4.4 - Global Industries

Question 1

What is a multinational corporation

Answer 1

a business that operated from 1 country but has facilities & assets in more than 1 country

Question 2

4 characteristics of an mnc

Answer 2

-dominant players in the market

-complex structures

-heavy investment in R&D

-globally recognised brands

Question 3

Name 4 positives MNCs have for the local economy

Answer 3

-create jobs

• ^ wages -> ^ standard of living

-^ working conditions

-skills development

Question 4

Name 3 disadvantages MNCs have on the local economy

Answer 4

-creates wage inflation for local businesses

-may look to exploit cheap workers

-working conditions may be poor

Question 5

Name 4 positives MNCs have on local businesses

Answer 5

-provide support services -> raw materials, factories

-improved infrastructure

-higher spending power from local community -> ^ demand for other businesses

Question 6

Name 4 disadvantages MNCs have on local businesses

Answer 6

• ^ costs

-loss of talented workers

-loss of sales -> subsitutes

Question 7

Name 3 positives MNCs have on the local community

Answer 7

-higher employment

-improved infrastructure

-improved education

Question 8

Name 2 disadvantages MNCs have on the local community and environment

Answer 8

-loss of traditions, cultures

-environmental disasters

Question 9

Name 4 positive impacts of MNCs on the national economy

Answer 9

FDI flows -> when MNCs invest into other countries -> inject cash into national economy -> creates jobs -> ^ local economy

tech & skills transfer -> MNCs can bring new tech & skills to local businesses -> ^ efficiency, productivity -> ^ competitiveness

consumers -> wider choice of goods, lower prices, better quality

balance of payments -> MNCs help improve BOP of a country as FDI flows will improve the BOP

business culture -> MNCs run professionally -> influences local businesses to do so

Question 10

How do MNCs benefit the national economies technology and skills transfer

Answer 10

MNCs can bring new tech & skills to local businesses -> ^ efficiency, productivity -> ^ competitiveness

Question 11

How do MNCs impact the national economies consumers

Answer 11

wider choice of goods

lower prices

better quality

improved living stndards -> higher incomes -> ^ jobs

but
MNCs can push out domestic businesses -> less choice -> higher prices, lower quality products produced -> know cust have less choice

Question 12

How do MNCs impact the national economies FDI flows

Answer 12

positively:
-initial lump sum enters the country -> enriches local firms/ citizens -> generates new job -> economic growth

negatively:
-assets from home country -> now owned by foreign businesses

Question 13

What is a balance of payments

Answer 13

statement showing all financial transactions between country and world

Question 14

How do MNCs impact the national economies business culture

Answer 14

positively:
-MNCs are run professionally -> domestic businesses may be influenced by this -> start copying ideas like kaizen, continuous improvement

negatively:
-MNCs may demonstrate unethical behaviour -> may exploit -> encourage local firms to ignore working condition laws

Question 15

How do MNCs impact the national economies tax revenues and transfer pricing

Answer 15

positively:

Question 16

What is transfer pricing

Answer 16

technique used by MNCs to shift profits out of where they operate & into tax havens -> method of tax avoidance

Question 17

What are business ethics

Answer 17

principles and norms that govern business behaviour

Question 18

Name the 6 ethical considerations businesses need to consider

Answer 18

-pay & working conditions

-stakeholder conflicts

-environmental considerations

-supply chain considerations

-marketing considerations

-inappropriate promotional activities

Question 19

What stakeholder conflicts may occur in the workplace

Answer 19

management vs workers -> managers may be more focused on output/ reducing costs, than worker safety/ creating a positive working environment

management vs owners -> owners want management to maximise profits
-managers want to sacrifice some profit to ensure workers are safe, good wellbeing

Question 20

How do pay and working conditions become ethical issues for MNCs

Answer 20

-MNCs operate in countries which have diff employment regulations and working conditions - need to decide if they comply with base location rules/ abroad country rules

-some MNCs behave unethically -> expoloiting workers in LEDCs -> paying them lower wages

-or provide poor working conditions to cut costs -> ‘sweatshops’ -> e.g. Nike in Vietnam

-or child labour -> sch children are working rlly long hrs

Question 21

How do environmental considerations become ethical issues for MNCs

Answer 21

-emissions -> often released from factories/ products made by MNCs -> impacts local communities -> health issues

