global industries + companies Flashcards
what is a multinational company
is one that has branches or manufacturing plants in several countries
what are the areas that MNC have impact on in the local economy
employment
local businesses
local communities + the environment
(employment) positive and negative impact of MNC on local labour
P - western training methods may make the local workforce more productive/employable
N - western employers may attract over-qualified people and possibly strip local businesses and public services of skilled staff
(employment) positive and negative impact of MNC on wages
P - MNC usually pay higher wage rates than local firms, improving living standards
N - some locals may feel bitter that they are paid less than westerners for doing exactly the same job
(employment) positive and negative impact of MNC on Working conditions
P - MNC have multinational reputations to maintain, so they will tend to provide above - average conditions
N - Conditions may be above average but still shocking to westerners, there paper policies may not reflect to reality
(employment) positive and negative impact of MNC on Job creation
P - high employment in MNC locations
N - the success of MNC may be at the expense of local independent firms.
Impact of MNC - local businesses
Its most likely positive, as it creates hundreds of jobs that will look to local businesses for supplies, increase spending power in local shops/restaurants and will add income to the area that local entrepreneurs can exploit.
However the MNC can become direct competition
Impact of MNC - local communities and environment
there are both examples of MNC investing in local communities therefore improving the standards of living (healthcare education infrastructure) but also examples of MNC who have damaged the local communities like brining crime due to newly found wealth.
There are many examples or MNC ruining the local environment, but in lots of cases local businesses are just as (and sometimes more) guilty of causing environmental damage as they don’t have a global reputation/standard to live up.
the 6 impacts of MNC on the national economy
- FDI flows
- balance of payments
- technology skills transfer
- consumers
- business culture
- tax revenues and transfer pricing
(national economy) Impact of MNC - FDI flows
MNC are injecting cash into the national economy when they invest directly into other countries. that cash creates jobs and extra money for local economies.
A lot of the time however, profit generated will likely be sent out of that country back to MNC home.
FDI - foreign direct investment meaning
occurs when a business purchases non-current assets in another country
(national economy) Impact of MNC - balance of payment
countries that import more than they export run a current account deficit, likely leading to a fall in the value of the currency, creating a risk of inflation. However if they attract FDI, the inflow of cash from MNC cancels out current account deficit.
It only opposes an issue when the MNC decides to withdraw its FDI, leaving the country further outflows, its especially an issue when MNC withdraw from smaller economies
(national economy) Impact of MNC - technology and skills transfer
MNC will introduce new ideas and methods into the new country, allowing the local economy to copy techniques and improve efficiency of local businesses. Access to new tech can be a key to economic development and skills developing among local workforces
(national economy) Impact of MNC - consumers
consumers gain more choice when an MNC enters a new country. However the competition of MNC can drive local firms out of business
(national economy) Impact of MNC - business culture
MNC are run professionally and generally in a consistent way, which may not be found in host countries. Experience of seeing how MNC operates can transfer to these local firms, and domestic suppliers to MNC are likely to adapt the business culture
