Key Business Terms
What is a Multinational Company (MNC)?
A company that operates in multiple countries, with headquarters in one country and operations in others.
Name one way a company can achieve internal growth (organic growth)
Reinvesting profits, launching new products, expanding operations.
What is the difference between internal and external economies of scale?
nternal occurs within the company (e.g., bulk buying), external benefits the industry
Name one major MNC and its industry
McDonald’s (food), Apple (technology), Toyota (automobiles)
What type of business expansion strategy did McDonald’s use for CosMc’s coffee chain
Internal growth (organic growth).
What is Foreign Direct Investment (FDI)?
A company’s investment in a foreign country, often involving ownership of assets and operations.
What is a joint venture, and how does it differ from a strategic alliance?
A joint venture creates a new entity owned by both companies, while a strategic alliance is a partnership without ownership change.
What is a technical economy of scale?
Cost savings from better technology and production techniques.
How do MNCs expand through Foreign Direct Investment (FDI)
By establishing new operations, acquiring businesses, or building infrastructure in foreign countries.
Name one company Disney acquired in its expansion strategy.
Pixar, Marvel, Lucasfilm, 21st Century Fox.
Define economies of scale and provide an example
Cost advantages due to increased production; e.g., Amazon’s bulk purchasing power.
What are two benefits of franchising for a business looking to expand?
Rapid expansion with low capital investment and risk-sharing with franchisees.
Give one example of a company benefiting from economies of scale
Walmart, Amazon, Tesla,
List two advantages MNCs bring to host countries
Job creation, economic growth, improved technology transfer, tax revenue.
How did Amazon expand externally into the grocery industry?
By acquiring Whole Foods.
What is the difference between internal and external growth?
Internal growth occurs within the company through reinvestment; external growth involves partnerships, acquisitions, etc.
What is the advantage of staying small rather than expanding
Better customer relationships, lower costs, flexibility in niche markets, and ownership control.
What is a diseconomy of scale, and what is one cause of it?
An increase in costs as a company grows too large; causes include communication issues, inefficiency, or bureaucracy
List two disadvantages of MNCs for host countries
Environmental harm, labor exploitation, repatriation of profits, cultural erosion
What is one way The Walt Disney Company has expanded its global brand presence?
Opening theme parks worldwide, licensing merchandise, streaming services.
Explain the difference between mergers and acquisitions (M&As) and takeovers.
M&As are voluntary and often strategic; takeovers may be hostile, where one company forcibly buys another.)
Explain two ways to measure market size
Sales revenue, market share, number of employees, or geographical reach
Explain how Unilever’s job cuts are an example of diseconomies of scale
As Unilever expanded, inefficiencies arose, leading to restructuring and job losses.
Compare how MNCs are measured in size using two methods.
Sales revenue, number of employees, market share, global reach
A company has recently decided to implement a new capital-intensive production process that would increase efficiency and gain from additional economies of scale. However, many employees have resisted the change. What could be two reasons for resistance to these changes?
Fear of the unknown
Lack of trust in AC's management team
A lack of understanding of the reasons or urgency for the change
Poor communication about the benefits of change for employees