Theme 4 Flashcards
What is protectionism?
Protectionism is when a government seeks to protect domestic industries from foreign competition.
What are some protectionist measures?
- Tariffs
- Import quotas
- Other trade barriers such as government legislation and domestic subsidies
What is a tariff?
A tariff is a tax placed on imported goods from other countries.
What is the effect of tariffs on demand for products?
Tariffs help to shift demand for that product/service from foreign businesses to domestic businesses.
What is the tariff percentage on tennis rackets imported into the UK from China?
4.7%
What is one benefit of tariffs?
They protect infant industries so they can eventually become more competitive globally.
What is two drawbacks of tariffs?
Increases the cost of imported raw materials which may affect businesses that use these goods for production.
Reduces competition for domestic firms who may become more inefficient and produce poor quality products for their customers.
True or False: Tariffs can lead to an increase in government tax revenue.
True
What is an import quota?
A government imposed limit on the amount of a particular product allowed into the country
How do import quotas benefit domestic businesses?
They face less competition and benefit from a higher market share
Fill in the blank: Import quotas can reduce _______ and benefit the wider economy.
unemployment
How can higher prices from import quotas affect new businesses?
They may encourage new businesses to start up in the industry
True or False: Countries can easily change import quotas as market conditions change.
True
Why might foreign countries view quotas as less confrontational than tariffs?
Exporters can still sell their goods at a higher price in domestic markets, but a limited amount
What is a drawback of import quotas regarding product supply?
They limit the supply of a product, causing prices to rise
How can import quotas affect the efficiency of domestic firms over time?
They may become more inefficient due to reduced competition
What is the purpose of government legislation regarding imports?
To impose laws that restrict certain imports to protect customers and businesses
Give an example of government legislation that restricts imports.
Chicken from the US is banned in the UK due to health and safety reasons
What is a pro of government legislation on imports?
Domestic businesses can grow as competition is limited
What is a con of government legislation on imports?
Can face retaliation from other countries
What are domestic subsidies?
Payments given to domestic businesses to help lower their cost of production
Provide an example of a domestic subsidy.
The UK government providing subsidies to farmers post Brexit
What is a pro of domestic subsidies?
Reduced costs can lead to lower prices, making domestic firms more competitive
What is a con of domestic subsidies?
Businesses could become inefficient as they know their costs are subsidised
What is globalisation?
Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance.
What is trade liberalisation?
Trade liberalisation is the removal or reduction of barriers to trade between different countries.
What is dumping?
Dumping is when a country or company exports a product at a lower price than its domestic sale price.
What is one benefit of globalisation for businesses?
Allows businesses to increase their market size.
How does free trade benefit businesses?
Free trade helps businesses to reduce costs as imported raw materials and components can be sourced more cheaply.
What is a drawback of globalisation for domestic firms?
Domestic firms, particularly infant industries, may not be able to compete against international firms.
What is one effect of political change on globalisation?
Increased significance of global (transnational) companies.
How has transport and communication impacted globalisation?
Reduced cost of transport and communication.
What demographic change contributes to globalisation?
Growth of the global labour force.
Fill in the blank: _______ is when a country or company exports a product at a lower price than its domestic sale price.
Dumping
True or False: Trade liberalisation can lead to increased output for countries.
True
Fill in the blank: Trade liberalisation is the removal or reduction of barriers to _______.
trade
What advantage does globalisation offer in terms of economies of scale?
Countries can benefit from economies of scale due to increased output.
What political change can influence a country’s attitude to trade?
Changes in the government of a country
For example, China joined the World Trade Organisation in 2001, leading to a significant increase in exports.
What has reduced business costs and contributed to globalisation?
Economies of scale due to innovation in containerisation on large ships
This innovation has made transport more efficient.
How have technological advancements contributed to globalisation?
Improved connectivity between buyers and sellers via the internet and mobile technology
What is the significance of Foreign Direct Investment (FDI) in an economy?
It is important for job and wealth creation
FDI allows businesses to establish themselves in countries where they may face trade barriers.
How has migration affected globalisation?
It has increased globalisation by providing workers with more flexibility when looking for work due to better transportation and deregulation
For example, in 2022, the United Arab Emirates had the highest proportion of immigrants at 88%.
What has contributed to the growth of the global labour force?
Emerging economies such as India and China
More people in work means more income to spend on goods and services, boosting global demand.
What is one consequence of an increased supply of labour?
Falling wages, which reduces business costs
What practice is common and speeds up the process of globalisation?
Offshoring
What was the UK’s biggest import in 2022?
Cars valued at approximately £3.25 billion
What are exports?
Goods and services sold by domestic businesses to people or businesses in other countries
Exports generate extra revenue for businesses selling their goods abroad.
What was China’s biggest export in 2022?
Smartphone manufacturing valued at approximately $21.4 billion
What is specialisation?
When a country/business focuses on producing a particular good/service
Give an example of a business that specialises.
Apple focuses on the production of technological products and services
Can countries specialise as well? Provide an example.
Yes, for example, Ghana specialises in cocoa and gold.
What is specialisation?
Specialisation refers to the focus on increasing the quantity and quality of goods and services.
What are the benefits of specialisation?
Benefits include:
* Lower unit costs due to economies of scale
* Lower prices for consumers
* Increased profit margins
* Excess output can be sold as exports
How does specialisation affect unit costs?
It lowers unit costs as costs are spread over a large output.
What happens if businesses do not lower their selling price after specialisation?
They can increase their profit margins due to lower costs.
What is a competitive advantage?
A competitive advantage is an edge over competitors, often gained by increasing the value added on goods/services.
Give an example of a competitive advantage.
Having access to local markets, resources, and materials that competitors do not have.
What is Foreign Direct Investment (FDI)?
FDI is investment by foreign firms resulting in more than 10% share of ownership of domestic firms.
How do businesses typically grow through FDI?
Through mergers, takeovers, partnerships, or joint ventures with a foreign business.
Fill in the blank: Specialisation can increase the quantity and quality of _______.
[goods and services]
True or False: Specialisation can lead to higher unit costs.
False
What is one reason for Foreign Direct Investment (FDI)?
Access to local knowledge and skills
How does FDI allow businesses to grow?
Investment in expanding industry and fast growing, profitable businesses
What type of resources can businesses access through FDI?
Access to local resources e.g. copper or wine
What infrastructure benefits can FDI provide?
Access to infrastructure and complementary industries
What brand-related advantage does FDI offer?
Access to foreign brands
What is one benefit countries receive from FDI?
Increased economic growth as there is an inflow of money into the country
How does FDI create job opportunities?
Increased job opportunities as businesses expand operations
What type of knowledge does FDI provide to countries?
Access to knowledge and expertise from foreign investors
What is Horizontal FDI?
Horizontal FDI occurs when a foreign business invests in the same industry or sector in a host country as it operates in its home country
Give an example of Horizontal FDI.
McDonald’s invests in the same industry (fast food) and replicates its operations (restaurants) in different countries
What is vertical foreign direct investment (FDI)?
When a multinational corporation invests in a foreign business that’s part of its supply chain.
What types of investments can vertical FDI involve?
Acquiring a supplier or distributor, or setting up a new operation in a foreign country.
Provide an example of vertical FDI.
Toyota investing in a tyre manufacturer.
What is the growth rate of a country measured by?
The annual change in its gross domestic product (GDP)
GDP is a key indicator of economic performance.
Define emerging economies.
Economies that have increasing growth rates but relatively low income per head (per capita)
These economies are often in transition from developing to developed status.
Give an example of an emerging economy.
China
China is noted for its rapid economic growth and significant manufacturing output.
How does UK growth compare to emerging economies?
UK growth tends to be lower than emerging economies
This indicates a disparity in economic performance.
What is a key factor for the faster growth of emerging economies compared to the UK?
The growth of the manufacturing sector
Emerging economies often focus on manufacturing as a driver of growth.
What has happened to the manufacturing sector in the UK?
It has seen a decline
This decline is attributed to businesses relocating manufacturing to emerging economies.
Why do businesses choose to manufacture in emerging economies?
Due to lower labour costs and access to raw materials
Cost efficiency is a major factor for businesses in global manufacturing.
Which country is the world’s largest manufacturing economy?
China
China has become a global leader in manufacturing and export of goods.
What is globalization?
The economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance.
What does BRICS stand for?
Brazil, Russia, India, China and South Africa.
What does MINT stand for?
Mexico, Indonesia, Nigeria and Turkey.
What economic trend is observed in emerging economies?
A growing middle class with increasing incomes.
How does the growing middle class in emerging economies affect international firms?
It increases the profitability of international firms who sell their goods and services in these emerging economies.
