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.
 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
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 DRVELOPMENT
 DISADVANTAGES OF MULTINATIONALS

• ENVIRONMENTAL DAMAGES
• EXPLOITATIONS OF LESS DEVELOPED COUNTRIES.
• REPATRIATION OF PROFITS.
• LACK OF ACCOUNTABILITY.