Global Industries 4.4 Flashcards
How do MNCs create local labour/ job creation?
They have the funds to train locals and provide full time jobs. They can also provide them with a stable income
How do MNCs lead to higher wages?
When MNCs arrive, they will demand large amounts of labour which pushes up the wage rate
How can MNCs provide working conditions?
Working conditions are likely to be favourable because they have the profits to be able to invest in better facilities etc
How many third party businesses in the local area benefit?
When MNCs arrive, they may look for new suppliers in the local area, increasing their demand. If also raises incomes of workers meaning they can spend more in the local area.
How can third party businesses be worse off when MNCs arrive in the local area?
Local businesses may become worse off by losing employees. This can harm the revenue and income of locals
How do MNCs help the local community and the environment?
MNCs have the profits to be able to spend on building local infrastructure such as roads and buildings.
They also provide large amounts of corp tax the govt which can also be spent on development
3 main ways in which FDI flows can significantly benefit an economy?
When a foreign firm invests into another country this could:
1. increase employment (directly and indirectly) increasing national income
2. Reduced national debt from money received by FDI and tax revenue.
3. Increased tax revenue to spend on development
How do MNCs benefit the balance of payments in an economy?
Initially, FDI flows improve the BOP. Then, when the MNCs export abroad, this could also improve the trade of goods and services
What is the Horizontal transfer of knowledge?
This is the transfer of knowledge in the same industry
What is the difference between vertical forwards transfer of knowledge and vertical backwards?
A backward transfer is the transfer of knowledge to local businesses or suppliers. A forward transfer is when businesses or suppliers buy from MNCs in the host country
What is reverse engineering?
Some rivals may analyse a competitors products closely. This means that they can identify any new features that may be worth copying.
What are 4 ways consumers in the national economy benefit from MNCs?
- More choice
- Lower prices
- Improved quality of goods
- Better living standards
How may employees who work for MNCs benefit in the long run?
They have gained knowledge and skills. This means in the LR, they could set up their own businesses etc
What is transfer pricing?
This is when an MNC may sell its product made in country A to a country with a lower tax rate such as country B. This could lead to higher profits due to higher net profit
What is a conflict between shareholders and owners of business ethics?
Shareholders have an aim to maximise profits. Being ethical however is very costly and so this can cause problems with shareholders if they get lower dividends
What is a conflict between employees and owners of business ethics?
Business ethics is costly which means that employees wages may be cut
What are working conditions in poor, developing countries like?
- Low wages
- Child labour
- poor health and safety
- lack of regulation
How may consumers react to poor working conditions?
- protests
- Publicly shaming them
- No longer buying their products
Why may setting up supply chains in low income, developing countries not be an issue?
- They have a lower cost of living and so lower wages may be sufficient for them
- working conditions have begun to be improved such as fairtrade, fair wages and laws
What negative impact do MNCs have on the environment?
- Low income countries may have less rules and regulation so carbon emissions and waste disposal may be higher, worsening living standards
What positive impact do MNCs have on the environment?
- Large amount of finance means that they can spend on improving environment
- Pressure from consumers means businesses may want to act more ethically
What are the 2 things that should be avoided when using marketing strategies in different countries?
- Misleading product labelling
- Inappropriate misleading labelling
What are 4 ways that MNCs can be controlled?
- political influence
- social media
- pressure groups
- legal control
How may political influence control MNCs?
- subsidies, grants, low corp tax
- becoming state-owned
How may legal controls influence MNCs?
- Tariffs and quotas will encourage the use of domestic materials
- Consumer and employee legislation
- Competition laws
- fines, laws on tax avoidance etc
How might pressure groups change the behaviours of MNCs?
Campaigns to target MNCs and striking for their unethical actions may essentially force the MNCS to change their actions
How might social media change the behaviours of MNCs?
Consumers can share information on an MNC to shame their behaviours which can spread to lots of people.
What might the control of MNCs depend on?
- The power of the government
- How much the MNC relies on that country
- The size of the MNC and if it is a mass market MNC
