theme 4.4

Question 1

name all 4 ways of controlling MNCs

Answer 1

political influence
legal control
pressure groups
social media

Question 2

how can governments control MNCs give examples of methods

Answer 2

through legislation and laws

e.g quotas and tariffs to reduce the import of raw resources - encouraging use of in-house resources - ↓ FDI outflow.
e.g employment working condition laws (COSHH)
e.g competition laws (Sainsbury’s and Asda merger block)
e.g tax avoidance laws
e.g environmental laws

Question 3

why might the govoment of a LEDC be reluctant to increase the min wage in its country

Answer 3

MNCs in the LEDC may leave the county if min wages increase increasing production.

Question 4

Why does an MNC need to consider its product labelling in different countries

Answer 4

different countries have different regulations

e.g EU requires salt to be labelled in the ingredients while the US requires sodium. US promotional advertisements promoting 50% less sodium could be misleading for EU consumers.

Question 5

examples of initiatives to improve working conditions.

Answer 5

fairtrade

Question 6

wich is best for firms operating unethical working conditions B2C B2B

Answer 6

B2B as there is less publicity and public scrutiny involved. pressure groups also have less power.

Question 7

MNC ethics:
1. positive of bad working conditions
2. however

Answer 7

lower costs of production - ↑ EoS - ↑ competitive advantage - ↑ quality/R&D/↓price/↑retained profit.

consumers may not approve of bad working conditions - ↑ of pressure groups - ↓ reputation - ↓ D from ethically minded consumers - ↓ sales and profit.

Question 8

define stakeholders

Answer 8

those affected by the firms and its actions

Question 9

other MNC positives for the national economy (non-financial). give however were applicable .

1 more however

Answer 9

• MNCs may train workers or introduce new technology
  
  • ↑ in a skilled worker pool in the country - ↑
    transfer of skilled from MNC to local firms - ↑
    productivity
  • ↑ entrepreneurship
• EoS means MNCs may be able to offer customers cheaper products H - can undercut local firms - local businesses close - ↓ choice and competition

however - an influx of MNCs could dilute local traditions and culture - ↓ loss of national culture as traditional businesses are faced out.

note:
MNC’s impact on a country depends on the nature of its business, whether ist based on the extraction of local resources so will be more likely to pollute whether the firm needs high skilled labour so imports in increasing unemployment.

Question 10

MNC FDI flows can reduce a country’s negative balance of payment. while sending profits back to the home country can exacerbate it.
define the balance of payments

Answer 10

the difference between the total value of payments into and out of the country over a certain period of time.

Question 11

MNCs may pay a lot of tax to local governments how can they avoid paying most taxis

Answer 11

transfer pricing

Question 12

MNCs affecting local economies:
1. positive (3)
2. negative(3)

Answer 12

1. positive impact:
   - production- new factories - ↑ local jobs - ↑ pay - ↑ tax revenue for the government
   - ↑ wages - ↑ disposable income - ↑ demand for local business
   - MNC investment into local infrastructure
2. negatives
   - if MNC bring own labour from other countries - ↑ strain on local resources - ↑ price for locals
   - ↑ wage competition - strip local business of skilled labour
   - ↑ pollution - government might have to clean up at a cost