Multinational companies Cambridge IGCSE Business Studies (9–1) revision
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In plain words
A multinational company makes or sells in more than one country. It has its head office in one, the home country, and factories, shops or offices in others, the host countries.
Governments compete to attract them, and also worry about what they take out.
6 things to know
- A multinational company (MNC) is a firm that produces goods or services in more than one country.
- Foreign direct investment (FDI) is investment by a firm in another country, for example building a factory or buying a business there.
- Why firms go multinational: lower costs of labour or materials, to be near their customers, to get round trade barriers, to reach natural resources, and to gain economies of scale.
- Advantages to a host country: jobs, investment, new skills and technology, tax revenue, and better infrastructure.
- Disadvantages to a host country: profits are sent back to the home country, the firm may avoid paying tax, it may damage the environment, and local firms may be driven out of business.
- For the home country: profits flow back in, but jobs may be lost when production moves abroad.
Tips and tricks
- Be clear whether a question is about the host or the home country. The same event, a factory moving abroad, is a gain for one and a loss for the other.
- Jobs created by an MNC may be low-skilled and low-paid, with the best jobs kept in the home country. That is a good evaluation point.
It lands in your notebook with its questions as flashcards.
Multinational companies: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
A multinational company is a firm that
Producing abroad, not just selling abroad, is what makes it multinational.
A car maker builds a new factory in another country. This is an example of
It is investment by a firm in a country other than its own.
Which is an advantage to a host country of a multinational company?
The firm employs local workers.
Why might a firm set up a factory in another country?
Labour or materials may be cheaper there.
Which is a disadvantage to a home country when one of its firms moves production abroad?
The work is now done by people in another country.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Multinational companies
Cambridge IGCSE Business Studies (9–1) 0986 · 8 marks · papermunch.org
Name ______________________________ Date ______________
Define a multinational company.[2]
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A company that produces goods or services in more than one country.
Explain two advantages to a host country of a multinational company opening a factory there.[3]
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It creates jobs for local people, which raises incomes. It brings investment and new technology and trains workers, which raises the country's productivity.
Explain one disadvantage of a multinational company to its host country.[3]
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Much of the profit it earns is sent back to its home country, so the money does not stay to be spent or invested in the host country.
Answers: Multinational companies
- 1. A company that produces goods or services in more than one country.
- 2. It creates jobs for local people, which raises incomes. It brings investment and new technology and trains workers, which raises the country's productivity.
- 3. Much of the profit it earns is sent back to its home country, so the money does not stay to be spent or invested in the host country.