Economic reasons to go multinational
- The local market has become saturated there is not much space for further growth.
- To make larger supernormal profit by basing in developing countries which have increasing number of middle income households such as China and India.
- To exploit economies of scale when they produce in larger volume.
- To take advantage of ease in obtaining natural resources in developing economies.
- Productivity of labour is increasing and yet they are able to endure long working hours. Also they hardly ask for higher pay.
- Easy to press local government to pass on laws that favour MNCs e.g. extension period of tax holidays, investment allowances & cheap provision of factory sites.
- Avoiding legal compliance in developed world which actually increase their production costs e.g. health and safety Standards