Cambrige Notes: Multinational Companies/ Trans National Companies

• These are large limited liability companies with branches in other countries and a headquarters in one country.
• Control is centralized and products have very similar features
• for example Zimplats (Implats), Coca Cola, Shell and BP.

Advantages

To host country

• Multinational companies bring several advantages to the host country including the following:
• They create employment.
• Improve infrastructure.
• Increase the country’s GDP and standard of living.
• Improves the skills of the host country’s workforce through training.
• Brings the latest technology to the host country.
• Bring in foreign currency.

To the company

• Multinational companies enjoy several advantages themselves as a result of their nature.
• These include:
• Cheap raw materials.
• Spreads the risk of failure by spreading it to different countries.
• Circumvents trade barriers.
• Cheap labor
• Enjoy economies of scale.

Disadvantages

To host country

• Exploitation of labour.
• Social cost and environmental degradation.
• Companies remit back their profits to parent companies thus reducing the benefits of increased standard of living.
• Political interference in some countries.
• Brings in unfair competition onto local infant industries.

To the company

• Multinational companies also suffer from certain disadvantages as a result of their nature
• These include:
• Increased risk of loss of company due to political instability
• Complex legal requirements from country to country.
• Complex macroeconomic environments.

To access more topics go to the O Level Business Notes page.