Advantages of Multinational Companies

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Questions and Answers

How do multinational companies (MNCs) achieve low costs in their operations?

MNCs achieve low costs by accessing lower-cost labor and raw materials by relocating to cheaper areas or exploiting economies of scale.

What potential advantages do MNCs gain from having access to a large customer base?

MNCs can achieve high sales volumes due to their access to a large and diverse customer base.

In what way can being a well-known business contribute to a multinational's success?

A high profile allows MNCs to increase brand recognition, which aids in achieving market dominance and becoming household names.

How do MNCs navigate trade barriers effectively?

<p>MNCs bypass trade barriers by establishing operations in trade blocs or countries with lesser import tariffs or quotas.</p> Signup and view all the answers

What is one tax advantage that MNCs often pursue?

<p>MNCs often locate their head offices in countries with low tax rates to minimize their tax liabilities.</p> Signup and view all the answers

Flashcards

Low Costs in MNCs

MNCs can reduce costs by moving to locations with lower labor and material costs, especially those with economies of scale.

High Sales Potential for MNCs

MNCs can access a broad customer base across different countries, leading to greater sales potential.

High Profile of MNCs

MNCs are well-known and their products become familiar household brands, increasing market dominance.

MNCs Bypassing Trade Barriers

MNCs can set up operations within trade blocs or countries that have import barriers, bypassing these restrictions.

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Tax Optimization in MNCs

MNCs can choose to locate their headquarters in countries with low tax rates, like Ireland or Cyprus, maximizing profits for shareholders.

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Study Notes

Multinational Company (MNC) Advantages

Lower Costs: MNCs can reduce expenses by sourcing cheaper labor and raw materials in different countries or by benefiting from economies of scale.
High Sales Potential: MNCs reach a vast customer base, leading to higher sales volumes.
High Profile and Market Dominance: MNCs often gain recognition, making their products more popular and potentially leading to market control.
Trade Barrier Avoidance: MNCs can establish operations within trade blocs or countries with import restrictions, circumventing trade barriers.
Reduced Tax Burden: MNCs can minimize tax obligations by registering in countries like Ireland or Cyprus that have low tax rates, maximizing profits for shareholders.