Theme 4 Topic 8 - Multinationals

Question 1

Define Multinational (MNC)

Answer 1

A firm with its headquarters in one country but with bases or assembly plants in others

Question 2

What is a positive impact of MNCs on local labour and job production?

Answer 2

MNCs can train local workers and provide a secure, regular income

Question 3

What are two positive impacts of MNCs on local wages and working conditions?

Answer 3

Higher demand for workers can drive wages up, MNCs tend to have favourable working conditions as they have modern working practices

Question 4

What is a negative impact of MNCs on local wages and working conditions?

Answer 4

MNCs are accused of exploiting workers in less developed countries by mistreating them

Question 5

What are two positive impacts of MNCs on local businesses?

Answer 5

Jobs created e.g. in the construction of a factory or supplying the MNC, Forces local forms to innovate and become more efficient to compete

Question 6

What is a negative impact of MNCs on local businesses?

Answer 6

Creates more competition and reduces sales for local firms

Question 7

What are three positive impacts of MNCs on the local community and the environment?

Answer 7

Improvements in infrastructure e.g. road networks, Helping local communities e.g. sponsoring local events, Paying local taxes

Question 8

What is a negative impact of MNCs on the local community and the environment?

Answer 8

There could be a negative effect on communities e.g. oil spills and pollution could damage the health of locals

Question 9

What are four positive impacts of MNC FDI flows on the national economy of a country?

Answer 9

Creating higher GDP and therefore higher incomes, Tax revenue for overseas government, Reducing unemployment benefit payments for governments by reducing unemployment, Reducing national debt due to the tax revenue received by the overseas government

Question 10

What is a positive impact of a balance of payments on the national economy of a country?

Answer 10

The FDI from an MNC could make domestic firms more competitive by improving quality and design, meaning exports increase

Question 11

What is a positive impact of technology and skills transfer on the national economy of a country?

Answer 11

Transfer of knowledge and skills from an MNC to domestic firms could help improve their efficiency, quality and productivity

Question 12

What is a negative impact of technology and skills transfer for an MNC?

Answer 12

Can threaten MNCs as domestic firms copy their technologies, products and working practices

Question 13

What is a positive impact of MNCs on consumers?

Answer 13

Consumers can benefit from more choice, lower prices, better quality and better living standards (through job creation)

Question 14

What is a negative impact of MNCs on consumers?

Answer 14

If domestic firms lose market share and close due to the MNCs, there could be less choice for consumers in the long term

Question 15

What are two positive impacts of MNCs on business culture?

Answer 15

MNCs set an example of entrepreneurial spirit and create a culture of enterprise, MNCs bring their own cultures e.g. TQM or Kaizen

Question 16

What is a negative impact of MNCs on business culture?

Answer 16

Overseas MNCs could be seen as a threat to some cultures, so locals may fight against them

Question 17

What is a positive impact of MNCs on tax revenues and transfer pricing?

Answer 17

MNCs pay corporation tax on profits in the country they are based in

Question 18

What is a negative impact of MNCs on tax revenues and transfer pricing?

Answer 18

By adjusting prices between different countries, MNCs can ensure they declare less profits in countries with higher corporation tax

Question 19

Define Balance of Payments

Answer 19

The difference between exports and imports

Question 20

Define Horizontal Transfers

Answer 20

Where knowledge is transferred across the industry

Question 21

Define Vertical Transfers

Answer 21

Where knowledge is transferred forward or backward e.g. a manufacture to a supplier

Question 22

Define Ethics

Answer 22

Moral principals that affect behaviour

Question 23

What do many MNCs have to ensure employees try to stick to ethical guidelines in their behaviour?

Answer 23

Written codes of conduct

Question 24

Define Stakeholder

Answer 24

Any groups or individuals with an interest in the business

Question 25

What are seven typical issues with stakeholders and multinationals?

Answer 25

Pay and working conditions, Emissions, Waste disposal, Exploitation of labour, Child labour, Misleading labelling, Inappropriate promotional activities

Question 26

What does LEDC stand for?

Answer 26

Less Economically Developed Country

Question 27

What are two benefits of using political influence to control MNCs?

Answer 27

State ownership can ensure firms’ actions are regulated properly, Elected officials can challenge the power of MNCs and force them to give in to certain demands

Question 28

What are four drawbacks of using political influence to control MNCs?

Answer 28

State ownership is often inefficient, Shareholder needs may be ignored if the government owns part of the firm, Less incentive to carry out R&D to save government funds, Retaliation could occur if protectionist policies are used

Question 29

What are three benefits of using legal control to control MNCs?

Answer 29

Can improve the competition in a domestic market and helps smaller firms compete, Helps regulate large dominant firms, Prevents exploitation of consumers

Question 30

What are three drawbacks of using legal control to control MNCs?

Answer 30

Can stir up competition between countries, MNCs can avoid the regulation by moving location, Policies aren’t easy to enforce

Question 31

What are three benefits of using pressure groups to control MNCs?

Answer 31

Raises issues not known to the public, Alerts politicians and authorities to the issues, Can quickly change the actions of large MNCs through direct action

Question 32

What are three drawbacks of using pressure groups to control MNCs?

Answer 32

Direct action can lead to prosecution and violent acts, Direct action can be countered by PR activity from the MNC, Campaigns can be ill-informed and damage the pressure groups reputation

Question 33

What are three benefits of using social media to control MNCs?

Answer 33

Raises issues not known to the public, Alerts politicians and authorities to the issues, Can quickly change the actions of large MNCs through global awareness and adverse publicity

Question 34

What are two drawbacks of using social media to control MNCs?

Answer 34

Incorrect messages can damage the reputation of the sender and be countered by PR activity from the MNC, Campaigns may be ill-informed and damage the reputation of the sender

Question 35

Define Pressure Group

Answer 35

Lobbyists with a common interest. Often called NGOs, they try to achieve a particular goal e.g. saving the environment

Question 36

Define Lobbying

Answer 36

Influencing politicians to try and bring about change in laws