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.