Features of multinational companies
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Flip to reveal answersState one resource-based reason an MNC enters a host country.
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Question
State one resource-based reason an MNC enters a host country.
Answer
To access resources or talent that are available in that location (raw materials or skilled labour).
💡 Hint
Go where the resources are.
Question
Give one reason why a business becomes multinational.
Answer
To access larger markets and increase potential sales revenue.
💡 Hint
More customers.
Question
What is a multinational company (MNC)?
Answer
A business that operates in more than one country, with headquarters in a home country and operations in host countries.
💡 Hint
Home country + host countries.
Question
Fill the gap: MNC challenges include exchange rates, time zones, and ______ differences.
Answer
Legal and cultural.
💡 Hint
Rules + culture.
Question
Fill the gap: An MNC operates in more than one ______.
Answer
Country.
💡 Hint
Multi-country.
Question
Why can political instability be a problem for MNCs?
Answer
Policy changes, unrest or corruption can disrupt operations and increase risk/costs in host countries.
💡 Hint
Political risk.
Question
State two key features of an MNC.
Answer
HQ in a home country and operations in host countries; operates at large scale across borders.
💡 Hint
HQ + host operations.
Question
Give one legal/regulatory challenge faced by MNCs.
Answer
Laws and regulations differ across countries (employment, environment, consumer protection), increasing compliance complexity.
💡 Hint
Different rules in each country.
Question
How can an MNC reduce costs globally?
Answer
By moving production to countries with cheaper labour, materials, energy or favourable taxes.
💡 Hint
Costs vary by country.
Question
What is meant by the “home country” of an MNC?
Answer
The country where the MNC’s headquarters is located (where it is based).
💡 Hint
HQ location.
Question
How can becoming multinational help a business avoid trade barriers?
Answer
Producing locally in a market can avoid import tariffs and quotas.
💡 Hint
Local production avoids tariffs.
Question
How can tax advantages encourage multinational expansion?
Answer
Some countries offer lower corporation tax or incentives to attract foreign investment.
💡 Hint
Incentives attract firms.
Question
How can culture and language be a challenge for MNCs?
Answer
Marketing messages and management styles may not transfer well across cultures, causing misunderstandings or poor demand.
💡 Hint
Local culture matters.
Question
Give one coordination challenge of running an MNC.
Answer
Managing long-distance operations increases communication delays and makes control/monitoring harder.
💡 Hint
Distance reduces control.
Question
Name two common reasons why firms become multinational.
Answer
Access larger markets and lower costs; they may also avoid trade barriers or spread risk.
💡 Hint
Markets + costs are safest.
Question
How can host-country regulation affect MNC impact?
Answer
Stronger regulation can reduce exploitation and environmental damage, shaping outcomes for stakeholders.
💡 Hint
Rules shape impact.
Question
Give two common challenges for MNCs.
Answer
Different laws/regulations and cultural barriers; also time zones and exchange rate risk.
💡 Hint
Rules + culture.
Question
How can one scandal in a host country affect the whole MNC?
Answer
Reputational damage can spread globally through media, reducing trust and sales across markets.
💡 Hint
Global brand = global fallout.
Question
Why do MNCs sometimes face ethical criticism?
Answer
They may use lower labour or environmental standards in some host countries, harming people or ecosystems.
💡 Hint
Ethical gap risk.
Question
What is meant by the “host country” of an MNC?
Answer
A country where the MNC has operations such as factories, offices or retail outlets outside its home country.
💡 Hint
Operations abroad.
Question
What does “economies of scale across borders” mean for an MNC?
Answer
Buying, producing and selling globally can lower average costs through bulk purchasing and high output.
💡 Hint
Global scale lowers unit cost.
Question
How does going multinational spread risk?
Answer
Operating in multiple economies reduces dependence on one country’s demand or growth.
💡 Hint
Don’t rely on one market.
Question
Why are time zones a challenge for MNCs?
Answer
Coordinating teams and decisions across different time zones slows communication and operations.
💡 Hint
Coordination is harder.
Question
Why can multinational expansion increase potential revenue?
Answer
Because selling in multiple countries increases the size of the customer base.
💡 Hint
More markets = more sales.
Question
Why do MNCs face more complexity than domestic firms?
Answer
They must handle different laws, taxes, cultures and languages across countries.
💡 Hint
Different rules everywhere.
Question
How does producing locally help an MNC compete in a foreign market?
Answer
It can reduce delivery costs and time, improve responsiveness, and avoid tariffs.
💡 Hint
Closer to customers.
Question
How can exchange rates affect an MNC’s profits?
Answer
Currency fluctuations change the value of overseas revenues and costs when converted back to the home currency.
💡 Hint
FX risk.
Question
Why do cultural differences affect product strategy?
Answer
Customer preferences vary, so a product/marketing approach that works at home may fail abroad without adaptation.
💡 Hint
Preferences differ.
Question
State one feature of MNC operations.
Answer
They operate across borders with activities such as production, marketing, or sales in multiple countries.
💡 Hint
Multi-country operations.
Question
What is the safest way to structure an MNC “discuss/evaluate” answer?
Answer
Make 2–3 positives and 2–3 negatives, apply to the case, then give a justified conclusion.
💡 Hint
Positives + negatives + conclusion.
Question
Why do good exam answers on MNCs need balance?
Answer
Because multinational expansion has both advantages and disadvantages depending on context and regulation.
💡 Hint
Not automatically “good”.
Question
Give one cost-based reason for becoming multinational.
Answer
To lower production costs using cheaper labour, materials or energy in another country.
💡 Hint
Lower input costs.
Question
Why can ethical concerns create reputational risk for MNCs?
Answer
Using lower labour or environmental standards abroad can trigger criticism and damage the global brand.
💡 Hint
Ethics travels globally.
Question
Why might a business “follow competitors” into global markets?
Answer
To protect market share and avoid being left behind if rivals expand internationally.
💡 Hint
Defensive strategy.
Question
Give an example of multinational activity.
Answer
HQ in one country, components/production in others, and sales across many countries (multiple host countries).
💡 Hint
Think: global supply chain.
Question
Why do MNCs often have significant market power?
Answer
Because they operate at large scale with strong brands and financial resources, giving influence in markets and sometimes politics.
💡 Hint
Scale + resources = power.
Question
What is one factor that makes MNC strategy harder than domestic strategy?
Answer
They must adapt to different laws, cultures, and market conditions across countries.
💡 Hint
Multiple environments.
Question
Exam tip: What should you show when discussing MNCs?
Answer
Balance benefits and challenges, and apply points to the specific country/context in the question.
💡 Hint
Balance + application.
Question
Quick check: HQ in home country + operations in host countries = ______.
Answer
Multinational company (MNC).
💡 Hint
Definition shortcut.
Question
Exam skill: When asked “reasons to go multinational”, what do you do?
Answer
Give 2–3 reasons and briefly explain HOW each increases revenue, reduces costs, or reduces risk.
💡 Hint
Reason + mechanism.
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Multinational companies (MNCs)
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