4.4 - Global Industries And Companies (MNCs) Flashcards
(39 cards)
What are the advantages of MNCs for employment, wages and working conditions?
- job creation for the local community
- may offer more competitive wages than local businesses
- may offer better working conditions than local businesses
What are the disadvantages of MNCs for employment, wages and working conditions?
- may exploit workers if employment regulation is weak or not enforced
- MNCs tend to establish production facilities in regions where labour costs are lower and pay relatively low wages
- may not create jobs - they may relocate workers from their own countries to work abroad.
What are the advantages of MNCs for local businesses?
— Can help to boost the local economy creating opportunities for local firms:
- if population has higher wages —> spend more on local firms
- MNCs may utilise the services of local businesses
— may be potential opportunities for joint ventures and partnerships with MNCs who seek to gain intellectual property:
- local firms may learn new skills and production methods that allow them to become more efficient
What ar the disadvantage of MNCs for local businesses?
- MNCs reduce the supply of workers available to local businesses if they offer better pay and working conditions
- if MNCs are able to compete with local businesses, they may lose local customers —> may cause unemployment for workers of local firms
What are the advantages of MNCs for the local community and environment?
— local residents may benefit from job opportunities and growth in the local economy
— MNCs often invest to improve infrastructure
- better roads, transportation and access to water/ electricity would help the local community in addition to helping the MNC operate more efficiently
— MNCs have to pay taxes and business rates to local councils
- may be reinvested back into the local community
— MNCs can establish charitable initiatives that have a positive effect on local community
What are the disadvantages of MNCs on the local community and environment?
- may abuse damage to local habitants/ environment e.g. Shell oil pollution in Nigeria
- MNCs may leave unsightly production facilities behind once they have extracted all the resources and left the country
What are the impacts of MNCs on the national economy?
- FDI flows
- Balance of Payments
- Technology and skills transfer
- Consumers
- Tax revenue and transfer pricing
- Business culture
What is FDI and how do MNCs contribute to it?
- when a business invests in a foreign country
- MNCs contribute by setting up operations or acquiring assets, boosting the hosts economy
What are the benefits of FDI to the national economy?
- increases capital inflows
- boosts employment, infrastructure and access to global markets
What is a drawback of FDI to the national economy?
Profits may be repatriated to the MNCs home country, limiting local economic benefits
How do MNCs affect the Balance of Payments?
They improve the BoP through exports, but worsen it if they import heavily or repatriate profits
What is a benefit of technology and skills transfer on the national economy?
MNCs introduce new technologies and train local worker, which raises productivity and innovation
What is a drawback of technology and skills transfer on the national economy?
Can lead to dependency if local firms fault to develop their own capabilities
How do MNCs impact consumers in the national economy?
Greater choice, lower prices and improved product quality due to increased competition
What is transfer pricing?
When MNCs set prices for transactions between subsidiaries to short profits to low-tax countries
What is a benefit of tax revenue on the national economy?
MNCs pay large amounts in corporation tax, contributing to public spending
What is a drawback of tax revenues on the national economy?
Use of transfer pricing and tax avoidance reduces actual tax paid to host governments, impacting the countries economy
How do MNCs influence business culture?
They can spread innovation, best practices and ethical standards but may also promote short-termism or westernised practices
What are ethics?
Principles and norms that govern businesses behaviours, determines how they operate and their decision making process
What are stakeholder conflicts?
When the interests of one stakeholder group (e.g. shareholders) clash with another (e.g. workers or local communities)
Give an example of a stakeholder conflict.
Management vs Workers:
- management may be more focused on output or reducing costs than worker safety or creating a positive working environment
- workers want to be safe and have a comfortable environment to work in
Ethical issue - Pay in developing countries
MNCs may paw low wages by local standards to maximise profit, raising concerns of exploitation
Ethical issue - Working conditions
Some MNCs operate in countries with weak labour laws, risking unsafe, long hours or harsh working environments
E.g. ‘Sweatshops’
How can MNCs act ethically towards workers?
By paying fair wages, providing safe conditions, respecting local laws and promoting worker rights
