(PAPER 1) 4.4.1 the impact of MNC'S Flashcards
MNC definition
a business that has branches in more than one country
4 impacts of MNCs on the local economy
- local labour
- wages
- job creation
- working conditions
positive and negative impact of MNCs for local labour in the local community
+ makes the local workforce more effective and employable if investments made in training
- own labour from other countries may be brought over rather than employees locally
positive and negative impact of MNCs on wages in the local economy
+ usually pay higher wages than local firms improving standards of living
- locals may resent that they are being paid less
positive and negative impact of MNCs for job creation in the local economy
+ regular income and financial security for workers
- may be at the expense of the local firms who may go bust
positive and negative impact of MNCs for working conditions in the local economy
+ have to keep reputation intact so should provide above average working conditions
- children may be exploited
positive and negative impact of MNCs on local businesses
+ may be used for the construction and/or supply of materials, increases revenue and profit.
+ growth within the local economy- increased income- more spending
- fewer workers available as locals attracted to gain employees within the MNC
- tough to compete as MNCs benefit from economies of scale
positive and negative impact of MNCs on local communities and the environment
+ improvements on infrastructure
+ may be more environmentally friendly as they have their reputation to uphold
- may take advantage of less strict environmental protection
- may just extract resources and then leave
6 impacts of MNCs on the national economy
- FDI flows
- tax revenues and transfer pricing
- consumers
- business culture
- balance of payments
- technology and skills transfer
positive and negative impact of MNCs for FDI Flows in the national economy
+ money invested into the country boosting economic activity creating income and jobs
- profits can be diverting back into the home country rather than being re-invested
positive and negative impact of MNCs for tax revenues and transfer pricing for the national economy
+ increases tax receipts allowing government to spend more
- MNCs can minimise there tax bill e.g. by using transfer pricing to avoid taxes by moving profit to countries with lower tax rates
positive and negative impact of MNCs for cheaper products in the national economy
+ cheaper products
- may drive local rivals out of business, reducing consumer choice
positive and negative impact of MNCs for business culture in the national market
+ may help to foster a culture of enterprise
- change in business culture could lead to loss of national culture
positive and negative impact of MNCs for balance of payments in the national market
+ brings cash into a country- improving balance of payment
- withdrawing from the country will represent an outflow- worsening the balance of payment
positive and negative impact of MNCs for technology and skills transfer within the national economy
+ train and develop local workforce improving skills
- reverse engineering which is a risk to the MNC
