Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

A LEVEL BUSINESS > Paper 1- Theme 4.4- Global industries and MNCs > Flashcards

Paper 1- Theme 4.4- Global industries and MNCs Flashcards

1
Q

define MNC

A

a multinational company is a business that has operations in more than one country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

characteristic of MNC

A
  • multi site and multi product
  • heavy investment into R&D
  • global brands
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Positive impact of MNCs on the local economy

A
  • job opportunities
  • high wages and better working conditions as they have brand image to protect
  • investment into local community and infrastructure
  • transfer of developed skills (upskilling) to other business through training workers
  • local community have greater spending power
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Negative impact of MNCs on the local economy

A
  • inflate wages for local business
  • small local businesses can’t compete and will lose sales
  • depletion of local resources & pollution
  • loss of supply of skilled workers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Impact of MNCs on the national economy

A
  • Flows of FDI
  • Balance of payments
  • Technology and skills transfer
  • Impact on Consumers
  • Impact on Business culture
  • Tax revenue and transfer pricing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define FDI

A

-money invested by an MNC into a host economy in order to set up operations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Drawbacks of FDI

A

-profits and investment may be sent back to domestic economy (repatriate)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the balance of payments

What is a surplus and a deficit

A

a record of a country’s trade with the rest of the world

surplus= exports are greater than imports

deficit= imports are greater than exports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Positive and negative impact of MNCs on a country’s balance of payments

A

POSITIVE

  • FDI improves the BoP
  • sales that the MNC make represents an inward flow of cash and increases exports

NEGATIVE
-materials and services imported by MNC represents an outward flow of cash and adds to imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Impact of MNCs on national economy: technology and skills transfer

A
  • new technologies and skills introduced to host economy and to domestic companies
  • improve productivity of whole host economy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Positive and Negative impact of MNCs on consumers

A

POSITIVE

  • wider choice
  • access to global brands
  • better quality products
  • lower prices (EoS)

NEGATIVE

  • local domestic business may be lost- loss of cultured products and services
  • exploit customers by high prices due to desirability of premium global brands
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

positive and negative impact of MNCs on business culture

A

POSITIVES
- encourage efficiency

NEGATIVES

  • traditional culture diluted
  • lack of ethical practice may rub off onto other firms
  • lead to more aggressive, profit driven firms adopting the MNC approach and disregarding tradition, sustainability, ethics
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

describe transfer pricing

A

DEFINITION
-a way MNCs can minimise their tax liabilities by transferring their profits from high-tax to low-tax countries

  • MNCs sell their own goods at a low price to one of their own set ups in a low tax country, in order to move profits
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

negative impact of transfer pricing on national economy

A
  • reduced amount of tax reinvested back into the country
    —> minimises the positive effect that this investment could have in developing countries (e.g. Shell has 10x the GDP of kenya, so transfer pricing means Kenya may miss out on a large % of revenue from their tax)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

define ethics

A

ethics are moral principles that underpin business decision making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

define stakeholder conflict

A

-needs of different shareholders may conflict and so an action may benefit one group but impact another group negatively

17
Q

Examples of stakeholders

A 
customers
employees
suppliers
banks
shareholders
community
18
Q

describe the stakeholder concept

A

Friedman suggested that the only concern should be to use resources available as efficiently as possible to maximise profit, as this will benefit the whole society

19
Q

Positives and negatives of ethical behaviour

A

POSITIVES

  • USP
  • higher employee motivation
  • better reputation so easier to attract investment and to recruit
  • modern social trend of higher demand for ethical products (consumerism)

NEGATIVES

  • expectation built up (pressure to maintain)
  • clash with shareholders (due to increased costs)
20
Q

State the common ethical issues with MNCS

A

• pay and working conditions - less established legislations can be exploited (pay and conditions legislation is weaker in less developed countries)

• environmental impact
> high emmisions
> unsustainable waste disposal

• supply chain - any unethical practice in the supply chain makes the MNC unethical

  • sweatshops
  • child labour
  • ignoring health and safety, and basic workers rights

• marketing
> misleading marketing - criminal act to make false statements about a product (includes labelling, price, quantity, ingredients, health claims)

> inappropriate promotional activities

  • promoting directly to children
  • aimed promotion at cultures or religions
21
Q

why must the activities of MNS be controlled?

