Alejandro C 1. Why do business become Multinational? Businesses become multinational because of different reasons.

For example, if the market in the country has been absorbed by other businesses and there is not much space left to keep the business growing, the business has to grow in other countries. Another very important reason is that the company may want to move closer to their global customers to be able to keep increasing their business. If the country in where the company is located has a high labor cost, the company may want to move to the exterior for low labor costs so they can have a higher profit, this also applies to lower tax rates. The company may also be persuaded by incentives provided by the government, if their current government is not providing monetary investments then they would prefer to expand to the other governments. The business may also need raw materials and energy recourses, which arent available in their current country, so they have to expand. Finally, the company may want to take advantage of colonial power to they exploit it and grab markets abroad and so expand. 2. What are the problems multinationals can face? There are several problem companies may produce by becoming multinational. For example if it is a nuclear business there may be issues with the environment and the country. In Bhopal, India, Union Carbide (a chemical plant business) had a leaking problem and toxic gases were released killing thousand of local residents. Another great example is the impact of fast food worldwide, obesity is now in countries were obesity wasnt even heard of or expected. A company may loose their respect by being un-loyal to a country and so government issues start to harm the company. Globalization: Globalization is the worldwide movement towards economic, financial, trade and communication integration. Globalization implies free transfer of capital, goods, and services across national frontiers. Multinational: Multinational companies are companies that have factories, franchise owners etc. in more than one country. Wal-Mart and Volkswagen are examples of multinational companies. Free International Trade: The countries can change between them with no limit. Tariff: A tax that you have to pay to a country to enter a new market. Quota: Limitation on the quantity that must not be exceeded, such as an import quota. World Trade Organization: UN multilateral trade organization formed on January 1, 1995 as the successor to GATT and the court of final settlement in trade disputes. Its objectives included removal of all barriers to international trade in goods, services, and intellectual property, equitable and speedy resolution of disputes between trading partners, and identification of non-compliance with trade agreements.

Alejandro C