HIGHER BUSINESS
MANAGEMENT
MULTINATIONALS
A multinational company is one that operates in
more than one country, and typically operates in
a number of major global markets.
The three main developed trading areas of the
world are North America, The European Union,
and South-East Asia (and Australasia).
Examples of multinationals are Coca-Cola,
Cadbury Schweppes, McDonalds, Kellogg's and
many more.
They are major employers, and they bring in new
technologies, new skills and new management
techniques.
In central belt Scotland, a major electronics industry
has been established with multinational companies
like IBM setting up major operations. In the
northeast, the oil industry is dominated by
multinationals such as Total, Shell and BP Amoco
and suppliers such as Kvaerner.
An important characteristic of these organisations is
that they have well established corporate brands that
are widely recognised - for example, Coca-Cola is the
second best known expression in the world after OK.
Many of these multinationals produce global brands
with similar marketing mixes across the world - e.g.
with the same or similar advertising, distribution and
retailing techniques and promotions.
Reasons pushing UK businesses to develop a
multinational presence are:
1. Size of market. Although there are only about 60 million
people in the UK to sell to, there are literally billions in the
global market.
2. Foreign companies are increasingly selling their own
products in the UK market. Many of these companies are
very big - like the US retailer Wal-Mart, which took over
ASDA in 2000. If UK businesses lose some of their UK
market they have to make up these losses by selling
abroad.
Reasons pushing UK businesses to develop a
multinational presence are:
3. In the world today billions of consumers are for the
first time earning enough money to buy modern
consumer goods like Coca-Cola and Mars bars. We are
seeing the rise of global consumers, who have similar
tastes and lifestyles whatever country they live in.
Many multinationals are setting up factories in
eastern Europe and China because the labour and
production costs are so low.
PRO’s FOR MULTINATIONALS
•Offers employment to local workers (cheaper workers
and cheaper premises)
•Promotes peace internationally
•Creates sense of community crossing international
borders
•Allows entire world to improve standard of living
•Gives access to quality products regardless of location
•Promotes economic stability
PRO’s FOR MULTINATIONALS
•Raises standard of living for regions involved in production
•Gives local economies new economic opportunities
•Fact of life which needs to be accepted
•Reflects global economy
•Saves on transporting goods abroad
•Avoids Trade Barriers
•Minimises International Tax Costs
•Cheaper Labour
CON’s FOR MULTINATIONALS
•Ruins local economies
•Depletes local work forces by drawing to metro centres
•Stifles cultural growth and expansion on local level
•Provides little help with problems which are local in nature
•Creates cultural ‘sameness’ (homogenization)
•Too big, little interest in the individual
CON’s FOR MULTINATIONALS
•Gives political power to outside interests
•Creates economic instability by being subject to the
whims of the global economy
•Replaces traditional values with materialistic values
•Makes local economies subject to mass layoffs
•Exploits Cheaper Labour
•Strips countries of natural resources
TASK
Group Discussion: Discuss whether
your group agrees with Multinational
Business.
Explain each point in detail.
Question

Describe the main characteristics of a
multi-national corporation. (4)
Answer
Multinational organisations will:
 involve operations in several different countries
 have a distinct ‘home’ base country
 have a global brand
 be able to dominate markets across many countries
 have budgets that are larger than some individual
countries
 be able to greatly influence local economies
 have cultural variations
Question

Many companies are now classed as
multinationals. Explain the
advantages and disadvantages of
operating as a multinational. (5)
Answer
Some advantages may include:
 An organisation may be given grants from governments to
locate in that country and the grants will not require to be
paid back improving their financial position
 Organisations will become larger which may result in them
being safer from takeovers
 Can allow organisations to increase their sales which in
turn should increase their overall profits
 Will allow organisations to take advantage of economies of
scale and reduce unit costs of products
Answer




Could allow organisations to employ cheaper staff which
will result in greater profitability
May help avoid legal restrictions in the organisation’s own
country which could allow them to sell/produce their
products abroad
Could allow for tax advantages which will increase
profitability
Will mean the organisation can avoid restrictions on
imports into a country which will help overall sales
Answer
Some disadvantages may include:
 Legislation may be different in other countries which may
require the organisation to alter its product/service
 Legislation may exist on how a product/service is
marketed and may result in some marketing techniques
having to be changed
 Cultural differences will mean that organisations have to
be sensitive to different countries cultures
 Different languages will exist and this may mean that
organisations have to employ specialist linguists to work
with the organisation
 Max 4 and 1