4.4 Flashcards
Define multi-national company (MNC)
A business that has operations in more than one country
Key factors in the growth of MNC’s?
-Growth in emerging economies
-Globalisation
-Deregulation
Why do activities of MNC’s need controlling?
-To protect against exploitation
-To discourage resource depletion
-To ensure local cultures are protected
-To discourage abuse of market power
Advantages of MNCs on employment/wages/working conditions
-Job creation
-Competitive wages
-Better working conditions than local businesses
disadvantages of MNCs on employment/wages/working conditions
-May exploit workers if weak employment legislation
-Low wages
-May relocate workers rathe than create jobs
Benefits of MNCs on local businesses
-Boost local economy
-Higher wages so people can spend more
-Opportunities for joint ventures, helps learn new skills
Disadvantages of MNCs on local businesses
-Reduce supply of workers for local businesses
-Compete with local firms so can lead to loss of customers
Benefits of MNCs on local communities
-Job opportunities
-MNCs often invest to improve infrastructure
-MNCs need to pay taxes & business rates
-Can create charitable incentives
Drawbacks of MNCs on local communities
-Cause damage to local habitats/environment
-Many leave unsightly production facilities behind
Define FDI
Inflows of money into a country
Benefits of FDI from MNCs on national economy
-Initial sum of money into country, enriches local firms and citizens
-Money may be reinvested back into local economy
Drawbacks of FDI from MNCs on national economy
-Assets from home country now owned by foreign businesses
-Profit may not be reinvested but instead moves abroad/offshored
Impacts of MNCs on national economies
-FDI
-Balance of payments
-Technology & skills transfer
Technology and skills transfer
-MNCs can bring technologies and skills to local businesses
-Helps improve efficiency & productivity helping domestic businesses become more competitive
How do consumers benefit form MNCs?
-Wider choice of goods
-Lower prices if MNCs pass on cost advantages in form of lower prices
-Better quality
-Improved living standards, higher incomes from job creation
How can consumers be effected by MNCs in long term?
-MNCs can push domestic markets out of the market which may lead to higher prices and low quality products.
Advantages of MNCs on business culture
-Domestic businesses may be influenced by the business culture of MNCs
-MNCs encourage culture of entrepreneurship
Disadvantages of MNCs on business culture
-Can demonstrate unethical behaviour and cultures of exploitation
-Encourages local firms to ignore working conditions
Tax revenue and MNCs
-Potential for host country to gain significant tax revenue
-Governments use tax revenue pay by MNCs to improve public services & infrastructure.
-MNCs seek to maximise profits so will try reduce there tax liabilities
Define Transfer pricing
a method used to shift profits form where they are generated countries with lower tax rates, method of tax avoidance
Define Ethics
The principles and norms that govern business behaviour
What can unethical actions do?
Damage the brand and result in loss of profitability
What are customers around the world putting more pressure on brands to do?
Behave ethically
What creates conflict between stakeholders?
Stakeholders have different levels of power and different priorities which creates potential for conflict, eg Managers Vs Workers, Managers Vs Owners
Pay & Working conditions (MNCs)
-MNCs operate in countries with different employment regulations and working conditions
-Many MNCs demonstrate unethical behaviour by exploiting workers and paying low wages to cut costs
-MNCs frequently use child labour
Environmental Considerations (MNCs)
-Waste management: less economically developed countries have less regulation and enforcement on waste management
-MNCs can also dispose of waste in LEDCs at cheaper costs
-Emissions need to be considered.
Supply chain considerations (MNCs)
-Many MNCs are now taking action to reduce unethical labour practises as part of their corporate social responsibility
-Some MNCs have manufacturing facilities in countries where child labour is common this can face backlash which can damage their brand.
Ways of controlling MNCs?
-Political influence
-Legal Control
-Pressure groups
-Social Media
Controlling MNCs: Political influence
-Political institutions enforce laws & regulations
-MNCs in developed countries often able to exert pressure on national governments to create favourable conditions for their business
-MNCs in developing countries can infuse governments as they ay establish deals beneficial to politicians, bribes
Controlling MNCs: Legal Control
-Governments can enforce legislation and regulation to control MNCs
-Governments want to attract MNCs to help boost their economy so creating legal controls in areas relating to taxes & employment ensures stability of MNCs
Controlling MNCs: Pressure Groups
(Groups that operate to influence companies & public policy)
-Pressure groups can now operate on an international scale
-Can take action in different forms: naming & shaming, direct actions, lobbying
Controlling MNCs: Social Media
-MNCs forced to address issues raised by customers/pressure groups on social media as there is high levels of public exposure
-MNCs influence on social media can belated in some countries as they have regulations in place to manage social media power eg China
