effects of globalisation

Question 1

positive effects for MNCs

Answer 1

• access to cheaper raw materials
• transfer pricing can reduce tax bills
• exploitation of local resources (eg lower labour costs)
• can benefit by learning different cultures
• closer to source of raw materials, cutting down transport costs
• new management techniques can be discovered and filtered down the organisation
• allows organisation to control production from start to finish (eg. oil industry)

Question 2

negative effects for MNCs

Answer 2

• cultural differences may lead to conflicts and misunderstanding
• increasing trend for local shops
• increased travel for senior managers of organisations - time away from office/expensive
• increased competition when new MNCs enter countries can damage the long serving smaller businesses
• may have employees working in politically unstable countries which may put them at risk
• increased consumer awareness of costs and product availability