Ch. 77 Transnational Corporations

Question 1

Four reasons for MNCs?

Answer 1

Economies of scale
Knowledge and innovation
Branding and marketing
Market and political power

Question 2

Four advantages of MNCs?

Answer 2

• International competitiveness for countries that are base of MNC (R+D, econ. growth, employment)
• Transfers of capital (FDI) to countries where MNCs develop
• Transfers of knowledge to developing countries
• Can create employment in poor countries and train workers. EV: often high paid jobs are given to workers from rich countries

Question 3

Five disadvantages of MNCs? (EV for 1 and 5)

Answer 3

DELLF

• Destruction of environment (EV: would happen anyway, MNCs often are more efficient so effect is less)
• Exploitation of poor countries
• Lack of accountability (especially in poor countries with weak governments)
• Loss of national identity
• Footloose capitalism (can move production anywhere, destroying and creating jobs to maximise profits) (EV: exploits comp. adv.)

Question 4

4 ways MNCs exploit poor countries and one EV?

Answer 4

• lowest wages possible
• employ child labour
• pay minimal tax
• poor working conditions
• take resources with minimal compensation
• profit repatriation

EV: not all, only some

Question 5

What is corporate social responsibility and EV?

Answer 5

One board member has the job to draw up aims for the company so it behaves responsibly.

EV: aims are often set too low and therefore and ineffective

Question 6

Define TNC/MNC?

Answer 6

A company with significant production operations in at least two countries.