4 Flashcards
MNC
multinational corporation - a business that operates in more than one country
positive Impacts of MNCs on local economy
Creates employment
improves Infrastructure - MNCs often improve communication links within a country, e.g. road, rail and port facilities are updated and expanded.
improves balance if payments - Many goods made by MNCs are exported to other
nearby countries. This increases amount of money earned by the country.
raises a country’s profile - movement into a particular country is a statement about its pro-business environment and political stability meaning more businesss will follow
increased standard of living - An increase in earnings increases taxes paid within the country and gives more money to
spend on services
Increase skill base Many MNCs operate training schemes for local people to learn how to use machinery.
Negative impacts of MNCs on local economy
Profit leakage - Profits from factories or hotels
run by the MNC go to the country in which the
head office of the company is found
low paid jobs - MNCs take advantage of low labour costs
Pull out quickly - in times of recession / low sales business fucks off
poor safety record - Poorer countries often have poorer safety standards, and governments are willing to turn a blind eye to breaking the standards that exist.
Increases urbanisation- too many people in urban areas can lead to overcrowding
widens poverty gap - Although wages are low in
factories, they are higher than elsewhere. This
increases the cost of living for all, as prices of goods
rise.
MNC impact on the local community
Businesses can have negative effects on community for example Dows chemicals produced chlorinated chemicals and burning and burying its waste - effects agriculture
Impact of MNCs on local economy (FDI flows)
FDI
When a multinational invests in a
host country, the scale of the investment (given the size of the firms) is likely to be significant.
- Governments will often offer
incentives to firms in the form of
grants, subsidies and tax breaks to attract investment into their
countries for FDI
?Impact of MNCs on local economy (BALANCE of payments)
Inward investment will help a
country’s balance of payments.
The investment will be a direct flow
of capital into the country and the investment is also likely to result in import substitution and export promotion.
MNCs impact on consumers
If the multinational manufactures
for domestic markets as well as
for export, then the local
population will gain from a wider
choice of goods and services and
at a price possibly lower than
imported substitutes
impact on business culture in local economy
Cultural and social impact - large numbers of foreign businesses can dilute local customs and traditional
cultures.
McDonaldization…
stakeholder conflict - suppliers
suppliers want to charge high prices to keep costs of production low
stakeholder conflict - owners
owners want high profits so there are good dividnens for their shareholders
stakeholder conflict - customers
Customers want
low prices, high
quality, availability
and ethical
products
stakeholder conflicts - managers
Managers want
promotion
prospects and
bonuses on high
profits
stakeholder conflicts -employees
job security and good working conditions
stakeholder conflicts - government
want tax payments and lawful and ethical business
Ethics
moral principals
