4.4.1 - The impact of MNC's Flashcards
What is an MNC
- A MNC is a multinational corporation, a business which operates in more than one country. For example COCA COLA producing in over 200 countries
What are some positive effect of MNC’s
- Creates Employment
- Increases skills base
- Increase standard of living
- Raises country’s profile
- Improves balance of payments
- Improves infrastructure
How do MNC’s create employment
- There are jobs available for local people, thus reducing numbers of unemployed and the resultant drain on local resources
How do MNC’s increase skills base
Many MNCs operate training schemes for local people to learn how to use machinery. Such skills also attract other firms to the country
How do MNC’s increase standard of living
An increase in earnings increases taxes paid within the country and gives more money to spend on services
How do MNC’s raise a country’s profile
MNCs plan their moves carefully. This is known worldwide and the movement into a particular country is a statement about its pro-business environment and political stability.
How do MNC’s improve balance of payments
Many goods made by MNCs are exported to other nearby countries. This increases amount of money earned by the country.
How do MNC’s improve infrastructure
MNCs often improve communication links within a country, e.g. road, rail and port facilities are updated and expanded. This benefits the country.
What are the negative effects of MNC’S
- Profit leakage
- Low paid jobs
- MNC’s pull out quickly
- Poor safety record
- Increase urbanization
- Widens poverty gap
How do MNC’s cause profit leakage
Profits from factories or hotels run by the MNC go to the country in which the head office of the company is found.
How do MNC’s cause low paid jobs
Mainly low paid jobs are provided for local people. Higher paid managerial jobs go to workers brought in from the head office country.
How could MNC’s pull out quickly
In times of recession/low sales, jobs of workers in the head office country are protected for longer than in other factories.
How do MNC’s have poor safety records
Poorer countries often have poorer safety standards, and governments are willing to turn a blind eye to breaking the standards that exist.
How do MNC’s increase urbanisation
Most jobs created by MNCs are usually found in or close to urban areas. Hope of securing these jobs attracts more people from rural areas to cities.
How do MNC’s increase poverty gap
Although wages are low in factories, they are higher than elsewhere. This increases the cost of living for all, as prices of goods rise.
What are MNC’s and FDI flows
- FDI is foreign direct investment
- When a multinational invests in a host country, the scale of the investment (given the size of the firms) is likely to be significant.
- Governments will often offer incentives to firms in the form of grants, subsidies and tax breaks to attract investment into their countries.
What are MNC’s and technology and skills transfer
- MNCs will bring with them technology and production methods that are probably new to the host country and a lot can therefore be learnt from these techniques.
- Workers will be trained to use the new technology and production techniques and domestic firms will see the benefits of the new technology. This process is known as technology transfer.
What are MNC’s and the impact they have on consumers
If the multinational manufactures for domestic markets as well as for export, then the local population will gain from a wider choice of goods and services and at a price possibly lower than imported substitutes.
Consumers get the benefit of new products and services from the more industrialized nations
What are MNC’s and the impact on business culture
- Cultural and social impact - large numbers of foreign businesses can dilute local customs and traditional cultures.