What is a potential benefit for businesses entering new markets in emerging economies?
Potential for increased profits as businesses gain more customers.
What type of demand are customers in emerging economies likely to have?
Income elastic demand.
What impact does economic growth have on trade opportunities?
Increased trade opportunities as demand for goods and services increases.
How can economic growth reduce production costs for businesses?
Businesses can benefit from lower labour costs and cheaper raw materials.
What is one reason businesses are more likely to invest during economic growth?
As the economy grows, businesses want to expand.
What is the impact of economic growth on unemployment?
Reduced unemployment as there is more demand for labour.
How does economic growth affect average incomes?
Increased average incomes due to rising employment.
What is one benefit of increased tax revenue from economic growth?
Improvement in the quantity and quality of public services.
What does GDP stand for?
Gross Domestic Product
What is GDP per capita?
GDP per capita is calculated by taking the total output (GDP) of a country and dividing it by the number of people in that country
What does a high GDP per capita indicate?
High standard of living
Why is it useful to look at GDP per capita over a period of time?
To see whether there has been an improvement
How does GDP per capita help in comparing countries?
It is a useful indicator to compare the growth in two countries
What does literacy refer to?
The percentage of adults within an economy who can read and write
According to the OECD’s International Adult literacy survey, what percentage of differences in economic growth is explained by differences in average skill levels among OECD countries?
55%
Why is information about literacy rates important?
It will determine the quality of the workforce and the customers they will be selling to
What is the Human Development Index (HDI)?
A composite statistic of life expectancy, education, and per capita income indicators
Fill in the blank: GDP per capita is a useful indicator to compare the growth in _______.
two countries
True or False: High literacy rates contribute to better economic growth.
True
Why is the health of a country’s citizens important to businesses?
It impacts the quality of the workforce.
What are key indicators of health to consider for investment in emerging economies?
Average life expectancy, infant mortality rate, access to healthcare, access to clean water.
What does the Human Development Index (HDI) combine to assess development?
Life expectancy, education, and income.
What three specific factors does HDI look at?
Life expectancy, mean years of schooling, gross national income per capita (GNI).
Who created the Human Development Index?
The United Nations.
What is the measurement scale of HDI?
0-1 (1 being the highest).
What is a limitation of using HDI as a measure of development?
It does not account for inequalities within a country.
What is another limitation of HDI?
There is a lack of reliable data in some countries.
What is a global marketing strategy?
A global marketing strategy means that a business doesn’t differentiate its products or marketing between countries.
Name three companies that successfully implement a global marketing strategy.
- AKEA
- Coca Cola
- Red Bull
What is one pro of developing a global marketing strategy?
Economies of scale can be achieved in both production and distribution.
What is another pro of developing a global marketing strategy?
Power in the market as the brand is known.
What is a third pro of developing a global marketing strategy?
Uniformity of marketing practices.
What is one con of developing a global marketing strategy?
Differences in consumer needs, wants and usage patterns for products.
What is a second con of developing a global marketing strategy?
Differences in brand and product development and the competitive environment.
What is a third con of developing a global marketing strategy?
Differences in the legal environment, some of which may conflict with those of the market.
Define glocalisation.
Glocalisation is a combination of the words ‘globalisation’ and ‘localisation’ and is used to describe products and services that are both developed and sold to global customers but designed to suit the needs of local markets.
What are the three main marketing approaches for expanding operations to other countries?
Polycentric, Ethnocentric, Geocentric
Define the Polycentric approach in marketing.
Businesses adapt their marketing strategy by tailoring their products to the local market
What is the Ethnocentric approach in marketing?
Standardise the product for all markets to keep costs low
What does the Geocentric approach in marketing entail?
A mixture of Polycentric and Ethnocentric approaches
What is a key feature of the Polycentric approach?
Treating each country as a unique market with a customised marketing mix
Give an example of a company that uses the Polycentric approach.
KitKat
How did KitKat adapt its product for the Japanese market?
Changed packaging to include cherry blossoms, a symbol of good luck
What is a pro of the Polycentric approach?
Sales are likely to increase as the product is tailored to meet customer needs
What is another advantage of the Polycentric approach?
Helps to develop brand loyalty in overseas markets
What is a con of the Polycentric approach?
Product development to adapt the product may increase average unit costs
What additional cost is associated with the Polycentric approach?
Market research to find out about the market
What are the three main marketing approaches for expanding operations to other countries?
