4.4 - Multinational corporations Flashcards
What is a multinational corporation?
An MNC is a business that has branches or departments in more than one country. It’s head office will be based in one country and it will coordinate its global activities from there.
What are the positive effects that MNCs have on local economies?
- MNCs can create jobs, increasing the employment of local labour
- Increased local employment can improve the local standard of living
- Local firms can benefit from MNCs, since the increase in wages will make people spend more
What are the negative effects that MNCs have on local economies?
- If MNCs bring their own labour from other countries this could put a strain on the local community and its resources, the increased demand could increase prices
-Increaed competition for staff could force up local wages
- MNCs might extract large quantities of unsustainable natural resources
What are the positive effects that MNCs have on national economies?
- MNCs can create large FDI flows, the flow of money in and out of a country’s economy from FDI
- An MNC may train local new staff with new skills or introduce them to new tech
- The nations level of entrepreneurship will increase.
What are the negative effects that MNCs have on national economies?
- MNCs can cause money to leave the national economy, which can have a negative impact on the host nations balance of payments
- MNCs can force domestic local businesses out of business
What are the possible conflicts an MNC could have with their stakeholders?
- Many businesses have an ethical code to guide the decisions and behaviours of its employees according to firms values. However, an MNCs code can often lead to conflicts between stakeholders.
An MNCs ethical code may state to pay fair wages, however shareholders may not like this decision since it could reduce the businesses profits.
What impact might MNCs have on the environment?
- Consumers are becoming increasingly aware of the environmental impacts of MNCs operating in less developed counties, which puts MNCs under increasing pressure to act ethically and reduce their environmental impacts.
Why might an MNC need to adapt its marketing to remain ethical?
- An MNCs marketing should be ethical in all the countries it operates in, which may mean that MNCs have to adapt their marketing for different markets
- MNCs might have to adapt their marketing to avoid innapropriate promotional activities which could be innapropriate and disrespectful in certain countries
What are all of the things that could try to influence and control MNCs?
- Governments
- Pressure groups
- Social media
How can governments try to influence the behaviour of MNCs?
Governments often try to control the activities of MNCs to make sure the MNC doesn’t expolit stakeholders or have negative effects on the economy.
This can be through legal control or political influences.
Which legislation and regulations can be used by the government to control MNCs?
- Governments can change tarriffs and quotas
- Some employment laws prevents MNCs from exploiting stakeholders
- Governments can introduce laws on local content provisions
What are the political influences governments can have on MNCs?
- Governments can use policies to try to persuade MNCs to make particular decisions
- Countries that offer low tax rates could come under criticism from other governments as they may be stealing tax revenue from other nations.
Why might pressure groups want to change the behaviour of MNCs?
Pressure groups are groups of people that want to change government policies or the behaviour of businesses.
Pressure groups may name and shame specific MNCs which they think are unethical.
How might social media influence MNCs?
Individuals and pressure groups can use social media to infleunce and MNCs behaviour.
Social media allows users to quickly share information about MNCs unethical actions.
