4.4 - Global industries and Multinational Corporations Flashcards
what is a MNC
A business that is registered in one country but has manufacturing operations in different countries.
What factors have led to the growth of MNC’s
Globalisation and deregulation
Globalisation
The increasing integration of businesses culture and experience on a global scale.
Deregulation
The process of removing government controls from markets in order to increase competition.
MNC’s advantages
Job creation for local community, more competitive wages than local businesses, better working conditions than local businesses.
MNC’s disadvantages
May exploit local workers if regulation is weak or not enforced, establish production facilities where labour costs are low and pay low wages, may not create jobs for local workers as they relocate workers from their own country to work abroad.
Adv of MNC’s on local businesses
Boost local economy creating opportunities for local businesses, potential opportunity for joint ventures.
Dis of MNC’s on local businesses
Reduce supply of workers available to local businesses, produce at a lower cost so will be big competition for local businesses.
FDI - Foreign direct investment
The net transfer of funds to purchase physical capital, e.g. machinery and factories.
Impact of MNC’s on national economy.
Adv of FDI from MNC’s
Initial lump sum of money entering country boosting local economy.
If money is reinvested back into the local economy, it may help generate new jobs and boost economic growth.
Dis of FDI from MNC’s
Assets in host nation now owned by foreign business.
Balance of Payments
A statement showing all of the financial transactions between a country and the rest of the world.
How to MNC’s impact balance of payments
Improve as the FDI flows into the country will help improve their balance of payments.
Any goods exported for sale by the MNC will generate further inflows to a countrys balance of payments.
