4.4

Question 1

define multinational

Answer 1

a business which operates in more than one country

Question 2

what do multinationals bring to a country

Answer 2

jobs
investment in infrastructure
multiplier effect

Question 3

what are the characteristics of multinationals

Answer 3

high assets and value turnover - higher profit margin
network of branches - lots of connections
rapid growth - access to large market
technology - lots of innovation and R&D
management - access to best talent
lower advertising spend - global brand

Question 4

why would businesses want to become multinationals

Answer 4

operate closer to target international markets - reduces transport costs, improves market information
gain access to lower cost of production - outsourcing & offshoring
avoiding protectionism - avoid tariffs and import quotas

Question 5

what does FDI involve

Answer 5

investment of foreign money into domestic structures, equipment and businesses
creates links between economies
encourages transfer of technology

Question 6

what are the positive effects of MNC’s

Answer 6

creates employment
increases skill base
increases standard of living
raises countries profile
improves balance of payments
improve infrastructure

Question 7

what are the negative effects of MNC’s

Answer 7

profit leakage
low paid jobs
interfere in politics of country
poor health and safety
increased urbanization
widens poverty gap

Question 8

what are business ethics

Answer 8

moral guidelines which govern good behavior

Question 9

give some examples of ethical issues

Answer 9

pay & working conditions
environment damage
exploitation of labor
inappropriate marketing claims
stakeholder conflicts

Question 10

what are the advantages of ethical behavior

Answer 10

higher revenue - positive consumer support
improved brand
better employee motivation & recruitment
new sources of finance - ethical investors

Question 11

what are the disadvantages of ethical behaviors

Answer 11

higher costs
higher overheads
builds false expectations

Question 12

what is CSR (corporate social responsibility)

Answer 12

the extent to which a business addresses the concerns and obligations to its wider stakeholders
the actions a business takes over and above the minimum required by law

Question 13

what are the concers of CSR (corporate social responsibility)

Answer 13

poor human rights
communities
business integrity & ethics
product responsibility
environment

Question 14

what is transfer pricing

Answer 14

when a business avoids tax by transferring sales from one country to another with lower corporation tax

Question 15

why do multinationals need to be controlled

Answer 15

prevent abuse of market power
reduce environment damage
ensure they pay fair tax
protect against workers rights
ensure they behave ethically

Question 16

how can multinationals be controlled

Answer 16

legal government action
campaigns by pressure groups
adverse media coverage
boycotting from social networks

Question 17

how much control do governments have over MNCs

Answer 17

strong governments - can restrict actions of MNCs to an extent however MNCs will often find loop holes in the law
weaker governments - have less power because they rely on MNCs for development and employment
MNCs may pay political lobbyists to influence political parties

Question 18

how much control do pressure groups and social media have over MNCs

Answer 18

can lobby the government to demand change
political stunts draw attention to issues
boycotting
damage reputation

Question 19

what is tax evasion and avoidance

Answer 19

tax evasion - using illegal means to avoid paying tax that are owed
tax avoidance - legal ways to not pay tax such as transfer pricing