Are multinationals a force for good or should they be controlled?

What is a multinational corporation?
They are businesses that are active in more than one country. They might have distrbution outlets or factories or offer services that people in other countries buy.
1 of 33
What is the case aginst MNCs?
Abuse their size and power to exploit employees and host economies, damage the environment, harm the economic prospects of developing contries, may leave the host country if they find cheaper more suitable labour elsewhere.
2 of 33
What is the case for MNCs?
Create employment and wealth in their own annd host country, raise incomes, help poor counties develop, reap economies of scale and cater for mass markets, employees acquire scarce skills.
3 of 33
What are the main objectives of MNCs?
To access new markets, reduce costs, control resources, take advantage of government incentives, get round trade barriers.
4 of 33
What might an MNC want to enter new markets?
Domestic markets are often saturated so expansion is needed to increase profits and growth. It can extend the product life cycle.
5 of 33
How can moving overseas reduce costs?
May be economies of scale leading to lower unit costs, can reduce imput costs-labour may be cheaper and less regulated, poximity to markets can reduce transportation costs.
6 of 33
How do government incentives attract MNCs?
Effectively cut production costs
7 of 33
What are the benefts of MNCs?
Employment, wages, skills and technology transfer, benefits the economy, corporate social responsibility can benefit communities.
8 of 33
How do MNCs create empolyment?
Initial investment in building buildings and factories, one operations commence a workforce is needed, businesses involved in supplying or servicing an MNC see increased business and take on more workers. Creates a positive multiplyer effect.
9 of 33
Why do some companies pay over the average wage in the host country?
Increased mostivation, Increased productivity, Lower staff turnover, wider choice of workers.
10 of 33
How does the transfer of skills and technology benefit the host country?
Trains the local work force, workers acquire usefull skills that may be usedful when they move on, locals trained as managers may learn new business techniques, new technologies can be adopted in the host country making it more competitive and grow.
11 of 33
How do MNCs benefit the wider economy of the host country?
Increase employment and wages increases the tax base and government income, benefits paid to unemployed decreases, profits of MNC's can be taxed, increased government expenditure can benefit the wider population and the economy, exports may increase.
12 of 33
How does corporate scocial responsibility benefit the host country?
Could include better pay or working conditions, improvements in infrastructure, use of sutainable resources and environmental protection.
13 of 33
How do MNCs exploit the labour force in the host countries?
Low wages, poor working conditions, poor health and safety and regulations may be ignored, Child labour may used.
14 of 33
What are the negative effects of MNCs on the local community?
Local businesses suffer, mass produced standardised goods threaten national product variety, cause great damage to the environment, act as agents for cultural imperialism which replaces the native culture with unwanted products or values.
15 of 33
Why might there be a limited amount of skills and technology transfer?
May not train local workers to a high level, skills may be brough in by expat workers with locals getting unskilled jobs, Managers are often not recruited locally, R+D may be kept in home country reducing oppertunities for skill development.
16 of 33
What is cultural imperialism?
The practice of promoting, distinguishing, seperating or artificially injecting the culture of one society onto another.
17 of 33
What are the negative economic impacts of MNCs on the host country?
Profits can be tranferred back to the home country, taxation can be avoided or reducced by transfer pricing, MNCs are likely to take an incentive stay for a while and then move on leaving unemployment, encourages a race to the bottom.
18 of 33
What is transfer pricing?
Occurs when one part of an MNC in one country sells goods to another part in another country. The price charged is the transfer price which reduces or cancels out profit reducing the tax bill.
19 of 33
What is the race to the bottom?
Used to describe how MNCs move to the country that offers the lowest tax rates and weakest environmental controls.
20 of 33
What is good about MNCs?
Creates FDI, Brings jobs, regional multiplyer effect, sklls and technology transfer, increased demand for local businesses, increases tax revenue increasing government spending, export earnings, other MNCs may follow, CSR brings benefits.
21 of 33
What is bad about MNCs?
Illegal unethical behaviour, exploitation of workers-low wages, poor working conditions, poor health and safety, child labout, Environmental damage/pollution, Tax avoidance, Race to the bottom, Cultural imperialism, local businesses damaged
22 of 33
Why is it hard to control MNCs?
They transcend national boundaries. There is not world government or court to prevent MNCs doing what they want
23 of 33
What are pressure groups?
Organisations that attempt to influence public policy and especially Government legislation, regarding their particular concerns and priorities.
24 of 33
What factors effect the ability to control MNCs?
Size of the company, size and importance of the host government, importance of the MNC to the host country, strength of public opinion, the degree to which public opinion matters to the MNC, Social media/internet, strength and vigour of the pressure
25 of 33
How does public opnion control MNCs?
The way people feel about a company can influence its actions by boycotting it.
26 of 33
How do pressure goups control MNCs control MNCs?
Can organise campigns, protests or direct action.
27 of 33
How does social media control MNCs?
Speeds up the flow of information making action groups much more effective.
28 of 33
How does the media control MNCs?
Newspapers and TV programmes can mount campaigns to mobilise public opinion.
29 of 33
How does self regulation? control MNCs?
Set standards for their own behaviour which may be to prevent critism.
30 of 33
How does government control and regulation control MNCs?
Regulatory bodies can moniter behaviour with legal or advisory powers.
31 of 33
How does legal enforcement control MNCs?
If legal codes are broken MNCs are subject to prosecution.
32 of 33
How do shareholder groups control MNCs?
Shareholders can affect behaviour by protests or votes at the AGM.
33 of 33

Other cards in this set

Card 2

Front

What is the case aginst MNCs?

Back

Abuse their size and power to exploit employees and host economies, damage the environment, harm the economic prospects of developing contries, may leave the host country if they find cheaper more suitable labour elsewhere.

Card 3

Front

What is the case for MNCs?

Back

Preview of the front of card 3

Card 4

Front

What are the main objectives of MNCs?

Back

Preview of the front of card 4

Card 5

Front

What might an MNC want to enter new markets?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Business Studies & Economics resources:

See all Business Studies & Economics resources »See all Are multinationals a force for good or should they be controlled? resources »