1.6 multinational companies

Question 1

multinational companies

Answer 1

any business organization that has operation in overseas markets- have operations in two or more countries

Question 2

foreign direct invesment (FDI)

Answer 2

refers to cross border investments in which the foreign company establishes an ongoing financial interest and influence in its operations in another country

Question 3

does exporting count as a MNC

Answer 3

no, selling products overseas does not qualify since the MNC operated from the domestic country

Question 4

positives of multinational companies

Answer 4

*employment opportunities
*support for the workforce
*support for local business
* choice and equality
* efficiency gains
*tax revenues

Question 5

employment opportunities

Answer 5

significant job opportunities in the host countries- huge economic benefits like higher incomes, consumption, savings and tax revenue. raise quality of life for citizens

Question 6

support local businesses

Answer 6

they are likely to purchase stocks from domestic suppliers of raw materials, semi-finished goods and finished goods. This provides revenue for local firms and supports domestic industries. In addition, MNCs are also likely to use the services of local firms, such as insurance and distribution.

Question 7

support for the workforce

Answer 7

Local workers may also benefit from training and development opportunities. wages better than local firms

Question 8

choice and equality

Answer 8

mncs offer host countries more choice for better products. better prices and quality

Question 9

efficiency gains

Answer 9

reate increased competition for local suppliers, forcing the domestic businesses to improve their operational efficiency. This covers aspects of the prices, quality and customer care of local firms.

Question 10

tax revenues

Answer 10

The host country’s government benefit from profitable multinational companies as they pay corporate taxes. The additional finance can be spent to further improve the economy, such as better infrastructure to further entice foreign direct investment.

Question 11

negatives of multinational companies

Answer 11

*negative impact on local businesses
*repatriation of profits
*exploitative business practices
*loss of cultural identity

Question 12

negative impacts on local businesses

Answer 12

Many local firms, especially smaller ones, may lose customers to the larger foreign multinational companies. A fall in their market share and profit can eventually lead to bankruptcies and some job losses in the economy.

Question 13

the repatriation of profits

Answer 13

Any profits declared at interest and tax payments are accounted for may be repatriated (sent back) to the home country, rather than the funds being used to invest further in the host country.

Question 14

exploitative business practices

Answer 14

MNCs have been known to be socially irresponsible, especially when operating in less economically developed countries where rules and regulations are less stringent. This has often resulted in workers being exploited (poor pay and working conditions) and business operations that cause damage to the environment (such as air pollution and destruction of natural habitats).

Question 15

loss of cultural identity

Answer 15

The growing presence of multinational companies, and the convergence of habits and tastes brought about by globalization, can cause a depletion of local cultures. MNCs and globalization have been blamed for causing a cultural shift in how people live, especially for the younger generation.