4.4

Question 1

MNC’s

Answer 1

• multi national company
• a business that is registered in one country but has manufacturing operations in different countries
  – chose locarions based on factors such as cost advantage and access to markets

Question 2

MNCs - advantages on employment, wages and working conditions

Answer 2

• job creation for local communities
• offer competitive wages than local businesses
• may offer better working conditions than local businesses

Question 3

MNC’s - disadvantages on employment, wages and working conditions

Answer 3

• may exploit local workers if employment regulation is weak or not enforced
• tend to establish production facilities where labour costs are low and pay low wages
• may not create jobs as they may relocate workers from their own country

Question 4

MNC’s - advantages for local business

Answer 4

• can boost local economy, creating business opportunities as people earn more and will spend more on local businesses
• potential for partnerships or joint ventures with MNC’s who seek knowledge of local market

Question 5

MNC’s - disadvantages on local businesses

Answer 5

• reduced supply of workers if the mnc offers better pay and conditions
• if mncs can produce at lower costs and compete with local business, they may lose customers leading to unemployment

Question 6

MNC’s = advantages to local communities / environment

Answer 6

• local residents benefit from job opportunities and economic boost
• mncs invest to improve infrastructure so they can operate efficiently
• mncs have to pay taxes which may be reinvested into local community
• mnc can establish charitable initiatives

Question 7

MNC’s - disadvantages to local community / environment

Answer 7

• may cause damage to habitat and environment during production, eg to get oil
• may leave unsightly production facilities behind

Question 8

impact of MNC’s on national economy - FDI flows

Answer 8

• inflow of money into a country if mnc decides to invest through fdi

Question 9

impact of MNC’s on national economy - FDI flows - advantages

Answer 9

• initial lump sum of money entering the country to pay for investment
• money enriches local firms who have more money to spend in economy
• if money is reinvested into the economy, may generate new jobs

Question 10

impact of MNC’s on national economy - FDI flows - disadvantages

Answer 10

• assets from home country are now owned by foreign businesses
• local firm or individuals who have sold the assett may not reinvest into local economy but may move it abroad

Question 11

impact of MNC’s on national economy - balance of payments

Answer 11

• statement showing all financial transactions between a country and the rest of the world

Question 12

impact of MNC’s on national economy - balance of payments - advantages

Answer 12

• mncs help improve as any goods exported for sale by MNC will generate inflows for BOP
• especially beneficial when exporting valuable raw material

Question 13

impact of MNC’s on national economy - balance of payments - drawbacks

Answer 13

• if mncs buys raw materials abroad, money flows out of the country
• same if they send profits back to home country

Question 14

impact of MNC’s on national economy - technology and skills transfer

Answer 14

• helps imrpove efficiency and productivity, helping domestic business to be more competitive internationally

Question 15

impact of MNC’s on national economy - consumers - advantages

Answer 15

• wider choice of goods and services
• lower prices if mncs pass on cost advantages
• better quality goods
• improved living standard due to job creation promoting higher incomes

Question 16

impact of MNC’s on national economy - consumers - disadvantages

Answer 16

• can push domestic business out the country, leaving consumers with limited choice
• may lead to MNC’s exploiting customers with higher prices and low quality

Question 17

impact of MNC’s on national economy - business culture - advantages

Answer 17

• domestic businesses may be influenced by business culture of mncs and copy work styles eg. kaizen
• may encourage entrepreneurship, boosting overall economic growth

Question 18

impact of MNC’s on national economy - business culture - disadvantages

Answer 18

• may behaviour unethically and exploit workers
• this may encourage local firms to also ignore working conditions

Question 19

impact of MNC’s on national economy - tax revenue and transfer prices

Answer 19

• can use tax revenue paid by mncs to invest in improving public services and infrastructure
  X mncs may want to reduce tax liabilities by shifting profits to countries with lower tax rates

Question 20

business ethics

Answer 20

• refers to principles a business has
• determines how they operate and decision making process

Question 21

stakeholder conflicts - management v workers

Answer 21

• management may be focused on output or reducing costs, rather than work safety or a positive woring environment
• workers want to be safe and comfortable

Question 22

stakeholder conflicts - management vs owners

Answer 22

• owners may want management to maximise business profits and thus be less interested in well being of employees
• management work daily with employees and will sacrifice some profit in order to look after worker health

Question 23

stakeholder conflicts - company profits v resource depletion

Answer 23

• owners aim to maximise output so as to generate increasing levels of profit
• higher output requires more rapid usage of natural resources, generating environmental damage.

Question 24

MNCs pay conditions

Answer 24

• mncs operate in countries with different employment regulations, need to decide if they will comply
• may exploit workers in LEDCs by paying lower wages

Question 25

MNCs working conditions

Answer 25

- poor conditions to cut costs - eg sweatshops - use of child labour to cut wage costs

Question 26

environmental considerations - waste management

Answer 26

- LEDCs have less waste regulation and waste management enforcement - MNCs can dispose of waste in LEDCs at cheaper costs, allowing them to maintain higher profits

Question 27

environmental considerations - emissions

Answer 27

- released from MNC factories - negative impact on local communties as it causes health issues

Question 28

supply chain considerations

Answer 28

- may have poor conditions under mncs, now taking action to reduce unethical labour - child labour + labour exploitation

Question 29

marketing conditions

Answer 29

- must consider societal and cultural differences in operating countries - must include labelling that complies with rules and regulations and is not false - must have appropriate promotional activities

Question 30

managing mncs

Answer 30

- important to enhnace benefits and reduce disadvantages

Question 31

controlling MNCs - political influence

Answer 31

- enforce laws and regs which businesses must adhere to - mncs in developed countries are able to exert pressure on national government through lobbying to create favourable conditions - politicians can occupy roles on board of directors for mncs after retiring in return for reducing political control - bribes

Question 32

controllings MNCs - legal control

Answer 32

- gov can enforce legislation and regulation to control operations of MNCs - eg fines - gov want to attract MNCs to boost economy, so legal control relating to taxes and employment ensures stability for MNC

Question 33

controlling MNCs - pressure groups

Answer 33

- operate to influence company and public policy in interest of a certain cause - can work against or on behalf of MNCs

Question 34

controlling MNCs - social media

Answer 34

- mncs can use to advantage to spread awareness and promote their business on a global scale - however , stakeholders can share info on unethical behaviour of mncs - social media forces mncs to address issues raised due to exposure - some countries have social media regulations