A
  • lack of/ fickle commitment to host country (a footloose company)
  • so large so may have more power over government (may persuade them to make decisions in the MNC’s best interests)
  • reduce environmental damage (e.g. unsustainable resource depletion)
  • help domestic businesses compete (protectionsm)
  • limit cultural erosion
  • protect against exploitation rand abuse of power over workers and other smaller businesses
22
Q

4 ways that MNS can be controlled

A
  • political influences
  • government legislation
  • pressure groups
  • social media
23
Q

define political influences

A

actions taken by the government to try and influence the behaviour of business and their customers

24
Q

describe how political influence can control MNCs

e.g.

A
  • MNCs can lobby with governments (attempt to influence them to create new legislation in favour of the MNC)
  • governments can apply pressure to MNCs, forcing change :
  • protectionism (include subsidiaries and trade initiatives)
  • trade blocs
  • requirement to form a joint venture (like in China)
  • trade delegations (government officials visit companies in other countries and attempt to sell to them)
25
Q

advantages of politically controlling MNCS

A
  • large powerful organisation controlling them
  • can create business relationships or manage/ end current ones
  • can lead to elected officials challenge MNCs on problems the general public have- everyones idea is considered
26
Q

disadvantages of politically controlling MNCS

A
  • can be difficult if MNC has more power than government
  • may allow for corruption to occur easier
  • controlling MNC may limit innovation and industry development in country
27
Q

describe how legislation can control MNCs

e.g.

A
  • governments introducing new laws that affect the operations of MNCs
  • laws apply to all MNCs
  • labour laws (conditions, min wages)
  • environmental laws (emissions, sustainability, waste disposal)
  • competition laws (may reduce takeover opportunity and prevent anti competitive pricing from market leaders
  • promotional laws (unethical marketing and inaccurate product descriptions
28
Q

advantage of legislation controlling MNCs

A
  • it is the law for all business to follow these rules, so not abiding will lead to punishment
  • may lead to improved drive for efficiency in market
  • protects consumers, environment and predatory attempts on other businesses
29
Q

disadvantages of legislation controlling MNCs

A
  • business may relocate to different country with more suitable legislation (fickle commitment)
  • legislation is harder to enforce in smaller countries
30
Q

define pressure groups

A

an organisation who organisations that fight to influence the actions of others, for the good of a particular cause

31
Q

describe how pressure groups can control MNCs

A
  • use direct and indirect action to influence governments and MNCs to change behaviour
  • aim to change legislation or company operations or change public opinion
32
Q

define direct and indirect action and examples of how these can be used to control MNCS

A

DIRECT: where a group focuses directly on changing policies and bringing about action

  • protest
  • boycott
  • lobbying (attempt to influence legislation)

INDIRECT: where a group persuades others to act against a cause

  • adverts
  • publicity
  • petitions
33
Q

1 strength 1 weakness of pressure groups controlling MNCs

A

+ gathers all passionate, committed people together to fight same cause

X - direct action may lead to violence and different outsider perception of the true aim

34
Q

define social media as a way to control MNCs

A

the use of virtual communities on social network sites to communicate about and highlight the behaviour of MNCs

35
Q

describe how social media can be seen as way to control MNCs

A
  • can make ethical issues viral (using a sharing culture) causing major PR disaster if unresolved quickly
  • aim to reach wider audience of different demographic to allow it to spread quicker
36
Q

2 Strengths of using social media to control MNCs

A

+ viral spread, can generate momentum behind the cause quickly
+ can be seen by all interested parties (government, MNC representatives, others who believe in same cause)

37
Q

2 Weaknesses of using social media to control MNCs

A

X - can’t control message that is being spread
X - MNCs may see off unwanted attention through strong brand image, loyal customer base, finance available and even through their own influence on politics

38
Q

Impact of social media on MNCs generally

A

+ allow for immediate customer service

+ improve brand image and emotional branding (brand has a persona online)

+ cost efficient way to gain awareness

X can build momentum behind consumer action

X can be at risk of false information spreading

X business operation are fully transparent- may lead to controlling measures from pressure groups or government

A LEVEL BUSINESS (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions