Topic 1 - Types of Multinational Corporations

Question 1

Why do multinational corporations (MNCs) exist?

Answer 1

To access new markets, reduce costs, gain economies of scale, and diversify risk.

Question 2

What are common criticisms of MNCs?

Answer 2

Exploitation of labor/environment, tax avoidance, cultural domination, harm to local businesses.

Question 3

What is horizontal multinational activity?

Answer 3

Expansion across countries at the same stage of production (e.g., Starbucks cafés worldwide).

Question 4

What is vertical multinational activity?

Answer 4

Expansion across different stages of the supply chain in different countries (e.g., oil drilling + refining).

Question 5

What is backward vertical integration?

Answer 5

Owning suppliers upstream in the supply chain (e.g., car company buying steel plant).

Question 6

What is forward vertical integration?

Answer 6

Owning distribution or retail (e.g., Apple opening Apple Stores).

Question 7

How is outsourcing different from vertical integration?

Answer 7

Outsourcing uses external firms (no ownership), vertical integration owns the entire process.

Question 8

What are trade and disintegration costs?

Answer 8

Trade: tariffs/logistics. Disintegration: coordination/control across countries.