Chapter 6.

CHAPTER 6.3
MULTINATIONAL COMPANIES
(MNCs)

LECTURER: N. NEWAZ KARIM. ACCA AFFILIATE

 Chapter 6.3

MULTINATIONAL COMPANIES

These are businesses who operate in more than one country. Examples – (KFC, Pizza-hut, Grameen-
phone, Nike, etc)

ADVANTAGE TO THE ECONOMY WHEN MNCS ENTER A COUNTRY

1. Create employment in the economy.

2. Government can earn revenue by taxation.
3. Brings in new ideas, technology and expertise from developed countries.
4. Often the services or products are better in quality in comparison to the ones locally produced.
5. Creates a competition in the market, hence a motivation to produce better quality products/service.

DISADVANTAGE TO THE ECONOMY WHEN MNCS ENTER A COUNTRY

1. The use up natural resources.

2. Contributes to the environmental pollution.
3. If they exit the market, unemployability may increase.
4. They may drive out small businesses from the market.
5. They may drive out local producers from the market as they source their own materials required for
production.

ADVANTAGE TO THE CONSUMERS WHEN MNCS ENTER A COUNTRY

1. More variety of goods and services are available in comparison to the choices they might have if no
MNCs are not present as they may not be manufactured locally.
2. Improves living standard as they use foreign products/services.
3. Better quality goods at a cheaper price is available as competition increases.

DISADVANTAGE TO THE CONSUMERS WHEN MNCS ENTER A COUNTRY

1. Consumers have to pay higher price if there is no competition.

2. Consumers sometimes gets confused which products to buy from the multiple options available.
3. There is a risk that consumers may buy a counterfeit/fake product.
4. MNCs may exploit customers by creating a fake demand. (Whatever Apple makes has a demand).

ADVANTAGE TO THE MNC WHEN THEY ENTER A COUNTRY

1. Increased market share, hence increased sales.

2. Further improvement of Brand image when they start operations in a new country.
3. Economies of scale can be achieved due to mass production and sales.
4. They can save on Advertisement expenses, as a single advert can be used in all the countries.
5. Since they are international brands, they can charge higher prices.

LECTURER: N. NEWAZ KARIM. ACCA AFFILIATE

 Chapter 6.3

DISADVANTAGE TO THE MNC WHEN THEY ENTER A COUNTRY

1. They have to pay higher tax.

2. They have a risk of their brand being copied.
3. They have to comply to the strict rules and regulations imposed by the government of the host
country.
4. They might face fierce competition from local firms.
5. They need to invest high levels of capital.

THANK YOU!

LECTURER: N. NEWAZ KARIM. ACCA AFFILIATE

 Chapter 6.3

QUESTION PRACTICE

1. State 2 advantages & 2 disadvantages to the Economy when multinational companies enter a
market.

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2. State 2 advantages & 2 disadvantages to the Consumer when multinational companies enter a
market.

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3. State 2 advantages & 2 disadvantages to the multinational companies when they enter a new
market.

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LECTURER: N. NEWAZ KARIM. ACCA AFFILIATE

 Chapter 6.3
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LECTURER: N. NEWAZ KARIM. ACCA AFFILIATE