4.4 Flashcards
1
Q
Multinational
A
A company that operates in its home country, as well as in other countries around the world
- Maintains central office located in one country, which coordinates the management of all its other offices
2
Q
Features of a multinational
A
- High assets value and turnover
- Network of branches
- Rapid growth
- Use of technology
- Management skills
- Advertising spend
3
Q
Reasons for multinational growth
A
- To operate closer to target international markets (reduces transport costs and improves market info and intelligence)
- Gaining access to lower costs of production (outsourcing/offshoring)
- Avoiding protectionism
4
Q
FDI
A
- Foreign direct investment of foreign money into domestic structures, equipment, infrastructure etc
- Creates direct, stable and long-lasting links between economies
- Encourages transfer of tech etc so countries develop faster
5
Q
Positive effect of MNC’s
A
- Creates employment
- Increases skills base
- Increased standard of living
- Raises the country’s profile
- Improve infrastructure
- Improves balance of payments
6
Q
Negative effects of MNC’s
A
- Profit leakage
- Low paid jobs
- Interfere in politics
- Poor H&S
- Increased urbanisation
- Widens poverty gap
7
Q
Ethical business behaviour
A
- Moral guidelines which govern good behaviour
8
Q
Issues related to the ethical behaviour of multinationals
A
- Pay and working conditions
- Environmental damage
- Exploitation of labour
- Inappropriate marketing claims
- Stakeholder conflicts
9
Q
Advantages of ethical behaviour
A
- Higher revenue (demand from positive consumer support)
- Improved brand (business awareness and recognition)
- Better employee motivation and recruitment
- New sources of finance - e.g. from ethical investors
10
Q
Disadvantages of behaving ethically
A
- Higher costs (sourcing from fairtrade suppliers rather than lowest price)
- Higher overheads (training & communication)
- A danger of building up false expectations (window dressing)
11
Q
CSR corporate social responsibility
A
- refers to a business considering and taking responsibility for its effects on the environment and its impact on social welfare
- Many businesses have responded to growing concerns of CSR by auditing their activities
12
Q
Indicators of CSR
A
- Human right indicators
- Communities
- Business integrity & ethics
- Product responsibility
- The environment
13
Q
Why multinationals need to be controlled?
A
- To prevent abuse of market power
- To ensure that environmental damage is reduced
- To ensure that MNCs pay a fair amount of tax
- To protect rights of workers
- To ensure that MNCs behave ethically
14
Q
How multinations can be controlled
A
- Legal challenges/rulings/court cases brought by governments against MNCs
- Campaigns by pressure groups to change the actions of MNCs
- Adverse media coverage that mobilises public opinion against MNCs
- Use of social networks to organise a boycott that could hit sales
15
Q
How much control do governments have over MNCs
A
- Strong governments in large countries can restrict the actions of MNCs
- less developed countries have less power as they need MNCs to help development
- All countries find it difficult to collect taxes from MNCs due to use of tax havens and subsidiary companies
- MNCs pay political lobbyists to influence law makers
