Please enable JavaScript.

Coggle requires JavaScript to display documents.

Reasons For Globalization - Coggle Diagram

- - - - A reason why MNCs are able to develop successfully is because they can sell a lot of goods and services in global markets than they can in domestic markets. Which means that they can make more profit.
    - - Large companies are likely to invest in other countries because they need to buy huge quantities of resources. A significant portion of FDI is at the mining industry. Many countries import significat amount of food from overseas because in some countries the food needs of the population is not met by domestic producers
    - - Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. MNCs are in a better position to exploit economies of scales because they are very large. Firms that sell to global markets will will produce more therefore they can lower costs. They are very powerful that they could pressure suppliers to lower their prices.
    - - Moving Profit Abroad
        
        Profits made by MNCs are to be returned to the country where the MNC is based (repatriation). MNCs bring more benefits to developed countries rather than less developed countries as the headquarters of most MNCs are based in developed countries.
      - Environmental Damage
        
        MNCs are heavily involved in the extraction industries such as coal, oil and gold mining which are often destructive. These actions are likely to cause pollution, and other damages to the natural environment.
      - Tax Avoidance
        
        MNCs has attracted the media's attention as they were accused of failing to pay their fair shares. MNCs responded by saying that they have paid their taxes and has done nothing wrong. If MNCs are able to avoid paying taxes in countries with well-developed legal systems, then less developed countries have little chance of getting their fair shares from MNCs
    - - More Job Opportunity
        
        When MNCs set uo their companies overseas, local suppliers are likely to get work. Employment will be generated and will increase economic growth which will raise the living standards
      - Investment in Infrastructure
        
        It will be difficult to do business in ocuntries that has poor infrastructure therefore it will be hard to attract FDI, governments are likely to invest in infrastructure in order to attract investors .
      - Developing Skills and Capitals
        
        Skills: MNCs provide training and work experience when they locate operations in foreign countries. The government will try to increase education in the country to attract MNCs. The arrival of an MNC will also encourage locals to set up businesses such as supplying services, trasnport, accomodation, etc.
        
        Capital: The arrival in MNCs will help boost the stock capital in host countries. It is because when businesses set up a new facility, it is likely that they insstall up-to-date technology. The arrival of MNCs might also encourage local suppliers and business to invest in new capital projects.
      - Cpntributing to Tax
        
        The profits made by MNCs will be taxed by the host countires. This increases tax revenues for the government which could be used for improving government services.