IGCSE BUSINESS STUDIES Topic : Multinational businesses

What are Multinational Businesses?

Businesses which have their operations, factories and assembly plants in more than one country are known as Multinational Business. They are also known as Transnational businesses.

Advantages of being a Multinational

• Multinational can set up their business operations in countries where the labour and raw material is cheaper, which can give them cost advantage in the international market.
• Multinational have access to many markets which spreads the risk of failure. If any product may not be successful in a particular market, it might be successful in another.
• MNCs produce in large quantities thus achieving greater economies of scales.
• A multinational business is less vulnerable to trade barriers. MNCs set up their local operations in countries where there is potential market for them and get away with import duties and restrictions.
• MNCs can locate their operations near the potential market which results in lower transportation cost.

Advantages of Multinational to the host country

• Multinationals create employment.
• They bring new technology and techniques of production.
• MNCs usually provide training to their worker which results in better skills for the country’s workforce.
• Multinational businesses usually produce in large quantities and export to other countries which can result in valuable foreign exchange for the host country.
• They pay huge taxes to the government which can be used for the development of the host country.