MHC's Flashcards
What is a multinational?
A company that operates in its home country as well as in other countries around the world
What are the reasons for being a multinational?
-Access to lower production costs
-Proximity to target international markets
-Access to larger target pool
-Avoidance of tariffs
What are the advantages to being a multinational?
-Efficiency = can reach target markets more easily, can access raw materials and cheaper labour costs
-Development = pay local taxes, pay higher wages to local labour force
-Employment = locals will know what the local market wants
-Innovation
What are the disadvantages of being a multinational?
-Increased local burden = different laws in different countries
-Increased tax compliance = different tax rates
-Public relations
-Political instability
Why have multinationals grown?
-Operate closer to target international markets
-Gaining access to lower costs of production
-Avoiding protectionism
What is FDI?
Investment of foreign money into domestic structures, equipment and businesses
-encourages transfer of technology allowing countries to develop
What are the positive effects of MHC’s?
-Creates employment
-Increases skills base
-Increased standard of living
-Improves a country’s image
-Improves balance of payments
-Improves infrastructure
What are the negative impacts of MHC’s?
-Profit leakage
-Low paid jobs
-Interfere in politics of country
-Poor health and safety
-Increased urbanisation
-Widens poverty gap
What are ethics?
Moral guidelines which govern good behaviour
-they are about what is right and what is wrong
What are the advantages of ethical behaviour?
-Motivates staff
-Attracts investors
-Improved brand awareness and recognition
-Higher revenues
What are the disadvantages of ethical behaviour?
-Higher costs
-Higher overhead costs e.g. training
-Danger of creating false expectations
What are the environmental considerations?
-Waste management
-Emissions
What are the supply chain considerations?
-Child labour
-Exploitation of labour
Why do MNC’s need to be controlled?
-Prevent abuse of market power
-Ensure environmental damage is reduced
-Ensure MNC’s pay a fair amount of tax
-Protect the rights of workers
-Ensure MNC’s behave ethically
How can governments control MHC’s?
-Laws and regulations
-Campaigns from pressure groups
-Media coverage to influence public opinions
-Boycotting
What is a pressure group?
Formed by concerned individuals to attempt to change the behaviour of a MHC
How can social media control pressure groups?
-Lobbying
-Viral marketing to affect reputation
-Boycotting
-Protesting to raise awareness
