4.4.1 The impact of MNCs Flashcards Preview

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Impact of MNCs on the national economy:

FDI flows
balance of payments
technology and skills transfer
business culture
tax revenues and transfer pricing


Impact of MNCs on the local economy:

local labour, wages, working conditions and job creation
local businesses o the local community and environment


define MNC

A multinational corporation is a business that, although operated from one country, has facilities and assets in more than one country


characteristics of MNCs

Dominant players in the market
Complex structures, multi site and multi product
Grown through organic and inorganic growth
Heavy investment in R&D
Globally recognised brands


Impact of MNCs on the local economy

Create jobs with better opportunities e.g. training, shared expertise, full-time, promotions
Push wages up improving overall standard of living
Skills development
Better working conditions as businesses look to maintain their own reputation

Provide support services e.g. building of factories, cleaning, raw materials/components
Improved infrastructure
Higher spending power from local community increasing demand for other businesses e.g. shops

Higher employment, less poverty, lower crime
Improved infrastructure e.g. hospitals and roads
Improved education
Increased funds for local governments from the payment of taxes
Projects to improve environmental standards


impact of MNCs on the local economy

Creates wage inflation for local businesses
May look to exploit cheap workers
Bring in own managers only offering low skilled jobs to workers
Working conditions may be poor
Lack of union representation

Increase costs e.g. workers, ancillary services
Loss of talented workers
Loss of sales from substitute products

Environmental disasters
Loss of traditions and cultures
Damage to traditional industries e.g. land for farmers


Impact of MNCs on the national economy

An injection into the host economy
-Economic growth (GDP)
-Generation of revenue for the local government
-Job creation and related wealth
-Technology and skills transfer
-wider choice of goods and services
-better quality products
-Taxes paid within the host country will boost the governments revenue allowing for greater spending on public services such as health care and infrastructure
- business culture
-FDI flow


whos does MNCs effect

local businesses
local community


effect of MNCs on consumers

- prices cheaper
- increased choice of products
improved quality

-less local competition
-price leadership


effect on MNCs on local business

- increased consumer spending
-skills transfer

-more competition
-competition for employees
-increased wage level


effect of MNCs on local community

-more jobs , less unemployed , less homelessness , better health
-better infrastructure

-environmental impacts eg pollution
-impact on culture and tradition


effect of MNCs on government

- less unemployed
-tax returns on wages , VAT and corporate tax on profits

-tax avoidance