4.4 Flashcards
Impact of MNCs on the local economy:
local labour,wages,working conditions and job creation
-local businesses
-the local community and environment
Explain impact on Local Labour, Wages, Working Conditions, and Job Creation
Positive:
-MNCs often create new jobs in local areas.
-May bring higher wages than local firms.
-Can offer training and better working conditions.
Negative:
-Jobs may be low-skilled or temporary.
-Risk of exploitation (e.g., sweatshops, poor conditions).
-Could undercut local wage standards.
Explain impact on local businesses
Positive:
-Can boost local supply chains and create opportunities.
-Introduce new business practices and competition.
Negative:
-Can push out small local businesses that can’t compete on price or scale.
-May create dependency on the MNC.
Impact on Local Community and Environment
Positive:
-Investment in infrastructure, schools, or healthcare as part of CSR.
-Support for local charities or initiatives.
Negative:
-Environmental damage (e.g., pollution, deforestation).
-Disruption to local communities (e.g., forced relocation).
Impact of MNCs on the national economy:
o FDI flows
o balance of payments
o technology and skills transfer
o consumers
o business culture
o tax revenues and transfer pricing
Explain FDi flows and balance of payments
FDI Flows
-Helps boost economic growth, infrastructure, and productivity.
-Injection into economy= decreased unemployment = decreased national debt , increased income and increased tax revenue
Balance of Payments
-Exports from MNCs help improve the current account.
-However, profit repatriation (sending profits back to home country) can worsen it.
Explain Technology and Skills Transfer
-MNCs often bring advanced technology and expertise.
-Local workers may gain new skills and training= improved compettiveness
-Encourages innovation in domestic industries.
Explain consumers
Positive:
-More product choice, often at lower prices.
-Higher quality goods and services and better SOL
Negative:
-Can lead to loss of cultural identity in local products.
-May result in overdependence on foreign brands.
Explain business culture and tax revenues and transfer pricing
-Business Culture
-MNCs influence local business practices (e.g., efficiency, professionalism, innovation).
-May clash with local norms or traditions.
-Tax Revenues and Transfer Pricing
Positive:
-MNCs may contribute to tax revenue in host countries.
Negative:
-Use of transfer pricing (selling product in low tax country even though produced in another) can reduce taxes paid in the host country.
-Leads to loss of government income for public services.
Stakeholder conflicts
In global ethics
-Management vs Workers-Management may focus on output and cost-cutting, while workers want fair pay, safety, and a positive work environment.
-Management vs Owners
Owners (shareholders) seek profit, but managers may prioritise employee wellbeing and long-term sustainability.
-Profits vs Environment
Increasing output = more profits for shareholders, but leads to greater resource depletion and environmental harm.
Pay and working conditions in global ethics
-MNCs often operate in countries with weaker labour laws.
-Some exploit workers by paying very low wages or providing poor conditions (sweatshops).
Environmental considerations in global ethics
-emissions - some legislation like environmetn eg climate change act of 2008 dont exist LEDs = no pressure from gove to report emissions.MNCs’ factories and products generate high emissions= health issues
-waste disposal- in some countries its less regulated= decreased costs for MNCs.
Supply chain considerations
-Child Labour-
Common in LEDCs. Often used for low-cost production. Causes brand damage and protests (e.g., Primark in Bangladesh).
-Exploitation of Labour-
Workers may face long hours, poor ventilation, and low wages. MNCs now under pressure from governments, consumers, and the ILO to take action.
Marketing considerations:
-misleading product labelling-False claims about product size, content, or features to increase sales. Must comply with local laws.
- inappropriate promotional activities-Offensive or culturally insensitive ads can damage brand image.
Factors to Consider When Controlling MNCs
Legal control- regulations eg competition laws,employment legislation,comsumer legislation. If break laws=fines,lawsuits
- Pressure groups- boycott,lobbying to expose unethical practises
- Social media- stakeholders share info about firm to see actions and behaviour = makes frim more transparents and ppl can take action
-Poltical infleunces eg quotas,tarrifs to support local frims but can lead to satte corruption
