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.
