3  Multi Nationals
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3 Multi Nationals






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3  Multi Nationals 3 Multi Nationals Presentation Transcript

    • A MNC is a business which owns or controls production or service facilities outside the country in which it is based.
    • This means that they do not just
    • export their products, but make
    • them abroad.
    • Usually have interests in at least
    • 4 countries , but most operate in
    • more than this
  • Some MNCs
    • Examples
    • Ford
    • British American Tobacco
    • Volkswagen
    • Matsui
    • Unilever
    • The biggest :
    • Exxon (Esso)
    • General Motors
    • Royal Dutch Shell
    • These companies have a turnover in excess of the GNPs of most
    • countries.
  • Some facts about MNCs
    • Multinational companies have branches called
    • ‘ subsidiaries’ in more than one country;
    • Many have sales ‘outlets’ in various countries;
    • A MNC must have production facilities in more than one country.
  • MNCs in Scotland
    • Electronics industry – in central belt of Scotland eg Compaq, IBM;
    • Oil Industry – in the northeast, multinationals like Shell and BP Amoco
  • Reasons for Establishing MNCs
    • To increase market share;
    • To secure cheaper premises and labour ;
    • Employment and Health & Satfey Legislation in other countries may be more relaxed
    • To avoid or minimise the amount of tax to be paid ;
    • To take advantage of government grants available;
    • To save on costs of transporting goods to the market place;
    • To avoid trade barriers like the EU Common External Tariff;
    • To develop an international brand
    • To avoid protectionist policies
    • By producing within a country, a company can avoid tariffs and import controls.
    • Japanese car companies who produce in the UK can export to other EU countries without having additional charges or limits placed upon them.
    • The Globalisation of markets
    • Many people believe that national boundaries are no longer important for firms
    • Communication and travel are increasingly faster and make the world seem smaller.
    • MNCs who are global in outlook can take advantage of this so-called ‘global village’
  • Advantages of MNCs to the Host Country
    • They bring new jobs to an area;
    • Often at the forefront of new technology and can bring this to another country;
    • Often more efficient than local companies;
    • They can lead to the introduction of new management techniques;
    • Often export their output therefore help the Balance of Payments;
    • They can lead to new businesses being set up locally once people have learned new skills.
  • Disadvantages of MNCs
    • They are very powerful and can influence the government of a country;
    • Local employment can be dependent on one large employer;
    • They may use up natural resources which may not be renewable;
    • They can force local firms out of business;
    • The profit they make goes back to the ‘home’ country;
    • They can be ‘footloose’ and may move to another country if better incentives offered.
  • MNCs and Social responsibility
    • Often criticised for their marketing techniques, eg Nestle and baby milk; Marlboro targeting children
    • Safety issues, eg factories in a host country have lower standards than allowed in base country eg India
    • Impact on the environment, eg rainforests being destroyed
    • However they may offer higher wages than local organisations and they have the power, money and knowledge to help preserve the environment if they choose.
  • Government control
    • Some people feel that MNCs have too much influence over governments.
    • In some countries MNCs avoid paying tax.
    • Some MNCs exert power on
    • politicians and decisions and
    • policies may be shaped to
    • suit them.
    • Suggest reasons for establishing MNCs . (4)
    • Identify the features of a multi-national company? (2)
    • Explain the possible advantages and disadvantages to the host country of a MNC operating there? (6)
    • Suggest how Aberdeen has benefited from North Sea Oil. (3)
    • Outline disadvantages to Aberdeen of MNCs operating
    • there? (3)