complete merger or takeover for MNCs is to buy one of the brands of the target company