MULTINATIONAL

COMPANIES
 GLOBALISATION

• Many markets today are global. Some firms expect to sell their products at any where in the
world.
• Firms and people are behaving as through there is one market in the whole world.
• This development is called globalisation.
Definition
Globalisation - the growing integration of the world’s economies.
 FEATURES OF GLOBALISATION

• Products are traded freely across international borders – no restrictions to prevent firms from
selling international markets.
• Such as eu people are free to live and work In any country they choose.
• High level of interdependence between nations. Events in one economy is likely to effect other
economies.
• Capital can flow freely between different countries.
 IMPORTANCE AND GROWTH OF
MULTINATIONALS

• Multinationals play large and growing role in the world economy.

• Contribute about 10 percent of world gdp and 2/3 of global exports
Definition
Multinational – a large business with markets and production facilities in several different
countries.
Repatriation (of profit) – where a multinational returns the profits from an overseas venture to the
country where it is based.
 WHY HAVE MULTINATIONALS BEEN CREATED

• Economies of scale
• Marketing
• Technical and financial superiority
 ECONOMIES OF SCALE

• Can exploit economies of scale.

• Can enjoy lower cost because of their size.
• Multinationals are powerful and put pressure on suppliers to lower their prices.
• Can have access to cheap global resources such as labour, capital and commodities
 MARKETING

• Some firms become multinationals by relying on effective marketing.

• Such as starbucks and macdonald’s
• Low tech that have developed a success brand at home and then exploit it globally.
• Both firms face fierce competition in their market but protected their brand with patents and use
heavy advertising and innovative marketing to attract customers globally.
 TECHNICAL AND FINANCIAL SUPERIORITY

• Developed into large business over period of time.

• Developed Advanced technologies and build up a huge bank of knowledge.
• Can afford to invest heavily in research and development
• Can employ most talented people available.
• Resources to take risk and diversity, as a result they can take on business ventures that small
firms could dream of.
 ADVANTAGES OF MULTINATIONALS

• Increase in income and employment

• Increase in tax revenue.
• Increase in exports
• Transfer of technology
• Improvement in the quality of human capital
• Enterprise development
 DISADVANTAGES OF MULTINATIONALS

• Environmental damages
• Exploitations of less developed countries.
• Repatriation of profits.
• Lack of accountability.