Business Studies - Multinational Business

Multinational Businesses

A multinational business is not one which sells in more than one country. To become multinational  a business must also produce in more than one country. Why do firms become multinational? To produce goods in countries with low costs, such as low wages To extract raw materials which the firm may need for production or refining To produce goods close to the market to reduce transportation costs To avoid barriers to trade To expand into different market areas to spread risks To remain competitive.

Multinational Businesses

Advantages Jobs are created, which reduces unemployment Output of goods and services increases in the country Some goods will be sold abroad, which will increase the exports of the country Imports may be reduced Taxes are paid by the multinationals More product choice for consumers and more competition.

Disadvantages Jobs created are often unskilled Local firms may be forced out of business Repatriation of profits Multinationals often use up scarce and non-renewable primary resources Multinationals may threaten to leave the country and create big job losses if the governments does not offer large grants to them.