Practise explaining MNC features, reasons for their growth, and evaluating their positive and negative impacts on host countries for IB Business Management SL.
Top Star (TS)
Top Star (TS) manufactures sports footwear. Its products are sold through retail outlets and online. Sales of TS' footwear in retail outlets are falling. However, because e-commerce is growing rapidly, online sales are increasing. In 2018, TS' total domestic sales were $5000000and total domestic market sales for the same time period were $50000000.
TS must consider several challenges:
- Some businesses in the sports footwear industry are finding that selling online leads to many problems and higher costs
- TS' website is not user friendly. Customer complaints about the website and ordering problems are increasing
- TS' presence in international markets is weak and its product range is limited. The directors of TS want to develop a new line of running shoes but the company has insufficient finance for research, development and creating brand awareness.
The directors think that TS should follow an external growth strategy. Two options are being considered:
- Option 1: Some directors propose a merger with a footwear manufacturer, the multinational company All Champion, which would allow TS to be more competitive
- Option 2: Other directors propose a merger with a footwear retailer that has a strong presence in domestic and international markets.
The finance manager believes that merging with All Champion could hurt TS' reputation. TS' factories may have to close, which the local population may resent.
Describe one feature of a multinational company (MNC).
- MNCs operate in more than one country. Their headquarters are located in one country (home country) while operations are carried out in a number of other countries (host countries).
- Because of their international operations, they usually have large physical and financial assets and turnover.
- MNCs are often large-sized and exercise a great degree of economic dominance.
- MNCs may control production activity with large foreign direct investment in more than one developed and developing countries.
Award [1] for each feature stated and award an additional [1] for a description up to a maximum of [2].
For a statement like "A multinational company operates in two or more countries" but with no further description, award [1].