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    IB Business Management - Unit 1.6 Multinational Companies (MNC'S) Notes

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    A multinational company (MNC) operates in more than one country, with operations such as factories, retail outlets, and offices located overseas. MNCs have foreign direct investments abroad and examples include food companies like McDonald's and KFC, fashion brands like Nike and Louis Vuitton, automakers like Toyota and Tesla, and oil companies like Shell. MNCs can positively impact host countries through job creation, support for local businesses, increased choices for consumers, and tax revenue for governments. However, they may also negatively affect host countries by causing losses for small local companies that cannot compete, repatriating profits back to the home country rather than reinvesting locally, and sometimes exploiting employees or

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    IB Business Management - Unit 1.6 Multinational Companies (MNC'S) Notes

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    jaden
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    A multinational company (MNC) operates in more than one country, with operations such as factories, retail outlets, and offices located overseas. MNCs have foreign direct investments abroad and examples include food companies like McDonald's and KFC, fashion brands like Nike and Louis Vuitton, automakers like Toyota and Tesla, and oil companies like Shell. MNCs can positively impact host countries through job creation, support for local businesses, increased choices for consumers, and tax revenue for governments. However, they may also negatively affect host countries by causing losses for small local companies that cannot compete, repatriating profits back to the home country rather than reinvesting locally, and sometimes exploiting employees or

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    IB Business Management - Unit 1.6 Multinational Companies (MNC's) Notes

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    A multinational company (MNC) operates in more than one country, with operations such as factories, retail outlets, and offices located overseas. MNCs have foreign direct investments abroad and examples include food companies like McDonald's and KFC, fashion brands like Nike and Louis Vuitton, automakers like Toyota and Tesla, and oil companies like Shell. MNCs can positively impact host countries through job creation, support for local businesses, increased choices for consumers, and tax revenue for governments. However, they may also negatively affect host countries by causing losses for small local companies that cannot compete, repatriating profits back to the home country rather than reinvesting locally, and sometimes exploiting employees or

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    Download as PDF, TXT or read online from Scribd
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    698 views4 pages

    IB Business Management - Unit 1.6 Multinational Companies (MNC'S) Notes

    Uploaded by

    jaden
    A multinational company (MNC) operates in more than one country, with operations such as factories, retail outlets, and offices located overseas. MNCs have foreign direct investments abroad and examples include food companies like McDonald's and KFC, fashion brands like Nike and Louis Vuitton, automakers like Toyota and Tesla, and oil companies like Shell. MNCs can positively impact host countries through job creation, support for local businesses, increased choices for consumers, and tax revenue for governments. However, they may also negatively affect host countries by causing losses for small local companies that cannot compete, repatriating profits back to the home country rather than reinvesting locally, and sometimes exploiting employees or

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    of 4

    1.

    6 Multinational Companies
    (MNC’s)
    Tags Unit 1 Introduction to Business Management

    Date of Lesson @November 16, 2022 → November 16, 2022

    MNC’s
    What is an MNC?
    Multinational company (MNC) is any business organisation that has
    operations overseas, irrespective of whether it produces/sells goods
    and/or provides services.

    MNCs operates in two or more countries

    Its headquarters might be located in one country, it has operations and


    premises (factory, retail outlets, offices) in other countries

    MNC has foreign direct investment (FDI) in overseas market.

    FDI refers to cross-border investment in which a foreign company


    establishes an ongoing and significant stake in its operations in another
    country.

    Examples of MNC’s
    Food and Beverage

    McDonalds, KFC, Din Tai Fung, Starbucks

    Fashion

    1.6 Multinational Companies (MNC’s) 1


    Gucci, Nike, Louis Vuitton, Dior, Adidas

    Automobile

    Toyota, Tata Motors, Tesla, Mercedes, Ferrari, Mazda

    Oil

    Shell, Petronas, ESSO

    Retail

    Target, Walmart, Costgo, 7/11, Ikea, Kinokuniya, Panda, Isetan,


    Takashimaya

    The biggest multinationals generate annual sales revenue in excess of the


    gross domestic product (GDP) of entire economies.
    HOWEVER,
    Business that only exports products overseas markets does not qualify to be
    a MNC as it operates from the home country.

    The impact of MNC’s on the host


    countries
    The rise of MNCs and international trade have intensified globalization.
    Consider some impacts MNC would have towards its host countries.

    Positive Impacts of MNC’s on Host Countries


    Employment Opportunities
    Availability of jobs in host countries which would benefit the economies from
    higher incomes, savings and tax revenues which could raise the quality of life
    for the community in the host country

    Support for the workforce


    Opportunities to work in larger companies are available that could offer higher
    wages/salaries compared to local firms. Training and development can also
    be benefited by locals

    Support for local businesses


    Local businesses benefit directly and indirectly.
    E.g. purchase of stocks from local suppliers. Transportation of supplies or
    finished goods from factory to retail stores

    1.6 Multinational Companies (MNC’s) 2


    Choice & Quality

    MNC’s offers consumers more choices and better quality products. Local
    community do not have to rely only on local companies.

    Efficiency Gains

    MNC indirectly increases competition with local businesses forcing domestic


    businesses to improve in quality and operational efficiency.

    Tax Revenue

    Host country government benefit from profitable multinational companies as


    they pay corporate taxes. This is additional finance which can be spent to
    improve the infrastructure and economy of the country.

    Negative Impacts of MNC’s on Host Countries


    Negative impact on local businesses

    Smaller local companies cannot compete with larger foreign multinational


    companies. Fall in demand or sales could lead to bankruptcy and loss of jobs

    Repatriation of profits

    Profits made by MNC will be repatriated (sent back) to home country. Not all
    profits will be kept on host country for further investments

    Exploitative Business Practices


    When operating in less economically developed countries, MNC is known to
    be socially irresponsible as rules and regulation are more flexible. (Working
    conditions, exploitation of employees, pollutions, etc)

    Loss of cultural identity


    Growing presence of MNCs and globalisation led to loss of local cultures and
    shift of how people live, especially in younger generation.

    1.6 Multinational Companies (MNC’s) 3


    1.6 Multinational Companies (MNC’s) 4

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