Business and Economics Unit 3 Chapter 7

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  • MNCS " businesses which are active in more than one country"
    • What are they?
      • Very large organisations, with turnover exceeding the GDP of many countries. Some may be small scale
      • Offices or factories in different countries and usually have a centralised head office where they coordinate global management, where they are based. Other countries are known as host countries
      • Most of the largest are American, Japanese or European. India and China now have large MNCs which are growing rapidly (Tata)
    • Why have they expanded?
      • To reduce costs
      • To take advantage of government incentives
        • Governments offer incentives to attract MNCS to their countries. These can be grants, cheap loans, tax breaks and subsidies, which can cut production costs
      • To access new markets
      • To get round trade barriers
        • Wish to penetrate markets to avoid tariffs or quotas
      • To control resoucres
    • Positives
      • Creates FDI
      • Brings jobs
      • Regional multiplier effect
      • Skills and technology transfer
      • Increased demand for local businesses/ suppliers
      • Increased tax revenues
      • Export earnings
      • Other MNCs may follow
      • CSR policies bring benefits
    • Negatives
      • Illegal and unethical behaviour
      • Exploitation of labour- low wages, poor working conditions, lack of health and safety, child labour
      • Environmental degradation/ pollution
      • Unsustainable practices
      • Tax avoidance
      • 'Race to the bottom'
      • Cultural imperialism
      • Local businesses pushed out
      • Profits repatriated and not put back into local economy
    • Factors that can control MNC behaviour
      • Public opinion
      • Pressure groups
      • Social media and the internet
      • The media
      • Self- regualtiob
      • Government control and regualtions
      • Legal enforcement
      • Shareholder groups


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