4.4.1 The impact of MNCs

Question 1

Impact of MNCs on the national economy:

Answer 1

FDI flows
balance of payments
technology and skills transfer
consumers
business culture
tax revenues and transfer pricing

Question 2

Impact of MNCs on the local economy:

Answer 2

local labour, wages, working conditions and job creation

local businesses o the local community and environment

Question 3

define MNC

Answer 3

A multinational corporation is a business that, although operated from one country, has facilities and assets in more than one country

Question 4

characteristics of MNCs

Answer 4

Dominant players in the market
Complex structures, multi site and multi product
Grown through organic and inorganic growth
Heavy investment in R&D
Globally recognised brands

Question 5

Impact of MNCs on the local economy

positive

Answer 5

Create jobs with better opportunities e.g. training, shared expertise, full-time, promotions
Push wages up improving overall standard of living
Skills development
Better working conditions as businesses look to maintain their own reputation

Provide support services e.g. building of factories, cleaning, raw materials/components
Improved infrastructure
Higher spending power from local community increasing demand for other businesses e.g. shops

Higher employment, less poverty, lower crime
Improved infrastructure e.g. hospitals and roads
Improved education
Increased funds for local governments from the payment of taxes
Projects to improve environmental standards

Question 6

impact of MNCs on the local economy

negative

Answer 6

Creates wage inflation for local businesses
May look to exploit cheap workers
Bring in own managers only offering low skilled jobs to workers
Working conditions may be poor
Lack of union representation

Increase costs e.g. workers, ancillary services
Loss of talented workers
Loss of sales from substitute products

Environmental disasters
Loss of traditions and cultures
Damage to traditional industries e.g. land for farmers

Question 7

Impact of MNCs on the national economy

positive

Answer 7

An injection into the host economy

• Economic growth (GDP)
• Generation of revenue for the local government
• Job creation and related wealth
• Technology and skills transfer
• wider choice of goods and services
• better quality products
• Taxes paid within the host country will boost the governments revenue allowing for greater spending on public services such as health care and infrastructure
• business culture
• FDI flow

Question 8

whos does MNCs effect

Answer 8

employees 
consumers
local businesses 
local community 
government

Question 9

effect of MNCs on consumers

Answer 9

• prices cheaper
• increased choice of products
  improved quality
• less local competition
• price leadership

Question 10

effect on MNCs on local business

Answer 10

• increased consumer spending
• opportunity’s
• skills transfer
• more competition
• competition for employees
• increased wage level

Question 11

effect of MNCs on local community

Answer 11

• more jobs , less unemployed , less homelessness , better health
• better infrastructure
• environmental impacts eg pollution
• impact on culture and tradition

Question 12

effect of MNCs on government

Answer 12

• less unemployed
• tax returns on wages , VAT and corporate tax on profits

-tax avoidance