4.4 Global Industries and Companies Flashcards
Key Features of a Multinational Company
High assets value and turnover
Network of Branches
Rapid Growth
Use of technology
Management Skills
Advertising spend
Key reasons for MNC growth
Operate closer to target international markets- logistical costs
Gain access to lower costs of production- outsourcing and offshoring production
Avoid protectionism- an MNC will avoid tariffs and import quotas
How do multinationals provide FDI?
Creates a direct, stable and long lasting link between economies
Encourages transfer of technology and know-how between countries so that a country can develop faster
Positive effects of MNCs on countries
Creates employment
Increases skills base
Increased standard of living
Raises countries profile
Improves BOP
Improved infrastructure
Negative effects of MNCs on overseas countries
Profit leakage
Low paid jobs
Interfere with politics of country
Poor health and safety
Increased urbanisation
Widens poverty gap
Ethical Business behaviour
Ethics are moral guidelines which govern good behaviour
Regarded as good business practice
Ethical principles and standards in business define acceptable conduct in business and should underpin how management make decisions
Issues related to multinationals and ethics
Pay and working conditions
Environmental damage
Exploitation of labour
Inappropriate marketing claims
Stakeholder conflicts
Advantages of ethical behaviour
Higher revenues – demand from positive
consumer support
Improved brand and business awareness and recognition
Better employee motivation and recruitment
New sources of finance – e.g. from ethical investors
Disadvantages of behaving ethically
Higher costs- sourcing from fair trade suppliers
High overheads- training and communication of ethical policy
A danger of building up false expectations
Corporate Social Responsibility CSR
The extent to which a business addresses the concerns and obligations to its wider stakeholders
The actions a business takes over and above minimum required law in addressing needs and wants
REFERS TO A BUSINESS CONSIDERING TAKING RESPONSIBILITY FOR ITS EFFECTS ON ENVIRONMENT AND IMPACT ON SOCIAL WELFARE
Human rights indicators
Focuses on how well does the company perform on human rights issues
Does it use child labour
Does it discriminate
Does it operate in countries with poor human rights
Product Responsibility
Are their health and safety issues
After sales care
Advertising fair and true
Does a company manage its consumers and suppliers information appropriately
Environmental Responsibility
Amount of energy used
Amount of pesticides used
Waste
Pollution
Recycling
Fines for failure to comply with environmental legislation
Why do MNCs need to be controlled?
Prevent abuse of market power
Ensure that environmental damage is reduced
Ensure that MNCs pay fair amount of tax
Protect right of workers
Ensure MNCs behave ethically
How can MNCs be controlled?
Legal challenges/rulings/ court cases brought by governments against MNCs
Campaigns by pressure groups
Adverse media coverage that mobilises public opinions
Use of social networks to organise a boycott that could hit sales