Polycentric, Ethnocentric, Geocentric
Define the Polycentric approach in marketing.
Businesses adapt their marketing strategy by tailoring their products to the local market
What is the Ethnocentric approach in marketing?
Standardise the product for all markets to keep costs low
What does the Geocentric approach in marketing entail?
A mixture of Polycentric and Ethnocentric approaches
What is a key feature of the Polycentric approach?
Treating each country as a unique market with a customised marketing mix
Give an example of a company that uses the Polycentric approach.
KitKat
How did KitKat adapt its product for the Japanese market?
Changed packaging to include cherry blossoms, a symbol of good luck
What is a pro of the Polycentric approach?
Sales are likely to increase as the product is tailored to meet customer needs
What is another advantage of the Polycentric approach?
Helps to develop brand loyalty in overseas markets
What is a con of the Polycentric approach?
Product development to adapt the product may increase average unit costs
What additional cost is associated with the Polycentric approach?
Market research to find out about the market
What is the Ethnocentric Approach in business?
Businesses see the domestic market and foreign markets as very similar, believing that the company’s home country culture and marketing practices are superior to those of other countries.
This approach results in no changes to products for overseas customers and uniform marketing strategies.
What is an example of a company using the Ethnocentric Approach?
Apple sells standardised products across their global markets, such as the iPhone and iPad.
This helps them to reduce costs by benefiting from economies of scale.
What is a pro of the Ethnocentric Approach?
Businesses can benefit from economies of scale as the product is standardised and produced on a large scale.
Lower costs result from not investing in product development for different markets.
What is a con of the Ethnocentric Approach?
The business could potentially lose sales as the product is not tailored to the needs and wants of markets overseas.
This approach can lead to cultural insensitivity and may not resonate with local customers in other countries.
What is the Geocentric Approach in business?
This strategy is a mix of the polycentric and ethnocentric approach, utilizing the benefits of standardised products while tailoring them to local markets.
It maintains a consistent brand image across different markets.
What is an example of a company using the Geocentric Approach?
McDonald’s adapts their menu to meet the tastes and culture of different overseas markets, such as not offering pork in India.
This illustrates how they tailor products while maintaining a global brand.
Why is the health of a country’s citizens important to businesses?
It impacts the quality of the workforce.
What are key indicators of health to consider for investment in emerging economies?
Average life expectancy, infant mortality rate, access to healthcare, access to clean water.
What does the Human Development Index (HDI) combine to assess development?
Life expectancy, education, and income.
What three specific factors does HDI look at?
Life expectancy, mean years of schooling, gross national income per capita (GNI).
Who created the Human Development Index?
The United Nations.
What is the measurement scale of HDI?
0-1 (1 being the highest).
What is a limitation of using HDI as a measure of development?
It does not account for inequalities within a country.
What is another limitation of HDI?
There is a lack of reliable data in some countries.
Why is the health of a country’s citizens important to businesses?
It impacts the quality of the workforce.
What are key indicators of health to consider for investment in emerging economies?
Average life expectancy, infant mortality rate, access to healthcare, access to clean water.
What does the Human Development Index (HDI) combine to assess development?
Life expectancy, education, and income.
What three specific factors does HDI look at?
Life expectancy, mean years of schooling, gross national income per capita (GNI).
Who created the Human Development Index?
The United Nations.
What is the measurement scale of HDI?
0-1 (1 being the highest).
What is a limitation of using HDI as a measure of development?
It does not account for inequalities within a country.
What is another limitation of HDI?
There is a lack of reliable data in some countries.
What is cultural diversity?
Cultural diversity recognises the ideas, customs and social behaviour of a particular people or society in different global markets.
Why do businesses need to consider cultural diversity?
Businesses need to take into account the different cultural behaviours and customs when operating in overseas markets.
Give an example of a cultural consideration in the United Arab Emirates.
There are rules around the consumption of alcohol that businesses need to adhere to.
What are global niche markets?
Global niche markets are small segments of the global market that are characterised by unique and specific needs and preferences.
What are groups of customers within global niche markets referred to as?
Subcultures.
List three features of excellent customer service.
- Clear understanding of the wants and needs of customers
- Emphasising on quality
- Expertise in product area
What does innovation ensure in niche markets?
Innovation ensures that products are highly differentiated and maintain a unique selling point (USP) that meets the needs of the target market.
