Lecture 3 - Multinationals Flashcards
What is a multinational corporation?
Owns or controls production or service facilities in one or more countries other than its home country. MNCs are key players in international trade.
What is global presence?
Apple designs its products in the U.S., but they are manufactured in various countries, including China, India, and Vietnam
What is diversified operations?
Production to marketing and sales in different countries.
What is large-scale production?
Toyota manufacture cars in multiple countries, tapping into global supply chains to optimise costs and distribution.
What is influence on global trade?
Influencing global market trends, and driving globalisation.
What is transfer pricing?
Pricing of goods, services, and intellectual property transferred between different parts of an MNC located in different countries. MNCs use this strategy to allocate profits and reduce tax liabilities
What is profit shifting?
MNCs can move profits to low-tax jurisdictions, leading to tax avoidance controversies. e.g Google and Apple have been criticised for shifting profits to countries like Ireland with favourable tax policies.
Economic impact of multinationals?
Benefits to Host Countries
* Job Creation
* Volkswagen’s plant in Mexico employs thousands of workers,
boosting the local economy.
Technology Transfer and Infrastructure Development
* Intel’s semiconductor manufacturing plants in Vietnam and
Costa Rica have significantly advanced local technological
capabilities.
Social impact of multinationals?
Labor Exploitation
- MNCs been accused of exploiting workers in low- wage countries, where labor standards may be lower.
* Nike faced criticism in the 1990s for labor practices in its factories in
Southeast Asia.
Cultural Erosion
- Spread of MNCs can contribute to erosion of local cultures as global
brands replace traditional practices.
- The dominance of fast-food chains like McDonald’s has altered local diets in many countries.
Environmental impact of multinationals?
MNCs’ large-scale operations often lead to environmental degradation in
host countries.
* Shell’s oil extraction activities in Nigeria have caused significant environmental damage in the Niger Delta.
Emerging markets future trend in multinationals and international trade
MNCs are increasingly focusing on emerging markets such
as China, India, and Brazil due to their growing consumer
base and untapped resources.
* PepsiCo’s expansion in India reflects its strategy to tap
into a growing middle-class market.
Impact of technology on multinationals?
Automation, artificial intelligence, and blockchain are transforming MNC supply chains, enhancing efficiency and transparency in trade.
* IBM uses blockchain technology to streamline supply chains and reduce fraud in international trade.
