4.4 Global Industries and Companies (MNCs) Flashcards
What are 6 local impacts of MNCs?
1) job creation- establishment of a new factory or plant can create hundreds of jobs, brings opportunities to develop skills and growth as people may relocate to work at the factory. This growth in population may generate more demand for local businesses
2) wages and working conditions- increased demand for labour is likely to create more competition for skilled workers if unemployment is low. If supply doesn’t sufficiently increase to meet this demand wages and working conditions will rise i
3) local businesses- MNC’s supply chain is made up of smaller local businesses, creates new opportunities for entrepreneurs in that area
4) community and environment- likely to cause negative externalities eg. congestion, pollution, to counteract this they may invest money to enhance the local area eg.build parks, support local schools
5) infrastructure- MNC may invest in local utilities where the community and local businesses benefit
6) social enterprise- MNC may set up charities to support the local community to fulfil their social responsibility or develop a positive image in the area
What are 6 national impacts of MNCs?
1) FDI flows- invest huge amounts of capital into the country which leads to spending in the economy, creates jobs/increased income, lowers unemployment, lower national debt, increased tax revenue
2) balance of payments- initial FDI blow boosts balance of payments in economy bur MNC goods may be exported globally bringing in a second flow of money
3) technology and skills transfer- MNCs develop new technologies and processes in home nation. It also trains and develops workforces skills which will transfer into the foreign country and help with local industries competitiveness
4) consumers- increased competition means lower prices, more choice, improved quality, better living standards(wide range of good to meet their needs/make life more enjoyable)
5) culture- business culture will naturally transfer to local businesses eg.working practices
6) transfer pricing- MNC will ensure its selling its products through a country with the lowest tax levels, it sometimes operates across countries to avoid paying high tax which can have a negative impact on gov. tax revenue
Explain global ethics in relation to MNCs?
For MNCs there is greater pressure to act ethically but also more scope to break ethical codes of practice. They operate across nations where there are more discrepancies between laws, expectations, values and culture norms in that what’s considered ethically acceptable in one country may not be in another
What are 4 international stakeholder conflicts?
1) shareholders- seek the greatest return on their investment and profit maximisation, other interests may be sacrificed
2) customers- increasingly more conscious of where their products have come from as it isn’t always clear if products have come from sustainable/ethical sources, especially when produced abroad
3) communities- although MNCs bring employment they also bring eg.pollution, if not managed effectively it could cause bad publicity
4) Government- place pressure on MNCs to pay correct tax levels, invest in local communities, look after their staff
Explain pay and working conditions in relation to global ethics?
Ethical businesses should pay an acceptable wage/ a living wage, provide suitable working conditions eg. ventilation, number of breaks, human rights eg.no inhumane treatment/excessive working hours
Explain environmental considerations in relation to global ethics?
some legislation doesn’t exist in less economically developed countries eg. climate change act, there are no gov. pressure to report on greenhouse gas emissions, legislation on waste management. but managing these can incur costs which conflict with a profit motive
Explain supply chain considerations in relation to global ethics?
Components of raw materials may come from a wide variety of countries which makes it difficult to track where, with what and how products have been produced. It also makes it more difficult to be certain if workers haven’t been exploited somewhere down the supply chain. This makes it easier for MNCs to hide unethical behaviour
Explain marketing considerations in relation to global ethics?
Referring to promotion and negotiation, unethical marketing may include misleading labelling on packaging, false claims in advertising, uses of company finance to entertain potential customers and suppliers, giving gifts to customers and suppliers, using business connections with a personal/family tie
Explain political influences in relation to controlling MNCs?
Gov. policies eg.tariffs influence trade, gov. subsidies support home industries. The danger with political intervention is that it can open up opportunities for state corruption
Explain social media in relation to controlling MNCs?
Allows all stakeholder groups to access and share the actions/behaviours of companies. It creates a
Explain legal controls in relation to controlling MNCs?
Fill in
Explain pressure groups in relation to controlling MNCs?
Fill in
Explain legal controls in relation to controlling MNCs?
Fill in
Explain taxation policy in relation to controlling MNCs?
Fill in
