Business – MNC Questions and Answers
Multinational Business
Headquarters in one country and operating branches, factories or assembly plants in other countries.
Must produce goods or services in more than one country.
Globalisation
Integration of economic, social, technical and cultura...
Business – MNC Questions and Answers
Multinational Business - answer Headquarters in one country and operating
branches, factories or assembly plants in other countries.
Must produce goods or services in more than one country.
Globalisation - answer Integration of economic, social, technical and cultural aspects
of the worlds economies.
Globalisation has accelerated in recent years with the rapid growth of mulit nationl
companies and the expansion of free internationsl trade.
Three important aspects:
Increased trade in Goods and services. Increased movements of labour from country to
country. Increased movment of financial capital
Why firms become MNC - answer Brings firms closer to their main markets
Reduces production costs- cheap labour
Gain access of natural resources in other country's
Takes advantage of expanding markets in other countries
Takes advantage of global economies of scale-whole globe as their market and supply
chain
Factors that contribute to globalisation - answer Contributing factors:
Consumer tastes- most consumers are now willing to buy foreign products. Our demand
for products from overseas is stimulated by advertising and our exposure to
international marketing via the internet and social media
Technological change- powerful communications technology and the internet have
dramatically changed the way we purchase products.
Cost of transportation - the single most important factor in the falling cost of
transportation has been the is of containerised transported
Liberalisation of trade- trade protection has been reduced due to the operation of
organisations such as the World Trade Organisation and inter-country agreements such
as Closer Economic Relationships (CER) between NZ and Australia and the NZ and
Thailand Closer Economic Partnership
Emerging markets and competition-new markets have opened up in some countries that
have seen a growth in their national income. As businesses in countries such as South
East Asia have become more successful that have been able to compete in western
economics
Reduction in the cost of communications and increase in their speed.
Disadvantages of MNCs - answer Exploitation of local workforce if cheap labour
rates are paid
Pollution and the depletion of limited resources : coca cola
Reduce market share for local businesses
MNC can denominate local suppliers, causing them to force up prices for raw materials
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