Definitions & Basics
What does MNC stand for?
Multinational Company.
Name one reason why a company becomes multinational.
Access new customers / Expand market / Cheaper materials.
ame one advantage of MNCs for the host country.
Creates jobs.
What environmental problem can MNCs cause?
Pollution / Environmental damage.
A U.S. burger chain opens restaurants in Japan. Is this MNC activity or FDI?
Both – it is an MNC using FDI.
What does FDI mean?
Foreign Direct Investment – when a company invests directly in business operations in another
Which term refers to cost savings from large-scale production?
Economies of scale.
How do MNCs contribute to a country’s infrastructure?
They invest in roads, ports, utilities to support operations.
What does it mean if a company moves profits abroad?
They send earnings back to their home country instead of reinvesting locally.
A car company moves production to Mexico to save on costs. Which reason for MNC growth is this?
Access to cheaper labor/materials.
Give one example of a well-known MNC.
McDonald’s / Apple / Toyota (accept any known MNC).
Why would an MNC want to access natural resources or cheap raw materials abroad?
To reduce production costs.
MNCs can help develop local skills. How?
By training workers and transferring knowledge/technology.
Why might some MNCs avoid paying taxes in the host country?
By using tax havens or accounting tricks.
A country gains 10,000 new jobs from an MNC but sees river pollution. Name one advantage and one disadvantage.
Advantage – job creation; Disadvantage – environmental damage.
What is the difference between exporting and FDI?
Exporting is selling goods abroad; FDI is investing in operations abroad.
Explain why lower transport and communication costs encourage MNC growth.
Makes it easier and cheaper to manage international operations.
Explain how MNCs contribute to the host country’s tax revenue.
They pay corporate taxes and workers pay income taxes.
Explain one way MNCs can harm local businesses.
They may dominate the market or drive out local competitors.
A mobile phone company builds a factory in Vietnam to serve Asian customers. Why is this strategic?
Closer to market, lower transport costs, potential to avoid tariffs.
Explain why an MNC is not the same as an international trader.
MNC owns/controls production or operations in more than one country, not just trading internationally.
Give two reasons why a company would choose FDI instead of just exporting.
To be closer to customers / To avoid tariffs / To access resources / To control production.
Give two ways FDI can boost a developing country’s economy.
Creates jobs, develops capital, improves infrastructure, stimulates local businesses.
Discuss one long-term risk of relying heavily on MNCs for economic growth.
If the MNC leaves, jobs and investment disappear, leaving the local economy vulnerable.
A country relies heavily on MNCs for growth. List two possible risks.
Moving profits abroad / Leaving the country suddenly / Exploiting resources / Avoiding taxes.