4.4 Global Industries & MNCs Flashcards
(13 cards)
Define MNCs
A multinational company (MNC) is a business that is registered in one country but has manufacturing operations/outlets in different countries
Advantages of MNCs on employment, wages and working conditions
- MNCs lead to job creation for the local community
- MNCs may offer more competitive wages than local businesses
- MNCs may offer better working conditions than local businesses
Disadvantages 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 produce at a lower cost and compete with local businesses, they may lose local customers
- If local businesses lose customers, this may also cause unemployment for workers of local businesses
Disadvantages of MNCs on employment, wages and working conditions
MNCs may exploit local 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
MNCs may not create jobs for local workers as they may relocate workers from their own country to work abroad (Chinese companies are notorious for this)
Advantages of MNCs for local businesses
MNCs can help to boost the local economy creating opportunities for local businesses
If the population is benefiting from higher wages, they may spend more on local business products
MNCs may utilise the services of local businesses
There may be potential opportunities for joint ventures and partnerships with MNCs who seek to gain knowledge of the local market
Local firms may learn new skills and production methods that allow them to become more efficient
Advantages of MNCs for local communities and the 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 and electricity would help the local community in addition to helping the MNC operate more efficiently
MNCs may have to pay taxes and business rates to local councils/ authorities
These funds may be reinvested back into the local community
MNCs can establish charitable initiatives that have a positive effect on the local community
Disadvantages of MNCs for local communities and the environment
MNCs may cause damage to local habitats/environment during production process
E.g. Shell has a track record of oil pollution in vulnerable communities in Nigeria
MNC’s may leave unsightly production facilities behind once they have extracted all of the resources and left the country
The impact of MNCs on national economies
- Balance of Payments
- FDI Flows
- Consumers
- Business culture
- Technology & Skills transfer
- Tax revenue & Transfer pricing
Advantages of FDI flows from MNCs
There is an initial lump sum of money that enters the country to pay for the investment
This money enriches local firms or citizens who now have more money available to spend in the economy
If this money is reinvested back into the local economy, it may help to generate new jobs and boost economic growth
Disadvantages of FDI flows from MNCs
Assets from the home country are now owned (or partly owned) by foreign businesses
The local firms or individuals who have sold the asset, may not reinvest the money into the local economy but may move it abroad/offshore
Define The Balance of Payments
The Balance of payments is a statement showing all of the financial transactions between a country and the rest of the world
Define Business Ethics
Business ethics refers to the principles and norms that govern business behaviour
Ethical considerations
- Supply-chain considerations
- Marketing considerations
- Stakeholder conflicts
- Environmental considerations
