4.4

Question 1

Define multi-national company (MNC)

Answer 1

A business that has operations in more than one country

Question 2

Key factors in the growth of MNC’s?

Answer 2

-Growth in emerging economies
-Globalisation
-Deregulation

Question 3

Why do activities of MNC’s need controlling?

Answer 3

-To protect against exploitation
-To discourage resource depletion
-To ensure local cultures are protected
-To discourage abuse of market power

Question 4

Advantages of MNCs on employment/wages/working conditions

Answer 4

-Job creation
-Competitive wages
-Better working conditions than local businesses

Question 5

disadvantages of MNCs on employment/wages/working conditions

Answer 5

-May exploit workers if weak employment legislation
-Low wages
-May relocate workers rathe than create jobs

Question 6

Benefits of MNCs on local businesses

Answer 6

-Boost local economy
-Higher wages so people can spend more
-Opportunities for joint ventures, helps learn new skills

Question 7

Disadvantages of MNCs on local businesses

Answer 7

-Reduce supply of workers for local businesses
-Compete with local firms so can lead to loss of customers

Question 8

Benefits of MNCs on local communities

Answer 8

-Job opportunities
-MNCs often invest to improve infrastructure
-MNCs need to pay taxes & business rates
-Can create charitable incentives

Question 9

Drawbacks of MNCs on local communities

Answer 9

-Cause damage to local habitats/environment
-Many leave unsightly production facilities behind

Question 10

Define FDI

Answer 10

Inflows of money into a country

Question 11

Benefits of FDI from MNCs on national economy

Answer 11

-Initial sum of money into country, enriches local firms and citizens
-Money may be reinvested back into local economy

Question 12

Drawbacks of FDI from MNCs on national economy

Answer 12

-Assets from home country now owned by foreign businesses
-Profit may not be reinvested but instead moves abroad/offshored

Question 13

Impacts of MNCs on national economies

Answer 13

-FDI
-Balance of payments
-Technology & skills transfer

Question 14

Technology and skills transfer

Answer 14

-MNCs can bring technologies and skills to local businesses
-Helps improve efficiency & productivity helping domestic businesses become more competitive

Question 15

How do consumers benefit form MNCs?

Answer 15

-Wider choice of goods
-Lower prices if MNCs pass on cost advantages in form of lower prices
-Better quality
-Improved living standards, higher incomes from job creation

Question 16

How can consumers be effected by MNCs in long term?

Answer 16

-MNCs can push domestic markets out of the market which may lead to higher prices and low quality products.

Question 17

Advantages of MNCs on business culture

Answer 17

-Domestic businesses may be influenced by the business culture of MNCs
-MNCs encourage culture of entrepreneurship

Question 18

Disadvantages of MNCs on business culture

Answer 18

-Can demonstrate unethical behaviour and cultures of exploitation
-Encourages local firms to ignore working conditions

Question 19

Tax revenue and MNCs

Answer 19

-Potential for host country to gain significant tax revenue
-Governments use tax revenue pay by MNCs to improve public services & infrastructure.
-MNCs seek to maximise profits so will try reduce there tax liabilities

Question 20

Define Transfer pricing

Answer 20

a method used to shift profits form where they are generated countries with lower tax rates, method of tax avoidance

Question 21

Define Ethics

Answer 21

The principles and norms that govern business behaviour

Question 22

What can unethical actions do?

Answer 22

Damage the brand and result in loss of profitability

Question 23

What are customers around the world putting more pressure on brands to do?

Answer 23

Behave ethically

Question 24

What creates conflict between stakeholders?

Answer 24

Stakeholders have different levels of power and different priorities which creates potential for conflict, eg Managers Vs Workers, Managers Vs Owners

Question 25

Pay & Working conditions (MNCs)

Answer 25

-MNCs operate in countries with different employment regulations and working conditions -Many MNCs demonstrate unethical behaviour by exploiting workers and paying low wages to cut costs -MNCs frequently use child labour

Question 26

Environmental Considerations (MNCs)

Answer 26

-Waste management: less economically developed countries have less regulation and enforcement on waste management -MNCs can also dispose of waste in LEDCs at cheaper costs -Emissions need to be considered.

Question 27

Supply chain considerations (MNCs)

Answer 27

-Many MNCs are now taking action to reduce unethical labour practises as part of their corporate social responsibility -Some MNCs have manufacturing facilities in countries where child labour is common this can face backlash which can damage their brand.

Question 28

Ways of controlling MNCs?

Answer 28

-Political influence -Legal Control -Pressure groups -Social Media

Question 29

Controlling MNCs: Political influence

Answer 29

-Political institutions enforce laws & regulations -MNCs in developed countries often able to exert pressure on national governments to create favourable conditions for their business -MNCs in developing countries can infuse governments as they ay establish deals beneficial to politicians, bribes

Question 30

Controlling MNCs: Legal Control

Answer 30

-Governments can enforce legislation and regulation to control MNCs -Governments want to attract MNCs to help boost their economy so creating legal controls in areas relating to taxes & employment ensures stability of MNCs

Question 31

Controlling MNCs: Pressure Groups

Answer 31

(Groups that operate to influence companies & public policy) -Pressure groups can now operate on an international scale -Can take action in different forms: naming & shaming, direct actions, lobbying

Question 32

Controlling MNCs: Social Media

Answer 32

-MNCs forced to address issues raised by customers/pressure groups on social media as there is high levels of public exposure -MNCs influence on social media can belated in some countries as they have regulations in place to manage social media power eg China