THEME 4: SECTION 4 ( MNC's) Flashcards
Define MULTINATIONAL CORPORATIONS
A business with branch’s / departments in more than one country
2 POSITIVE impacts of MNC’s on the local economy
- Creates jobs and uses local labour
- Creates more disposable income and helps other businesses to grow
2 NEGATIVE impacts of MNC’s on the local economy
- A strain on recourses and gentrify areas
- Affects local domestic businesses and forces them out of business
Define TAX REVENUE
Income gained by the government through taxation.
Define TRANSFER PRICING
A legal form of tax avoidance. Used to shift profits. Done by a selling goods to another department of there own at a high price and charging above/below market price.
WHY is TRANSFER PRICING used ?
It is used to shift profits, often from a country with a high tax rate to one with a much lower tax rate so that that business has to pay less tax overall.
(This can effect the national economy so sometimes laws are put in place to stop transfer pricing)
Define ETHICS
The moral rights and wrongs of the decision a business makes
what do MNC’s need to consider for each country they work in?
The ethics of their:
- Actions
- Customer/ stakeholder values
- Laws of the countries
What are the ethical issues of working in an LEDC?
- LEDC have less legislation, MNC often take advantage in order to pay less
- MNC not considering safety and sanitation
- Some governments overlooking child labour/ exploitation to receive tax from MNC
- Pollution can be caused by a lack of environmental legislation/ infrastructure
Define GLOBAL SUPPLY CHAIN
All processes and people around the world who helped to make products for the business.
Explain the work done to try and reduce these ethical issues
- Consumers protesting, boycotting and increasing pressure on the businesses
- Orgs such as Fairtrade put in place
- MNC’s adapting the way they operate in each country
- MNC’s having CSR
- Ethical corporate objective put to meet mission statements
Define CSR
Corporate Social Responsibility means going above and beyond to be ethical, not just doing the bare minimum and not breaking laws.
Who has control over MNC’s and why?
- Governments, to stop labour exploitation and any negative effects on the economy
- Consumers/stakeholders ( Pressure groups), to ensure they are held accountable for unethical behaviours
2 POSITIVE impacts of MNC’s on the national economy
- Introduces new technology and skills that can be transferred
- Creates an FDI flow and economic growth
2 NEGATIVE impacts of MNC’s on the national economy
- Tax avoidance can occur, can be unethical
- Worker may be exploited leading to health issues