True or False: Customers in niche markets usually expect exceptional customer service.
True
Fill in the blank: Niche markets are lucrative and businesses focus on increasing profits that they can _______ into improving their products/services.
re-invest
What is prioritised over market share in niche markets?
Profit.
What is essential for expertise in a product area?
Emphasis on quality
What is crucial for understanding customer needs?
Clear understanding of the wants and needs of customers
How can businesses build value for customers?
Having employees that are highly skilled and keeping up to date with the latest developments within the niche market
What is important for businesses targeting wealthier customers?
Ensure the quality of the product is exceptional
Why is understanding customer needs critical for businesses with few customers?
The needs and wants of these customers must be fully understood
Fill in the blank: Businesses need to ensure the quality of the product is _______.
exceptional
True or False: Keeping employees skilled and updated is beneficial for building customer value.
True
What are the 4Ps of marketing?
Product, Price, Place, Promotion
How can a product be adapted for a global niche market?
By modifying the features of the product to meet the specific needs of the target audience
Give an example of a product adaptation for a niche market.
A line of vegan watches for consumers seeking cruelty-free luxury products
What does adapting price for a global niche market involve?
Offering a pricing strategy that is attractive to the target audience
Provide an example of price adaptation for a niche market.
Offering competitive prices similar to mainstream products for organic products
What is the focus of promotion adaptation in a global niche market?
Using marketing communication strategies that resonate with the target audience
How can influencer marketing be used in promotion adaptation?
To communicate the exclusivity of luxury products to wealthy customers
What does adapting place for a global niche market involve?
Choosing a distribution strategy that is convenient for the target audience
Give an example of a place adaptation for a niche market.
Distributing gluten-free products through local specialty stores and online platforms
Fill in the blank: Adapting the marketing mix involves tailoring the 4Ps to meet the specific needs of a _______.
niche market
What must global businesses consider to effectively market their products/services?
Cultural and social factors
These factors are essential to overcome challenges in different countries and regions.
What does ethnocentrism refer to?
The tendency to view one’s own culture or group as superior to others
It involves judging other cultures based on the standards of one’s own.
How can ethnocentrism manifest in a business context?
When a company assumes its home country’s practices will be well-received elsewhere
This can lead to failures in product acceptance in foreign markets.
What are some cultural factors that businesses must consider?
- Beliefs
- Moral values
- Traditions
- Language
- Laws
These factors are specific to each country and influence marketing strategies.
What are some social factors that businesses must consider?
- Lifestyle
- Religion(s)
- Economic wealth
- Family structures
- Education
- Political systems
These factors impact consumer behavior and preferences.
What should businesses understand to succeed in global markets?
Cultural differences
This understanding helps in adapting products and marketing strategies.
Fill in the blank: Businesses must adapt to local _______ to succeed in foreign markets.
[tastes]
What can lead to unintended meanings in marketing?
Inappropriate translations
This can damage brand reputation and customer relations.
What is a potential issue with branding and promotion in different cultures?
Inappropriate branding and promotion
Such issues can alienate potential customers.
True or False: Understanding cultural and social factors is not important for global businesses.
False
Understanding these factors is crucial for building strong relationships with global customers.
What is the outcome of effectively considering cultural and social factors?
Building strong relationships with global customers
This contributes to long-term success in international markets.
Why must businesses be aware of global market interactions?
To understand how businesses and customers interact in new global markets
This awareness is crucial for successful market entry and strategy formulation.
What must businesses understand about cultural differences?
Values, beliefs, customs, and traditions
Adapting marketing strategies to these cultural differences is essential.
How do tastes and preferences vary in global markets?
They vary greatly between cultures and regions
Businesses must adapt products and services to local preferences.
What is essential for businesses regarding language in marketing?
Accurate and appropriate translation of marketing messages
Understanding language nuances and idioms is critical.
What unintended meaning arose from KFC’s slogan translation in China?
Translated as ‘Eat Your Fingers Off’
This had negative connotations in Chinese culture.
What can result from inappropriate or inaccurate translations?
Loss of credibility, legal implications, and damage to brand reputation
Such consequences highlight the importance of professional translations.
What was the public reaction to the Dolce & Gabbana advert?
Outrage over the depiction of Chinese people as lacking refinement
This illustrates the risks of inappropriate branding and promotion.
Fill in the blank: Businesses must adapt their marketing strategies to meet local _______.
preferences
Local preferences include cultural tastes and consumer behavior.
