4.4 Flashcards
What are the 4 factors to consider in controlling MNC’s
- Political influence
- Legal control
- Pressure groups
- Social media
Choice of which depends on the MNC in question, the activities of the MNC and the country where this is all taking place.
How does political influence control MNC’s?
→Governments can apply pressure to attempt to change the behaviour of MNC’s.
→For example, the following MNC’s have been avoiding paying tax in the UK : starbucks, google and amazon.
The UK has helped reform international tax rules and led the way with action to prevent corporations from paying little or no taxes.
Benefits of political influence in controlling MNC activity?
→MNC’s may wish to get political approval from the governments of the host nations, this may help trade and setting up in a new country.
→If the MNC gains potential approval they may find trading smoother and less troublesome.
Drawbacks of political influence in controlling MNC activity?
→Politicians can be bribed, not such an issue in the UK but quite common in other countries.
→Some MNCs bring so much wealth and employment to an economy that a weaker government might ignore unethical activities.
How does ‘legal control’ control MNCs?
→If a country introduces laws to reduce pollution or protect children from child labour then this will all cost the MNC money to improve their practices.
→Quite often the MNC may ignore or openly disregard these regulations.
Benefits of legal controls in controlling MNC activity?
→Laws can be passed at any point to control the actions of a MNC which are already established in a country.
→Laws mean that consumers have some rights against the MNC as in the Mclibel case.
Drawbacks of legal controls in controlling MNC activity?
→ Even if laws are introduced they may still be broken.
→The MNC may simply move production to a country where there are fewer laws/restrictions.
→The host nation does not want to lose the economic input of the MNC so this deters laws being passed.
→MNCs can afford expensive legal defence of any challenge.
How do pressure groups control MNCs?
→Can have strong influence on public opinion and behaviour of MNCs, if they want to avoid a PR disaster.
e.g. Greenpeace, WWF, Friends of the earth, war on want.
What is a pressure group?
Organisations which campaign for changes in the law/new legislation in specific areas.
Benefits of pressure groups in controlling MNC activity?
→Can raise public awareness of MNC activities
→Can create PR problems for MNCs peacefully, which can change behaviour
Drawbacks of pressure groups in controlling MNC activity?
→Needs to be large and organised if it is to have any impact on changing the activities of the MNCs
→The size and wealth of the largest MNC means they can easily counter/quieten pressure group activity.
How does social media control MNCs?
→Tools such as twitter can see the swift mobalisation of public opinion and hence pressure on MNCs to change their behaviour.
→Can turn a product scare into a national crisis within hours.
→Can be used to orchestrate a boycott, affecting the sales/reputation of the MNC.
Benefits of the use of social media in controlling MNC activity?
→Very powerful e.g. puts pressure on large MNCs e.g. Trip Advisor → very powerful way for customers to alter policy, activity and services of large hotel chains.
Drawbacks of social media in controlling MNC activity?
→Can only effect short-term change as the internet is a dynamic medium → fickle customers become bored easily and move on to the next scandal.
→A MNC can just dust itself down and carry on with very little impact on their activities.
