MULTI-NATIONALS

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

The biggest:
Exxon

Ford
(Esso) Motors

British American Tobacco Volkswagen

General Royal

Dutch Shell

Matsui
Unilever

These companies have a turnover in excess of the GNPs of most countries.

Some facts about MNCs

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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

REASONS FOR BEING A MNC

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.