True or False: The color white symbolizes purity in all cultures.
False
While it represents purity in Western cultures, it symbolizes death in some Asian cultures.
What must businesses do to avoid inappropriate branding?
Use professional translation services and consult local experts
This ensures messages are accurately translated and culturally appropriate.
What are some consequences of using images or language that are offensive in different cultures?
Inappropriate branding and promotion
Such actions can lead to public backlash and damage to reputation.
Why must businesses be aware of global market interactions?
To understand how businesses and customers interact in new global markets
This awareness is crucial for successful market entry and strategy formulation.
What must businesses understand about cultural differences?
Values, beliefs, customs, and traditions
Adapting marketing strategies to these cultural differences is essential.
How do tastes and preferences vary in global markets?
They vary greatly between cultures and regions
Businesses must adapt products and services to local preferences.
What is essential for businesses regarding language in marketing?
Accurate and appropriate translation of marketing messages
Understanding language nuances and idioms is critical.
What unintended meaning arose from KFC’s slogan translation in China?
Translated as ‘Eat Your Fingers Off’
This had negative connotations in Chinese culture.
What can result from inappropriate or inaccurate translations?
Loss of credibility, legal implications, and damage to brand reputation
Such consequences highlight the importance of professional translations.
What was the public reaction to the Dolce & Gabbana advert?
Outrage over the depiction of Chinese people as lacking refinement
This illustrates the risks of inappropriate branding and promotion.
Fill in the blank: Businesses must adapt their marketing strategies to meet local _______.
preferences
Local preferences include cultural tastes and consumer behavior.
True or False: The color white symbolizes purity in all cultures.
False
While it represents purity in Western cultures, it symbolizes death in some Asian cultures.
What must businesses do to avoid inappropriate branding?
Use professional translation services and consult local experts
This ensures messages are accurately translated and culturally appropriate.
What are some consequences of using images or language that are offensive in different cultures?
Inappropriate branding and promotion
Such actions can lead to public backlash and damage to reputation.
What is a multinational company (MNC)?
A business registered in one country but has manufacturing operations/outlets in different countries.
Example: Starbucks has its headquarters in Washington, USA, but operates 32,000 stores in 80 countries.
What has contributed to the growth of MNCs?
- Globalisation
- Deregulation
Globalisation has opened up new markets, while deregulation has reduced government control over industries.
Fill in the blank: MNCs choose locations based on factors such as cost advantages and _______.
access to markets.
Which company originates from the USA but has 50% of its manufacturing in China, Vietnam, and Indonesia?
Nike.
True or False: Deregulation makes it harder for MNCs to enter new markets.
False.
What is the primary reason MNCs expand internationally?
To tap into a larger consumer base.
This is facilitated by globalisation.
What impact does globalisation have on MNCs?
It opens up new markets across borders.
This enables MNCs to expand internationally.
Fill in the blank: Starbucks has its headquarters in _______.
Washington, USA.
What percentage of Nike’s manufacturing takes place in lower-cost countries?
50%.
What is one major impact of MNCs on local labor?
MNCs create many jobs by building factories and offices
MNCs have the funds to invest heavily into a new area.
What opportunities do MNCs provide to local workers?
Full time jobs, training, career building, regular income, job security
MNCs often have a modern approach to business development.
How do MNCs influence wages and working conditions?
They typically provide favorable working conditions and modern facilities
MNCs use the latest technologies and efficient working practices.
What role do local businesses play in the establishment of MNCs?
They may be involved in construction and supply raw materials/services
Local businesses can benefit from increased revenues and profits.
What is a potential negative effect of MNCs on local businesses?
MNCs may lure workers away by offering better pay or working conditions
This can lead to local businesses facing staffing challenges.
Fill in the blank: MNCs have the funds to invest heavily into a new _______.
[area]
True or False: MNCs typically have outdated facilities and working practices.
False
MNCs are likely to have up-to-date facilities using the latest technologies.
What may local businesses need to do to meet increased demand from MNCs?
Employ more staff
Increased business from MNCs can lead to higher revenues for local businesses.
What is one major impact of MNCs on local labor?
MNCs create many jobs by building factories and offices
MNCs have the funds to invest heavily into a new area.
What opportunities do MNCs provide to local workers?
Full time jobs, training, career building, regular income, job security
MNCs often have a modern approach to business development.
How do MNCs influence wages and working conditions?
