Globalization & Multinational Corporations
AO1 Knowledge • AO2 Application • AO3 Analysis • AO4 Evaluation
Client Brief: GlobalShoes Inc.
GlobalShoes is an American footwear company headquartered in Portland, Oregon. They currently manufacture all their shoes in the USA, but labour costs are eating into profits.
🎯 The Strategic Decision:
The Board of Directors is considering opening a massive factory in Vietnam where labour costs are 80% lower. This would transform GlobalShoes from a domestic company into a Multinational Corporation (MNC).
AO1Key Definitions
Globalization
The increase in worldwide trade and movement of people and capital between countries.
Multinational Corporation (MNC)
A business with factories, service operations, or production facilities in more than one country.
Host Country
The country where the MNC sets up operations (e.g., Vietnam for GlobalShoes).
Home Country
The country where the MNC is headquartered (e.g., USA for GlobalShoes).
⚠️Examiner Trap
❌ Common Mistake
"GlobalShoes is an MNC because it sells shoes in Vietnam."
✓ Correct Answer
"GlobalShoes is an MNC because it has a production facility (factory) in Vietnam, not just because it exports there."
Remember: Exporting ≠ MNC. Retail stores abroad ≠ MNC. You need manufacturing/production in another country!
🌍 Why Does Globalization Happen?
Cheaper Transport
Container ships move goods globally at low cost
Better Communication
Internet enables instant global coordination
Trade Agreements
Countries reduce tariffs and barriers
📋 Lesson Summary: Key Exam Points
AO1 Definitions to Know:
• Globalization = ↑ worldwide trade & movement
• MNC = Production in 2+ countries
• Tariff = Tax on imports
• Repatriation = Profits sent to home country
AO4 Evaluation Framework:
• Host Country Benefits: Jobs, tax, technology
• Host Country Costs: Profit loss, local business harm
• Home Country Benefit: Cheaper goods
• Home Country Cost: Job losses
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