MULTI-NATIONALS A MNC is a business which owns or controls

production or service facilities outside the country in which it is based.

This means that they do not just export their products, but make them abroad.

Usually have interests in at least 4 countries, but most operate in more than this

Some MNCsExamples Ford

British American Tobacco

Volkswagen

Matsui

Unilever

The biggest:

Exxon (Esso)

General Motors

Royal Dutch Shell

These companies have a turnover in excess of the GNPs of most countries.

Some facts about MNCso Multinational companies have branches called

‘subsidiaries’ in more than one country;

o Many have sales ‘outlets’ in various countries;

o A MNC must have production facilities in more than one country.

MNCs in Scotland Electronics industry – in central belt of

Scotland eg Compaq, IBM;

Oil Industry – in the northeast, multinationals like Shell and BP Amoco

Reasons for Establishing MNCs

To increase market share; To secure cheaper premises and labour; Employment and Health & Satfey Legislation in other

countries may be more relaxed To avoid or minimise the amount of tax to be paid; To take advantage of government grants available; To save on costs of transporting goods to the market

place; To avoid trade barriers like the EU Common External

Tariff; To develop an international brand

REASONS FOR BEING A MNC

To avoid protectionist policies

By producing within a country, a company can avoid tariffs and import controls. Japanese car

companies who produce in the UK can export to other EU countries without having additional charges or limits placed upon them.

The Globalisation of markets

Many people believe that national boundaries are no longer important for firmsCommunication and

travel are increasingly faster and make the world seem smaller.MNCs who are global in

outlook can take advantage of this so-called ‘global village’

Advantages of MNCs to the Host Country They bring new jobs to an area; Often at the forefront of new technology and

can bring this to another country; Often more efficient than local companies; They can lead to the introduction of new

management techniques; Often export their output therefore help the

Balance of Payments; They can lead to new businesses being set up

locally once people have learned new skills.

Disadvantages of MNCs They are very powerful and can influence the

government of a country; Local employment can be dependent on one

large employer; They may use up natural resources which may

not be renewable; They can force local firms out of business; The profit they make goes back to the ‘home’

country; They can be ‘footloose’ and may move to

another country if better incentives offered.

MNCs and Social responsibility

Often criticised for their marketing techniques, eg Nestle and baby milk; Marlboro targeting children

Safety issues, eg factories in a host country have lower standards than allowed in base country eg India

Impact on the environment, eg rainforests being destroyed

However they may offer higher wages than local organisations and they have the power, money and knowledge to help preserve the environment if they choose.

Government control Some people feel that MNCs have too much

influence over governments.

In some countries MNCs avoid paying tax.

Some MNCs exert power on politicians and decisions and policies may be shaped to suit them.

WORKSHEET

1. Suggest reasons for establishing MNCs. (4)

2. Identify the features of a multi-national company? (2)

3. Explain the possible advantages and disadvantages to the host country of a MNC operating there? (6)

4. Suggest how Aberdeen has benefited from North Sea Oil. (3)

5. Outline disadvantages to Aberdeen of MNCs operating

there? (3)