4.4 Flashcards
(27 cards)
What is a multinational company?
firms that are registered in one country but have operations in another. They choose location based on: cost advantages + access to markets
impact of MNC’s on employment, wages + working conditions
advantages
- job creation
- comeptitive wages
- better working conditions
impact of MNC’s on employment, wages + working conditions
disadvantages
- relocate workers from the ome country
- establish factors where labour costs are low so they can pay low wages
impact of MNC’s on local community and environment
advantages
- job opportunities
- invest in infrastructure
- pay taxes - reinvested in the community
impact of MNC’s on local communities and environment
disadvantages
- damage local environment
impact of MNC’s on local businesses
advantages
- boost local economy
- potential opportunities for joint ventures - increase new skills
impact of MNC’s on local businesses
disadvantages
in competition with local businesses, as they produce the same products for a lower cost
impact of MNC’s on national economy
FDI flows disadvantages
- assets frothe m home country are owned by foreign businesses
- may reinvest money into home country
what are blance of payments
statement that shows all the financial transaction between a country and the rest of the world
Impact of MNC on the national economy
Balance of payments disadvantages
- MNC buying imported raw materials leads to a flow of money out of the country
- MNC sends profits to the home country, a flow of money out of the country
Impact of MNC on the national economy
consumers benefits
- wide choice of goods
- lwoerp rices
- better quality
- improved living standard
Impact of MNC on the national economy
consumers disadvantages
In the long term MNC push domestic firms out of the market, decreasing choice. MNC exploit customers with high price, low quality
Impact of MNC’s on the national economy
Positive of business culture
- domestic firms influenced by business culture of MNC
- encourage entrepreneurship - boosting economic growth
Impact of MNC on the national economy
negative of business culture
if they demonstate uenthical behaviour it will encourage firms to ignore working conditions etc
Impact of MNC on the national economy
tax revenue
government uses tax revenue to invest in improving public services and infrastructure
Impact of MNC on the national economy
transfer pricing
MNCS use transfer pricing to shift profits from where they are generated to countries with lower tax rates
why the activities of multinationals may need controlling
- to protect against exploitation
- to discourage resource depletion
- to ensure local culture is protected
- to discourage abuse of market power
- to protect domestic businesses
ethics
moral guidelines which govern acceptable behaviour
Benefits of behaving ethically
- higher revenues
- improved brand and business awareness
- better employee motivation and recruitment
- new sources of finance
drawbacks of behaving ethically
- Higher costs i.e. sourcing from fair trade suppliers
- higher overhead
- a danger of building false expectations
common ethical issues with MNC’s
- pay and working conditions
- environmental impact
- supply chain management
- marketing
Environmental issues with MNC
waste disposal and emissions
Different countries have different regulations, cheaper to dispose of waste abroad, increasing profits
Supply chain issues associated with MNC
- child labour - damage brand and affect sales
- exploitation of labour i.e. low wage
Marketing considerations associated with MNC
- misleading labelling - must comply with regulations of the country, no false information
- inapprotooaptie protminoals activietive, not be offensive or illegal
