4.4.1 - The Impacts Of MNCs

Question 1

Def multinational company

Answer 1

Is a business that operates in 2 or more countries

Question 2

Def FDI

Answer 2

Occurs when a business purchases non current assets in another country

Question 3

Def transfer pricing

Answer 3

Technique used by MNCs to adjust the internal prices paid by one branch of their operations to another as a way of minimising the total tax bill paid by the company

Question 4

6 impacts of MNCs on local economy

Answer 4

Local labour, wages, working conditions, job creation, local businesses and local communities and environment

Question 5

Positive impact of MNC of local labour

Answer 5

Western training methods making local workforce more productive/ employable

Question 6

Negative impacts of MNC of local labour

Answer 6

Attract over qualified people stripping local businesses of skilled staff

Question 7

Positive impact of MNC of wages

Answer 7

MNCs usually lay higher wages than local firms, improving standard of living

Question 8

Negative impact of MNCs of wages

Answer 8

Some locals may feel bigger about being paid less than westerners for the same job

Question 9

Positive impacts of MNC of working conditions

Answer 9

Have reputations to fulfil, providing above- average conditions

Question 10

Negative impacts of MNC of working conditions

Answer 10

Conditions aren’t up to western standards, workplace reality worse than paper theory

Question 11

Positive impact of MNC on job creation

Answer 11

Eg yum foods providing 20 000+ jobs

Question 12

Negative impacts of MNCs of job creation

Answer 12

Success of MNC at expense of local independent firms

Question 13

Positive impacts on local businesses

Answer 13

New factories creating hundreds of jobs, spending power in shops and restraints adding income to local areas boosting economy

Question 14

Weakness of MNCs on local businesses

Answer 14

Could provide direct competition to an existing business such as local rivals

Question 15

Positives of MNCs on local communities and environment

Answer 15

Raising stands of healthcare, communication and infrastructure

Question 16

Negative of MNCs on local communities and the environment

Answer 16

Distrusting social structure, indirectly bringing problems of crime that can be associated with new found wealth

Question 17

6 impacts of MNCs on national economy

Answer 17

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

Question 18

Positive of FDI flows

Answer 18

Injecting cash into national economy creates jobs injecting extra money into the economy

Question 19

Weakness of FDI flows

Answer 19

Lots of MNCs send profit back to their home country

Question 20

Weaknesses of balance of payments

Answer 20

Deficit caused by fall of value of the currency when countries import more than they export. When MNC decides to withdraw, further outflows from country damages balance of payments

Question 21

Strengths of technology and skills transfer

Answer 21

New ideas and methods to country, allowing economy to copy techniques improving efficiency, unlock economic development

Question 22

Strengths for consumers

Answer 22

They have more choice from both MNCs and domestic businesses

Question 23

Weaknesses of consumers

Answer 23

MNCs may drive domestic companies out of business, fairness of competition attached to entry of multinationals to foreign markets

Question 24

Strengths of business culture

Answer 24

Experience for host country to see how MNC operates and can adapt more professional and consistent business culture

Question 25

Strength of tax revenues and transfer pricing

Answer 25

MNCs can maximise profits where tax is lowest known as transfer pricing

Question 26

Weakness of tax revenues and transfer pricing

Answer 26

Pressure placed on host countries governments to keep tax rates low