4.4.1 The Impact of MNC's

Question 1

what is an MNC

Answer 1

a multi-national corporation is a business that has branches or departments in more than one country

Question 2

what are the positive effects of an MNC on local economies

Answer 2

+ create jobs
WHICH improves the standard of living and average wage
THEN more money can be spent in local firms/businesses
+ improved infrastructure

Question 3

what are the negative effects of an MNC on a local economy

Answer 3

• if the MNC brings employees with them it may but strain on the local community
• competition for staff may force local firms to increase their wages which they can’t afford
• increased competition for local firms
• creating pollution and waste due to little emotional investment in the country
• imposing on culture, reduces tourism

Question 4

what are the positive effects of an MNC paying tax

Answer 4

• an MNC will have to pay tax on their exports, profits and their land
• this money that the government aquires through taxes can be spent on improving infrastructure, schools or healthcare

Question 5

what are the potential problems with governments relying on tax from MNC’s

Answer 5

• MNC’s will use tax avoidance, which is using legal accounting methods to reduce the amount of tax they pay
• the host country may feel they can’t enforce legislation to prevent this as they fear the MNC may relocate

Question 6

what are the positive effects of MNC’s on the national economy

Answer 6

• more trained staff and better technology
• MNC may invest in their suppliers with training or technical help
• MNC’s may be able to offer cheaper products for consumers
• MNC’s increase the level of entrepreneurship

Question 7

what are the negative effects of an MNC on the national economy

Answer 7

• MNC may send all profits back to their country of origin
• MNC’s may force domestic firms out of business
• MNC’s may impose on the nations culture, undercutting traditional businesses
• industrialisation may reduce tourism