4.4 - Global Industries and Multinational Corporations Flashcards
What is a multinational corporation (MNC)?
A MNC is a business that is registered in once country but has manufacturing operations/outlets in different countries
What are the positive impacts of MNCs on employment, wages, and working conditions?
- MNCs lead to job creation for the local community
- MNCs may offer more competitive wages than local businesses
- MNCs may offer better working conditions than local businesses
What are the negative impacts of MNCs on employment, wages, and working conditions?
- MNCs may exploit local workers if employment regulation is weak or not enforced
- MNCs tend to establish production facilities in regions where labour costs are lower and pay relatively low wages
- MNCs may not create jobs for local workers as they may relocate workers from their own country to work abroad
What are the positive impacts of MNCs on local businesses?
- MNCs can help to boost the local economy, creating opportunities for local businesses
- If the population is benefiting from higher wages, they may spend more on local businesses products
- MNCs may utilise the services of local businesses
- There may be potential opportunities for joint ventures and partnerships with MNCs who seek to gain knowledge of the local market
- Local firms may learn new skills and production methods that allow them to become more efficient
What are the negative impacts of MNCs on local businesses?
- MNCs reduce the supply of workers available to local businesses if they offer better pay and working conditions
- If MNCs are able to produce at a lower cost and compete with local businesses, they may lose local customers
- If local businesses lose customers, this may also cause unemployment for workers of local businesses
What are the positive impacts of MNCs on the local community and the environment?
- Local residents may benefit from job opportunities and growth in the local economy
- MNCs often invest to improve infrastructure
- Better roads, transport, and access to water and electricity would help the local community as well as the MNC
- MNCs may have to pay taxes and business rates to local councils/authorities
- These funds may be reinvested back into the local community
- MNCs can establish charitable initiatives that have a positive effect on the local community
What are the negative impacts of MNCs on the local community and the environment?
- MNCs may cause damage to local habitats/environment during the production process
- MNCs may leave unsightly production facilities behind once they have extracted all of the resources and left the country
How do MNCs impact the national economy?
- FDI flows
- Balance of payments
- Technology and skills transfer
- Consumers
- Business culture
- Tax revenues and transfer pricing
How do MNCs impact FDI flows?
There will be an inflow of money into a country if a MNC decides to invest into a country through FDI
What are the advantages of FDI flows from MNCs?
- An initial lump sum of money that enters the country to pay for the reinvestment
- This is an injection into the circular flow of income and so will boost economic growth
What are the disadvantages of FDI flows from MNCs?
- Assets from the home country are now owned (or partly owned) by foreign businesses
- The local firms or individuals who have sold the asset, may not reinvest the money into the local economy but may move it abroad/offshore
How do MNCs impact a country’s Balance of Payments?
- The BoP is a statement showing all of the financial transactions between a country and the rest of the world
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