Why Governments May Not Welcome Multinational Businesses Part 2 (AS Business 9609)

 🎥 The video for this topic is attached below 👇

 If you prefer watching instead of reading, you can check it out first. This blog post covers the same content in written form for quick revision.

Multinational businesses (MNCs) bring investment, jobs, and new technology to host countries. However, governments are not always welcoming towards them. In this post, we’ll explore the main reasons why some governments may see MNCs as a challenge rather than a benefit.

1. Limited Employment Benefits

• While MNCs do create jobs, they often hire locals only for low-skilled roles. The higher-paid, specialized jobs usually go to staff from their home country. This means the overall employment benefit is smaller than expected.

2. Repatriation of Profits

• One of the biggest concerns is that most of the profits generated in the host country are sent back to the company’s home country. As a result, the host nation doesn’t get the full economic benefit of these large businesses.

3. Exploitation of Natural Resources

• MNCs rely heavily on local resources like raw materials and energy. Over time, this can cause resource depletion. On top of that, some companies may damage the environment through pollution and overuse of land or water.

4. Competition for Local Firms

• Domestic businesses, especially small ones, often struggle to compete with MNCs. Big companies have strong brands, efficient systems, and can sell at lower prices. This can reduce local sales and even discourage entrepreneurship.

5. Cultural Dominance

• MNCs bring their own products and culture. For example, global fast-food chains may replace traditional diets and eating habits. This can lead to the loss of local identity and culture over time.

6. Pressure on Governments

• Because of their size and importance, MNCs sometimes influence government policies. If rules or taxes are considered too strict, they may threaten to relocate to another country. This can result in the host nation losing jobs, tax revenue, and opportunities for growth.

Conclusion

While multinational businesses offer benefits, it’s clear why some governments are cautious. Issues like limited employment, profit repatriation, and environmental concerns make MNCs a double-edged sword.

📌 Tip for AS Level Business (9609) Students:

Always balance your answers in exams. Governments may benefit from MNCs, but they must also manage the risks listed above.

👉 Follow this blog for more AS & A Level Business and Economics notes to help with your exams!

Multinational Businesses (Part 1)– AS Level Business 9609

 Multinational businesses are one of the most important topics in Cambridge AS Level Business 9609. In this blog, we will break down the concept step by step. 

For a visual explanation of Multinational Businesses, check out this video on my YouTube channel:👇

📌 Definition of a Multinational Business

A multinational business (MNC) is a company that has its headquarters in one country but also operates in other countries through branches, factories, or outlets.

👉 Example: Toyota

Toyota started in Japan.

Over time, it expanded to countries like Pakistan, India, and China.

It does not only export cars but also has factories, assembly plants, and offices in these countries.

This is why Toyota is multinational, not just international.

📌 Why Do Companies Become Multinational (MNCs)?

There are several reasons why businesses expand globally:

1. Bypass trade barriers

• Tariffs and quotas on imported goods make trade expensive.
• Setting up in another country helps avoid these restrictions.

2. Government support

• Some governments offer grants, subsidies, tax reductions, or free market research to attract foreign businesses.

3. Lower costs

• Many MNCs move to countries with cheaper labour and raw materials, which reduces production costs.

4. Access to better quality raw materials

• Some countries have resources that are either cheaper or higher in quality than those in the home country.

📌 Why Do Governments Welcome Multinational Companies?

Governments of host countries encourage MNCs because they bring many benefits:

1. Employment opportunities

• Even if an MNC uses machines (capital-intensive), it still needs employees to operate them.

2. Contribution to GDP

• GDP stands for Gross Domestic Product, which is the total value of goods and services produced in a country.

• When MNCs increase production, GDP grows.
• Example: If two textile companies were producing before, and a new multinational joins, total production and GDP both increase.

3. Income for local suppliers

• Local businesses can sell raw materials or services to MNCs, increasing their income.

4. Improved workforce skills

• MNCs usually train employees before hiring them, improving the overall quality of the workforce.

5. Infrastructure development

• To deliver products quickly and receive supplies on time, MNCs often push for better roads, transport, and communication systems.

6. Higher tax revenue

• Governments earn through corporation taxes from MNCs and income taxes from employees.

• This increases the government’s budget.

7. More choices and variety for customers

• MNCs often bring new products and services to the local market.
• This provides customers with more options in terms of quality, price, and features, improving their overall shopping experience and satisfaction.

📌 Quick Summary

1. Multinational businesses operate in more than one country.
2. Companies become multinational to avoid trade barriers, reduce costs, and access better resources.
3. Governments welcome them because they create jobs, increase GDP, improve skills, and boost tax revenue.

✅ That’s it! Multinational businesses not only help companies grow internationally but also provide huge benefits to the countries they enter.

If you’re preparing for AS Level Business 9609, make sure you understand these points clearly—they often come in exams.