3.4.1 the impact of multinational corporations (MNCs) Flashcards
What are multi national corporations (MNCs)?
Firms which have assets in multiple countries. Usually have a head office in their home country, and other offices or factories in other countries.
Why do MNCs usually have a great deal of power in their market?
Due to their large size.
How do MNCs impact local labour?
By investing in the host country, the firm creates employment for local citizens.
The firm might need buildings, which have to be built. and equipment, which needs to be made and then operated. Products themselves need to be made, requiring a workforce.
What are the ethical issues of MNCs and local labour?
Working conditions might be poor or hazardous.
Why do some people argue that it is not unethical to have cheap labour factories?
As it can give a huge step up for some people, especially for women to gain financial independence from restraints of a patriarchal society.
Where does the bulk of FDI of MNCs go?
Usually back to their home country, usually a developed economy, despite them operating in developing countries.
How do MNCs create more business for local firms?
They might be involved in supplying or servicing the MNC.
Also, if employment in the area increases they are likely to increase their expenditure, likely to be spent on local firms, stimulating the local economy and creates more jobs through multiplier effect.
How can an MNC harm a local firm?
They could lose business to the MNC, if they cannot achieve the same economies or compete on the same price level. Rather than creating jobs, there could be a loss of jobs.
How do MNCs impact economic growth?
A positive multiplier effect on national economy results from increased employment and spending. Government may also earn more tax revenues from VAT and income tax, which might encourage more government spending and further increases growth.
How do MNCs impact FDI flows?
If one MNC sets up in a country, others might see potential for business there and also set up in that country. This could create an expanding business environment and FDI flows increase as a result.
How do MNCs impact technology and skills transfer?
They might bring a new industry or skill to a local community, as well as the opportunity for local citizens to acquire or develop their skills. This develops human capital.
Why may host countries receive little or no financial benefit from an MNC operating there?
The MNC might send their profits back to their home country.
