impact of MNC's on the economy Flashcards Preview

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Flashcards in impact of MNC's on the economy Deck (19):

improvement in infrastructure

MNC's may invest in roads, water, gas, facilities to help transport. Also to build trust with community


balance of payments

money into national account from FDI
value of sales overseas represents a flow into national account
helps LEDC's to become established in global market


higher GDP

spent on establishing new facility overseas


increased tax revenue

gov. can tax profits
increased employment means less unemployment benefits


domestic businesses supported

MNC needs suppliers


can encourage more FDI

income from original FDI used to reduce national debt making economy appear more stable, encouraging further FDI


local environments

agriculture can be negatively affected
large production leads to pollution, oil spills, outs fishing and farming at risk


employment competition

local employers can't offer the same high wage
can put pressure on local firms to make competitive changes


disposable income

higher employment rates means higher disposable incomes, boost in trade for restaurants


restricting opportunities for high skilled workers

may offer low value jobs and bring in skilled workers from home country


transfer pricing

MNC avoid tax
maintain a low profit in country A (high tax policy) and generate high profits in country B (low tax policy)
governments must consider attractive tax policies to encourage FDI, MNC will always want low tax


business culture

some people may use the employment opportunities with MNC to learn skills and save up capital to open their own firms. MNC's may encourage them to become supplier if they have been taught high quality standards. gives MNC flexibility
MNC culture also influences, e.g Japan in England influenced a lot of businesses to adopt Kaizen


horizontal transfers

knowledge transferred across same industry e.g when Nissan became established in UK many car manufacturers copied their practices


vertical transfers

training or assistance to suppliers
forward vertical when domestic firms buy from MNC e.g components to improve working practices


reverse engineering

analysing how a computer product was made and copying certain parts to produce and sell at lower price


lower prices for consumers

arrival of MNC's increases competition
MNC's use modern efficient production and can offer lower prices
competitive pressure forces domestic firms to offer low prices


more choice for customers

they increase available products e.g Macdonalds and supply other firms allowing them to increase product range


improved quality for customers

MNC's usually use TQM and state of the art machinery


better living standards

MNC's can lead to higher income allowing them to spend more on now wider choice of available goods