FDI Flashcards
1
Q
benefits of FDI on host country (4)
A
- increases employment thus disposable income to spend on domestic firms. higher living standard and higher tax revenue for host country gov thus increase public service spending
- outsourcing local business thus keeping them in competition
- improved infrastructure e.g. roads improving transport for the whole community
- exchange of new technology and management techniques
- increases choice and variety for consumers
- technology transfer
- increased competition could increase efficiency and reduce costs/prices
2
Q
disadvantages of FDI on host country (4)
A
- profits leave the country and return to the home country
- companies may leave the country once incentives end = waste in gov investment
- top jobs go to foreign employees
- local business could be unable to compete and close
- exploitation of resources and workers
- jobs are low skilled and low paid so no job satisfaction
3
Q
benefits of FDI on home country (5)
A
- increase in HQ jobs which pay more thus encourages people to stay in education
- up-skilling due to reduced demand for low skill labour meaning more earn income which increase living standards and spending power
- improved BoP from inward flow of foreign earnings and demand created from demand for home country exports
- skills learnt abroad can improve efficiency and increase economic growth
- repatriation of profits to the UK increasing tax revenue, improving UK BoP
4
Q
disadvantages of FDI on home country
A
- reduction in manufacturing jobs which transfer to cheaper countries = unemployment and reduced spending power so less sales for domestic business and less tax revenue and increase in benefit payment
- increase need to training and education to redeploy workers which requires government funding thus opportunity costs
- investment being made abroad instead of UK will negatively effect BoP
5
Q
why locate in Scotland (6)
A
- good infrastructure
- government assistance through regional grants
- well educated and skilled labour force
- quality universities and research facilities
- english speaking is important for US firms
- weak trade unions
6
Q
benefits of multinationals (7)
A
- increased consumer choice
- maintain quality
- train workers
- create job opportunities
- introduce modern technology
- increase exports improving BoP
- R&D
7
Q
Disadvantages of multinationals (7)
A
- they are more interested in profits than the expense of consumers
- market dominance menas small firms can’t enter competition
- pollution
- child labour and poor working conditions
- repatriating profits to home country to they are not reinvested locally
- only giving low skilled jobs
- little loyalty and may use all natural recourse then leave
8
Q
what is a multinationl
A
an organisation with HQ in one country and who operates in 2 or more countries
9
Q
location factors MNC may consider when locating in developing countries (7)
A
- low wages
- low tax rates
- cheap and lots of land
- government grants
- less trade unions
- large population of available workers
- consumers with disposable income
10
Q
location factors MNC may consider when locating in Scotland (6)
A
- good education standards so high productivity
- english spoken which is the main business language
- political stability
- good infrastructure
- weak trade union power
- high consumer population
11
Q
advantages of becoming a MNC (5)
A
- increase customer sales thus profits
- economies of scale reducing production costs
- employ cheaper staff around the world and reduce costs
- gov grants given to locate in their country
- growth can spread the risk and reduce failure
12
Q
disadvantages of becoming a MNC (3)
A
- legislation will be different in all countries which means extra costs to comply with all
- cultural differences will mean that organisations have to be aware and research
- language and time zone barriers reduces reaction to external factors
