The Impact Of MNCs Flashcards
What is a multinational corporation?
A firm that has its headquarters in one country and branches, manufacturing or assembly plants in others
What impact do MNCs have on local labour and job creation?
The unemployment rate decreases as more job opportunities arise and the employees also gain training and experience which benefits them for future jobs
What are the positive impacts of MNCs?
· Western training methods may make the local workforce more productive/employable
· MNCs usually pay higher wage rates than local firms
· MNCs have international reputations to maintain so they will provide above average conditions
· More job opportunities
What are the negative impacts of MNCs?
· Western employees may attract over qualified people stripping local businesses of skilled staff
· Some locals may be unhappy that they are paid less than westerners for doing the same job
· Conditions may be above average but still quite shocking for westerners
· The success of MNCs may be at the expense of local, independent firms
What are the impacts of MNCs on local firms?
· When MNCs set up in different countries, the demand for the local businesses could increase eg security services or delivery services
· MNCs aren’t beneficial for ‘competitors’ in the host country as the MNCs will be able to cut prices as a competitive advantage so the local businesses will either be outcompeted or sell to the MNC
What are the impact of MNCs on the local community and environment?
An MNC ignoring local green issues can backfire on their local and worldwide imagine, however these mistakes can give the MNCs incentives to be environmentally friendly in the future
What is the impact of MNCs on FDI flows
When an MNC invests money into expanding or production in another country the money is invested into land, infrastructure, recruiting and training staff - if the investment is successful then the subsidiary will make good profits but these may be sent back to the MNCs base country meaning the host country loses out financially long term
What is the impact of MNCs on the balance of payments?
If a country has a higher amount of imports than exports, it runs a current account deficit which is likely to push the value of a currency down creating a risk of inflation, FDI inflows would counter this
What is the impact of MNCs on business culture
Producers of raw materials will find professionalism within the MNC buying department which may rub off on them
