CAIE IGCSE Business Studies 6.2.2 multinational companies
Practise multinational-company questions by defining an MNC and applying benefits such as markets, jobs, exports or investment.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define an MNC as a business with production or service operations in more than one country.
- Explain business benefits such as wider markets, lower costs or access to resources.
- Apply host-country effects such as jobs, exports, investment, competition or pollution.
6.2.2—Multinational companies (MNCs) question 1
[Maximum number: 6]
GAE is a multinational company. It manufactures steel. GAE has 2400 employees and has factories in 4 countries. The business regularly introduces new technology. Holding inventory is important. GAE's directors are planning to build a new factory and want to know how legal controls over location might affect this decision. The Managing Director said, 'The new factory will create many external benefits.'
Explain two benefits to a business of being a multinational company. Which benefit is likely to be the most important? Justify your answer.
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which benefit of being a multinational company is likely to be the most important.
Points might include:
- Spreading risk [k] so a fall in sales / revenue in one country can be offset by an increase in sales / revenue in another country [an]
- Access new / wider markets / sales / customers [k] increasing revenue / (global) market share [an]
- Improve brand image / reputation [k] to help increase / maintain customers AND/OR could allow them to set higher prices / provide competitive advantage [an]
- Economies of scale [k] lowering average/unit costs [an]
- Cheaper / access (better quality) raw materials [k] reducing transport costs [an] OR access better quality / wider range of raw materials [k] allowing the business to produce new products [an]
- Access to cheap labour [k] which can lower costs / increase profit margin [an] OR Access to skilled labour [k] which could increase efficiency [an]
- Avoid import quotas [k] so no/fewer limits on the number of products the business can import into a country [an]
This is a general question so there are no marks for application.
Some points can be [k] or [an] but only award once.
The following are [an] only:
- Increase market share
- Provide competitive advantage
- Avoid import tariffs [k] so does not make products more expensive [an]
- Reduced tax liability / benefit from favourable / lower tax rates [k]
- Access government support/grants [k]
Other appropriate responses should also be credited.
Justification might include:
One benefit is spreading risk [k] so a fall in sales in one country can be offset by sales in another country [an]. It also allows for easier access to raw materials [k] reducing transport costs [an]. Access to raw materials is likely to be the most important benefit because this could reduce production costs leading to lower prices helping the business remain competitive [eval] and ensuring the extra sales are achievable [eval].
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