3.4.1 The impact of MNC's Flashcards
How may MNC’s impact local labour, wages, working conditions and job creation?
MNC’s investing and having assets in foregin countries will benefit the local economy as it creates greater economic prospects such as job creation for the locals. Can increase their living standards as earning more income however where MNC’s decide to operate in particularly lower wage economies, the working conditions may be harsh. Since the MNC’s look to profit maximise, wages likely to be kept low and the greater profits will be at the expense of workers welfare. Might not if the MNC wans to keep that high global brand recognition. So wages could increase and greater working standards.
How may MNC’s affect local firms?
look at both sides
The MNC setting up can benefit local firms as it can open up new business links with local firms who are able to supply goods. They will greatly beneft from this and due to the MNC setting up in the local area, more employment opportunites set up. So they have more money to dispose and will buy greater from local firms stimulating the economy and can create more jobs through the multiplier effect. On the flip side, can drive local producers out the market if they cannot compete with MNC due to the economies of scale they can benefit from whilst lcal frims may be smaller and cant gain so easily
How may the MNC affect the local community/environmet?
The MNC’s may be causing great envrionmental damage affecting the local community and environment through negative production externalities. However it gives a chance for locals to develop their skills and human capital. Firms could have CSR however where they are more responisble perhaps reducing their carbon footprint or not exploiting workers allowing them to target the ethically consious consumers in the local market also providing welfare gain to society as greater positive production externalities.
How can MNCs affect economic growth of the host nation?
Economic growth occurs as more people are in employement in the host nation. Greater consumption as more disposable incomes. Allows for greater tax revenue and government may use to invest back ino the economy to create multiplier effect.
How can MNCs affect FDI’s of the host nation?
FDI flows in host nation can cause for greater business between firms in economy and gretaer productivity levels
How can MNC’s affect the BoP of the national economy?
MNCs will inflow into the national economy through FDI’s which are form of inward investment leading to an improved BoP. Also greater exports from the MNC in the host nation will improve the BoP.
How can MNC impact technology and skill transfer?
Firms might bring a new skill to a local community, as well as the opportunity for local citizens to acquire and develop their skills. This could help develop the economy in the long term and help develop human capital. Adequate human capital ensures the economy can be productive and produce goods and services of a high quality. It helps generate employment and raise standards of living as well as levels of GDP.
