4.4 Flashcards
MNC
a business that has branches or departments in more than one country
positive effects of MNCs on local economies
- local labour and job creation leading to financial stability
- wages may increase due to demand for local workforce and conditions in MNCs may be better -local businesses may be needed to construct factories or trade
- local comuniy will recieve improvements in infrastructure
negative effects of MNCs on local communities
- may lure workers away from local businesses if better conditions or wages are offered
- new businesses create pollution
positive effects of MNCs on national economys
- will pay taxes to the national goverment on their profits, exports and land they buy
- create large FDI flows (inflows of money) which will improve a countrys balance of payments.
- will introduce new technology and skills into host nation and pay for training or techinal help
- economies of scale will aid MNC to offer cheaper products
negatives of MNCs on the national economy
- MNCs may use tax avoidence schemes through transfer pricing which moves money from a country with a high tax rate to a low tax rate. would result in less money in national economy
- may cause money to leave the national economy through sending profits back to home country or importing from abroad
- could put domestic firms out of business
- national culture may be lost or diluted which may make country lose tourism revenue
ethical issues arisen through pay and working conditions in MNCs
MNCs often set up in less economically developed countries which have lower rates of pay and lower health and safety standards.
ethical issues arisen through the environment with MNCs
most more economically devloped countries have legislation on business emmisions which LEDCs dont have, which makes locating in these places attractive for MNCs as it reduces production costs
how may MNCs need to adapt their marketing to remain ethical
may have to do this to avoid innapropriate promotions. It may be considered the norm to give gifts to business contacts in some countrys but in others be seen as bribery
how can the goverment control the behaviour of MNCs
- tarrifs and quotas to encourage MNCs to use resources from within the country to reduce FDI outflows
- emloyment laws
- environmental protection laws
- regulations requiring a minimum level of local labour
- laws restricting transfer pricing
how can pressure groups control MNCs
- name and shame them
- sit ins and strikes
- intimidation or property damage
how can social media control MNCs
info can be shared quickly about unethical practices and help organise large campaigns, however can lead to distorted or incorrect info
what might the level of control over an MNC depend on
- power of the goverment
- power of MNC
- if MNC would bring in large tax revenues for a goverment
- if MNC operates in a niche market then pressure groups and social media may not get as much interest