They typically provide favorable working conditions and modern facilities
MNCs use the latest technologies and efficient working practices.
What role do local businesses play in the establishment of MNCs?
They may be involved in construction and supply raw materials/services
Local businesses can benefit from increased revenues and profits.
What is a potential negative effect of MNCs on local businesses?
MNCs may lure workers away by offering better pay or working conditions
This can lead to local businesses facing staffing challenges.
Fill in the blank: MNCs have the funds to invest heavily into a new _______.
[area]
True or False: MNCs typically have outdated facilities and working practices.
False
MNCs are likely to have up-to-date facilities using the latest technologies.
What may local businesses need to do to meet increased demand from MNCs?
Employ more staff
Increased business from MNCs can lead to higher revenues for local businesses.
What is one major impact of MNCs on local labor?
MNCs create many jobs by building factories and offices
MNCs have the funds to invest heavily into a new area.
What opportunities do MNCs provide to local workers?
Full time jobs, training, career building, regular income, job security
MNCs often have a modern approach to business development.
How do MNCs influence wages and working conditions?
They typically provide favorable working conditions and modern facilities
MNCs use the latest technologies and efficient working practices.
What role do local businesses play in the establishment of MNCs?
They may be involved in construction and supply raw materials/services
Local businesses can benefit from increased revenues and profits.
What is a potential negative effect of MNCs on local businesses?
MNCs may lure workers away by offering better pay or working conditions
This can lead to local businesses facing staffing challenges.
Fill in the blank: MNCs have the funds to invest heavily into a new _______.
[area]
True or False: MNCs typically have outdated facilities and working practices.
False
MNCs are likely to have up-to-date facilities using the latest technologies.
What may local businesses need to do to meet increased demand from MNCs?
Employ more staff
Increased business from MNCs can lead to higher revenues for local businesses.
What improvements in infrastructure may MNCs invest in?
MNCs may invest in:
* Roads
* Electricity/gas/water supplies
* Schools
* Hospitals
* Local amenities
These investments can enhance the overall quality of life in the local community.
What type of contributions do MNCs make to local government taxes?
MNCs contribute rates to local authorities, which can be used for local government spending.
This is a requirement in the UK and similar payments are made in other countries.
How do MNCs help in local communities?
MNCs may:
* Give money to local charities
* Organise fundraising events
* Provide locals access to the company’s facilities
These efforts can strengthen community ties.
What is classified as Foreign Direct Investment (FDI)?
FDI is when a firm invests money in another country.
This investment is encouraged by governments for its economic benefits.
How does FDI contribute to a country’s GDP?
FDI leads to an increase in income as the output produced contributes to GDP.
This also increases tax revenue for the host nation.
What effect does investment by MNCs have on the balance of payments?
Investment improves the balance of payments by increasing money flow into the host country.
MNCs build facilities and sell products, generating additional revenue from abroad.
What benefits do MNCs bring regarding technology and skills transfer?
MNCs introduce new technologies and modern working practices, resulting in:
* Transfer of technologies
* Knowledge sharing with local businesses
This can enhance local business operations.
How do consumers benefit from the presence of MNCs?
Consumers benefit from:
* More choice
* Lower prices
* Improved quality
MNCs encourage local competition, enhancing consumer options.
What employment effects do MNCs have on local economies?
MNCs create more employment opportunities and higher incomes.
This contributes to improved living standards in the host country.
What is the impact of MNCs on the business culture in host countries?
MNCs influence the business culture in host countries and may lead employees to start their own businesses
The cultures of MNCs can shape local business practices and norms.
What is transfer pricing?
A technique where a company sells products to a foreign subsidiary for an artificially low price
This allows MNCs to minimize tax liabilities by shifting profits to countries with lower tax rates.
How do MNCs minimize their tax liabilities?
By using transfer pricing to sell products at low prices to subsidiaries in low-tax countries
The subsidiary then sells the products at market price, resulting in high profits but low taxes.
True or False: MNCs are not interested in minimizing tax liabilities.
False
MNCs are profit-seeking and actively seek ways to reduce their tax obligations.
Fill in the blank: MNCs can influence the _______ in the countries where they operate.
business culture
This influence can lead to changes in local practices and entrepreneurship.
What do MNCs seek to achieve through transfer pricing?
To pay low rates of tax while maximizing profits
By manipulating the pricing of goods sold between subsidiaries.