-waste management -> products that are hard to dispose of -> often dumped in LEDCs -> cheap -> harmful to ppl living there

Question 22

How do supply chain considerations become ethical issues for MNCs

Answer 22

MNCs have suppliers in different countries and increasingly they are held accountable for the working conditions of these suppliers

issues:
-child lavbour - Some MNCs have manufacturing facilities in countries where child labour is common -> MNCs facing backlash -> damage brand -> decreasing sales

-exploutation -> low wages, poor working conditions may be present

Question 23

How do marketing considerations become ethical issues for MNCs

Answer 23

-MNCs must consider cultursl, social differences in countries they operate in

-misleading labelling -> labelling must comply with regulation of the country - info must be correct - e..g size, features, content of product must be correct -> otherwise damages brand

-inappropriate promotional activites -> should not be offensive/ illlegal - e.g. promotions that encourage ppl to buy more than they need -> food waste

Question 24

Who has control over MNCs and who has influence

Answer 24

-control- large shareholders
-government
-small shareholders

-influence- customers
-pressure groups

Question 25

Name 4 factors to consider when controlling MNCs

Answer 25

-political influence

-legal control

-pressure groups

-social media

Question 26

What is lobbying

Answer 26

process of trying to influence key political decision makers to act in the best interests of a business

Question 27

What is Corporate social responsibility (CSR)

Answer 27

-self-regulating business model that helps a company be socially accountable

-enhances society & environment rather than degrading it

Question 28

What is a stakeholder

Answer 28

person, group that has an interest in a company

Question 29

Give 4 examples of why MNCs need to be controlled

Answer 29

-safety concerns -> MNCs producing in LEDCs may squeeze life out of unsafe machinery - unsafe for workers -> must be controlled

-short-term mineral extraction -> by their nature minerals can only be extracted once -> important host country receives correct rewards for allowing MNCs to have irreplaceable minerals

-weakening local cultures -> MNCs sell many products abroad -> have good marketing -> locals changing their habits & lifestyles -> loss of tradition

-lack of commitment to host country -> MNCs lack ties to countries -> leave country when they want to -> unemployment/ social problems

Question 30

What 4 benefits can MNCs gain through lobbying politicans

Answer 30

-encouraging changes in laws & regulations

-offering tax breaks

-overlooking instances when they fail to adhere to regulations

-granting licenses to run phone, rail/ electricity networks

Question 31

How can you control MNCs through political influence

Answer 31

-by enforcing laws and regulations which businesses must stick to

-must work within the institutional framework of that country

Question 32

Meaning of instituional framework

Answer 32

system of formal laws, regulations that shape a country

Question 33

How can you control MNCs through legal control

Answer 33

-govs can enforce legislation & regulation to control operations of MNCs

-EU has the Competition Commission which protects producers and consumers from anti-competitive or unfair practices

Question 34

What are pressure groups

Answer 34

voluntary organisations that operate at all levels of society,

-aim to change other political or commercial decision-making

Question 35

How is Direct Action defined?

Answer 35

the use of demonstrations, protests, strikes, or even sabotage to achieve a political or social goal

Question 36

How is Naming and Shaming defined?

Answer 36

Publicising behaviour that is considered to be unethical as widely as possible and thereby threatening a business’s reputation

Question 37

How is Tax Avoidance defined?

Answer 37

Using legal method to reduce the amount of tax that a company pays

Question 38

How is Tax Evasion defined?

Answer 38

using illegal means to avoid paying taxes that are owed

Question 39

How can you control MNCs through pressure groups

Answer 39

-pressure groups can take action through; naming & shaming, direct action, lobbying

-e.g. they can publicise undesirable behaviour and thereby threaten to damage the image of the firm

Question 40

Give an example of a pressure group

Answer 40

Greenpeace

Question 41

How can Social Media be used to Control MNCs?

Answer 41

-stakeholders can freely share information about the unethical behaviour of MNCs -> ^ caution in how ethical businesses are - know they will get found out

-MNCs are forced to address the issues raised on social media as there is a high level of public exposure and information can spread rapidly

Question 42

What is reverse engineering

Answer 42

method of analysing a product’s design by taking it apart