The increasing extension of international trade has created the need
for bigger enterprises with offices and factories scattered all over the
world.
Companies may expand through:
•Multinationals
•Mergers
•Joint ventures
•Cartels
- Take over
Multinationals
They are very large organizations that own companies in two or more
countries (host countries).
Strategy decisions are taken at the headquarters in the country of origin
(home country).
They often invest in developing countries which need capital and
expertise, and offer cheap raw materials and workforce.
To name but a few: IBM, Coca Cola, FIAT, Nestlè,Barilla….
These companies have often been attacked, because they take
advantages of incentives offered by developing countries to attract
foreign investment.
What are the pros and cons of multinationals?
ADVANTAGES DISADVANTAGES
•Multinationals invest money in a
host country
•They provide employment and
training opportunities
•They bring their experience and
working methods to the country
•Profits can be a source of
taxation revenue for the host
country
•Jobs created by multinationals
are often unskilled and low paid
•Multinationals can ruin local
development and destroy small
business
•They can cause environmental
problems in the host country
•They have a lot of power and can
exert a strong influence on
governments
Merger
A merger takes places when two or more firms join together to form
a new l larger company. Mergers
can be of different types.
