Theme 4 Topic 8 - Multinationals Flashcards
Define Multinational (MNC)
A firm with its headquarters in one country but with bases or assembly plants in others
What is a positive impact of MNCs on local labour and job production?
MNCs can train local workers and provide a secure, regular income
What are two positive impacts of MNCs on local wages and working conditions?
Higher demand for workers can drive wages up, MNCs tend to have favourable working conditions as they have modern working practices
What is a negative impact of MNCs on local wages and working conditions?
MNCs are accused of exploiting workers in less developed countries by mistreating them
What are two positive impacts of MNCs on local businesses?
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
What is a negative impact of MNCs on local businesses?
Creates more competition and reduces sales for local firms
What are three positive impacts of MNCs on the local community and the environment?
Improvements in infrastructure e.g. road networks, Helping local communities e.g. sponsoring local events, Paying local taxes
What is a negative impact of MNCs on the local community and the environment?
There could be a negative effect on communities e.g. oil spills and pollution could damage the health of locals
What are four positive impacts of MNC FDI flows on the national economy of a country?
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
What is a positive impact of a balance of payments on the national economy of a country?
The FDI from an MNC could make domestic firms more competitive by improving quality and design, meaning exports increase
What is a positive impact of technology and skills transfer on the national economy of a country?
Transfer of knowledge and skills from an MNC to domestic firms could help improve their efficiency, quality and productivity
What is a negative impact of technology and skills transfer for an MNC?
Can threaten MNCs as domestic firms copy their technologies, products and working practices
What is a positive impact of MNCs on consumers?
Consumers can benefit from more choice, lower prices, better quality and better living standards (through job creation)
What is a negative impact of MNCs on consumers?
If domestic firms lose market share and close due to the MNCs, there could be less choice for consumers in the long term
What are two positive impacts of MNCs on business culture?
MNCs set an example of entrepreneurial spirit and create a culture of enterprise, MNCs bring their own cultures e.g. TQM or Kaizen
What is a negative impact of MNCs on business culture?
Overseas MNCs could be seen as a threat to some cultures, so locals may fight against them
What is a positive impact of MNCs on tax revenues and transfer pricing?
MNCs pay corporation tax on profits in the country they are based in
What is a negative impact of MNCs on tax revenues and transfer pricing?
By adjusting prices between different countries, MNCs can ensure they declare less profits in countries with higher corporation tax
Define Balance of Payments
The difference between exports and imports
Define Horizontal Transfers
Where knowledge is transferred across the industry
Define Vertical Transfers
Where knowledge is transferred forward or backward e.g. a manufacture to a supplier
Define Ethics
Moral principals that affect behaviour
What do many MNCs have to ensure employees try to stick to ethical guidelines in their behaviour?
Written codes of conduct
Define Stakeholder
Any groups or individuals with an interest in the business
What are seven typical issues with stakeholders and multinationals?
Pay and working conditions, Emissions, Waste disposal, Exploitation of labour, Child labour, Misleading labelling, Inappropriate promotional activities
What does LEDC stand for?
Less Economically Developed Country
What are two benefits of using political influence to control MNCs?
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
What are four drawbacks of using political influence to control MNCs?
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
What are three benefits of using legal control to control MNCs?
Can improve the competition in a domestic market and helps smaller firms compete, Helps regulate large dominant firms, Prevents exploitation of consumers
What are three drawbacks of using legal control to control MNCs?
Can stir up competition between countries, MNCs can avoid the regulation by moving location, Policies aren’t easy to enforce
What are three benefits of using pressure groups to control MNCs?
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
What are three drawbacks of using pressure groups to control MNCs?
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
What are three benefits of using social media to control MNCs?
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
What are two drawbacks of using social media to control MNCs?
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
Define Pressure Group
Lobbyists with a common interest. Often called NGOs, they try to achieve a particular goal e.g. saving the environment
Define Lobbying
Influencing politicians to try and bring about change in laws
