4.4.3 Controlling MNCs

Question 1

what are state owned enterprise?

Answer 1

A State Owned Enterprise (SOE) is a body formed by the government through legal means so that it can take part in activities of a commercial nature.

Question 2

what are problem with SOEs?

Answer 2

• might be favoured by powerful politicians. (corruption)
• State owned operations may soak up the capital that other firms might better employ. This is because politicians or regulators, rather than the market, deciding where funding should go.
• shareholders’ and other investors’ right may be reduced or ignored because they are not the true beneficiaries of the business. The actual beneficiaries may be with the politicians.
• Investment expenditure especially on research and development, may be ignored. With state ownership, there is likely to be less competitive pressure from other firms. As a result less incentive to undertake expensive research for a new product.

Question 3

what are beneficiaries?

Answer 3

Beneficiaries are the consumers of your products or services – they are the people or organisations directly using your products or services and benefiting from them.

Question 4

How can privately owned businesses be controlled?

Answer 4

-Tarris, courses, regulations and local content requirements can be used to protect domestic businesses from international competitors.
-Many countries even place, direct or indirect ownership restrictions on businesses that to be considered to be key thus political opposition prevented the Chinese state oil company from taking over a private US firm.
-Countries had also supported domestic industries through subsides or tax breaks

Question 5

Benefits of using political influence to control MNCs

Answer 5

• Can create, manage and end a business
• helps elected officials to challenge the power of private business and to address issues of concern, such as ethics and the environment

Question 6

Drawbacks of using political influence to control MNCs

Answer 6

• Facilitates corruption
• Entrenches inefficiencies, such as the misallocation of capital and lack of research and development

Question 7

Benefits of using laws to control MNCs

Answer 7

• Can be used to improve competition in the domestic market
• helps to check corporate power
• facilities consumer protection

Question 8

Drawbacks of using laws to control MNCs

Answer 8

• It is difficult to achieve consistent legal practice between countries, so businesses have an incentive to find the most friendly legal environment where the laws and tax policies are the best for them.
• It is relatively easy for Big footloose international firms to move to family environment and avoid treatment that they considered to be unfavourable to the business.
• Even where there is agreement over the laws, policies and standards, there are often not easy to enforce

Question 9

Benefits of using pressure groups and social media to control MNCs

Answer 9

-enlists committed people including volunteers
- Particularly where social media is involved activists can be enlisted, incredibly quick to engage in information, gathering or protest
-Raises issues that may otherwise not be public knowledge
-Alerts, politicians and authorities to issues of concern to the public

Question 10

Drawback of using pressure groups and social media to control MNCs

Answer 10

• Campaigns maybe ill, informed, or misguided
• When information goes “viral” It may be impossible for a pressure group to influence the message that is ultimately communicated
• Direct action can lead to violence or miscarriages of justice.

Question 11

Competition policy

Answer 11

Government policy that exists to promote competition and ensure that firms do not abuse their market power do not attempt to fix prices or use pricing strategies to drive our composition and do not collude against other producers or the consumer

Question 12

Direct action

Answer 12

The use of demonstrations, protests, strikes, or even sabotage to achieve a political or social goal

Question 13

Naming and shaming

Answer 13

Publicising behaviour that is considered to be unethical as wildly as possible, and thereby threatening a business’s reputation

Question 14

Pressure groups

Answer 14

Generally voluntary organisations that operate at all levels of society including international levels and aim to change either political or commercial decision making

Question 15

Tax avoidance

Answer 15

Using legal methods to reduce the amount of tax that a company pays

Question 16

Tax evasion

Answer 16

Using illegal means to avoid paying taxes that are owed

Question 17

What is lobbying?

Answer 17

Lobbying is when an individual or a group tries to persuade someone in Parliament to support a particular policy or campaign. Lobbying can be done in person, by sending letters and emails or via social media.