Global Industries 4.4

Question 1

How do MNCs create local labour/ job creation?

Answer 1

They have the funds to train locals and provide full time jobs. They can also provide them with a stable income

Question 2

How do MNCs lead to higher wages?

Answer 2

When MNCs arrive, they will demand large amounts of labour which pushes up the wage rate

Question 3

How can MNCs provide working conditions?

Answer 3

Working conditions are likely to be favourable because they have the profits to be able to invest in better facilities etc

Question 4

How many third party businesses in the local area benefit?

Answer 4

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.

Question 5

How can third party businesses be worse off when MNCs arrive in the local area?

Answer 5

Local businesses may become worse off by losing employees. This can harm the revenue and income of locals

Question 6

How do MNCs help the local community and the environment?

Answer 6

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

Question 7

3 main ways in which FDI flows can significantly benefit an economy?

Answer 7

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

Question 8

How do MNCs benefit the balance of payments in an economy?

Answer 8

Initially, FDI flows improve the BOP. Then, when the MNCs export abroad, this could also improve the trade of goods and services

Question 9

What is the Horizontal transfer of knowledge?

Answer 9

This is the transfer of knowledge in the same industry

Question 10

What is the difference between vertical forwards transfer of knowledge and vertical backwards?

Answer 10

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

Question 11

What is reverse engineering?

Answer 11

Some rivals may analyse a competitors products closely. This means that they can identify any new features that may be worth copying.

Question 12

What are 4 ways consumers in the national economy benefit from MNCs?

Answer 12

• More choice
• Lower prices
• Improved quality of goods
• Better living standards

Question 13

How may employees who work for MNCs benefit in the long run?

Answer 13

They have gained knowledge and skills. This means in the LR, they could set up their own businesses etc

Question 14

What is transfer pricing?

Answer 14

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

Question 15

What is a conflict between shareholders and owners of business ethics?

Answer 15

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

Question 16

What is a conflict between employees and owners of business ethics?

Answer 16

Business ethics is costly which means that employees wages may be cut

Question 17

What are working conditions in poor, developing countries like?

Answer 17

• Low wages
• Child labour
• poor health and safety
• lack of regulation

Question 18

How may consumers react to poor working conditions?

Answer 18

• protests
• Publicly shaming them
• No longer buying their products

Question 19

Why may setting up supply chains in low income, developing countries not be an issue?

Answer 19

• 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

Question 20

What negative impact do MNCs have on the environment?

Answer 20

• Low income countries may have less rules and regulation so carbon emissions and waste disposal may be higher, worsening living standards

Question 21

What positive impact do MNCs have on the environment?

Answer 21

• Large amount of finance means that they can spend on improving environment
• Pressure from consumers means businesses may want to act more ethically

Question 22

What are the 2 things that should be avoided when using marketing strategies in different countries?

Answer 22

• Misleading product labelling
• Inappropriate misleading labelling

Question 23

What are 4 ways that MNCs can be controlled?

Answer 23

• political influence
• social media
• pressure groups
• legal control

Question 24

How may political influence control MNCs?

Answer 24

• subsidies, grants, low corp tax
• becoming state-owned

Question 25

How may legal controls influence MNCs?

Answer 25

• Tariffs and quotas will encourage the use of domestic materials
• Consumer and employee legislation
• Competition laws
• fines, laws on tax avoidance etc

Question 26

How might pressure groups change the behaviours of MNCs?

Answer 26

Campaigns to target MNCs and striking for their unethical actions may essentially force the MNCS to change their actions

Question 27

How might social media change the behaviours of MNCs?

Answer 27

Consumers can share information on an MNC to shame their behaviours which can spread to lots of people.

Question 28

What might the control of MNCs depend on?

Answer 28

• 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