Globalisation (04)

Question 1

SUMMARY

Answer 1

In summary, the following are covered in this topic:
1. Multinational businesses refer to businesses that are headquartered in one
country, but with operating branches and factories in other countries.
2. Businesses may decide to set up operations in other countries due to benefits
such as proximity to key markets, lower costs of productions, to avoid import
restrictions or simply due to the availability of natural resources in these
countries.
3. Multinational businesses are important to the global economy as they promote
technological advancements, globalisation and economic integration.
4. Multinational businesses bring about both benefits and costs to host countries.
5. Due to globalisation, a major event such as natural disasters or labour strikes,
in one country could have major impact on businesses in another country.

Question 2

What are Multinational businesses?

Answer 2

Multinational businesses (AKA Multinational companies/ corporations (MNCs) ), refer to businesses that are headquartered in one country, but with operating branches and factories in other countries.

MNCs do not just import and export, but actually produce goods and services in more than one country.

Question 3

What are the reasons for businesses to set up operations in other countries?

Answer 3

1) Proximity to key markets
- Lower transport costs
- Better market information
- Perceived as a domestic business

2) Lower costs of production
- Lower labour costs
-Cheaper location costs
-Governments grants and tax incentives

3) Avoid import restrictions

4) Access to local natural resources

Question 4

What are the importance of a Multinational Business in the Global Economy?

Answer 4

1) Promote technologies and innovations
2) Promote globalisation
3) Economic integration

Question 5

What are the influence of Multinational Businesses on Host Countries?

Answer 5

1) Benefits to host countries
-Infusion of investments
-Employment opportunities
-Management and technical expertise
-Benefits to local businesses

2) Costs to host countries
-Exploitation of domestic workforce
-Pollution
-Depletion of natural resources
-Dilution of culture
-Shut down of local businesses

Question 6

Why would MNCs benefit local businesses?

Answer 6

With the multinational businesses in the host
country, local businesses might be engaged to provide supporting services or ancillary goods for used in the operations of these multinational businesses.

This not only improves the sales of the local businesses but could also force them to improve on their productivity and quality to stay competitive and viable.

Question 7

What are major events that could affect a business?

Answer 7

1) Natural Disasters
2) Political Change
3) Labour Strikes