Impacts of TNCs Flashcards
disadvantages
They are a great environmental threat. They often use non-renewable resources, pollute the environment, have a strong reputation for dumping waste and are typically not very careful when using their resources
They can push local firms out of business. Giant multinationals use the scale of developing economies to push the local firms out of their business.
They are willing to gain ridiculous profits at any cost. These companies are able to realize tremendous profits and do not share their wealth. For example, these organizations that have manufacturing plants in China, where wages are very low, do not increase worker salaries when actually they have very huge amounts of extra revenues.
Disadvantage 2
They might exploit the workforce. These corporations are not well-known for treating people fairly and are instead known for ignoring rules and regulations, as well as turning a blind eye to injustice in the workplace. They are put into the spotlight for outsourcing to the lowest bidders and for skimping on quality. They are not known for having what smaller businesses have—the “human” touch. Many of them are even found exploiting workers and natural resources without considering the economic well- being of any country.
They will shut down their operations and move to a new location if the cost of production is cheaper elsewhere.
The profits from the production of goods and services return back to the country of origin or TNC.
Advantage
Their size benefits consumers. The operational size and scale of these corporations can give them economies of scale, lower average costs and prices for consumers. This is particularly important to industries that carry extremely high fixed costs, such as car manufacturers and airlines.
They can help a country in many ways. Multinational corporations have the ability to bring advanced technology to poorer countries, while bringing low-cost products to the wealthier ones.
They adhere to the best brand standards. This is one of the best qualities of these corporations. For example, McDonalds is still McDonalds wherever it is operating in the world. There is a standard to which this restaurant chain is expected to adhere. This builds trust and confidence among consumers, which is then converted to consumer loyalty.
Advantage 2
They help improve standard of living. Multinational corporations have the capability to improve the world’s standard of living, providing people with access of quality products regardless of the place.
They can cause a multiplier effect. This is a situation where an initial injection of investment or capital into an economy in turn creates additional income by, for example, increasing employment, wages, spending and tax revenues. One simple example, is the introduction of a TNC into the area will encourage the setting up of cafes to support the workers.
