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Topic 1:Global Interdependence P2 (Why firm become MNCs (Transfer tech&…
Topic 1:Global Interdependence
P2
Globalisation
Benefits*
Life expect
Trade tech
improved health tech
life expect->
FDI
Global income->
FDI->
Eco grow of :red_flag: :black_flag: ->
Std of living
Foreign employ locals
Job oppor& wagerate ->
UR-<
Std of living->
Tech
Tech-> =EOS=Produce more=Fixed cost divide=Profit->
Tech
EOS
Produce more
Fixed cost divide
Profit ->
Costs*
Life expect
Increased trade&travel
Spread of disease
exp HIV cases->
Life expect -<
FDI
FDI->
Depend on other countries
Vulnerable
Exp Asian Financial Crisis of 1990s
Std of Living
Foreign richer
Widen gap between poor and rich :red_flag: :black_flag: :checkered_flag
exp gap between poor and rich countries :
30in1 1960, 82to1 1995
Tech
Local cannot fight with foreign
domestic producers die
Job Opp-<
UR->
Why firm become MNCs
Transfer tech&human resource
MNCs establish links between economies
Cost efficient
Overcome tariff , transport costs
Increase sale&profit
Can sell products in more countries
Expand &grow
Domestic market saturated
Search for new markets international
MNCs to Host country
*Benefits
Wage rate
MNCs pay more than local
Wage rate->
Househ income->
Std Lving->
Better working cond
MNCs advanced
Better work cond
Productivity->
Production
MNCs bring tech
Efficiency level->
Production->
GDP ->
Import subs
MNCs goods available local
Import subs
Level of import -<
BOL improve
Costs*
Money flow out
Profits of MNCs
Flow to home country
BOP deficit
Harm environ
MNCs exploit nonstrict laws
cause air & waste pollution
Local cannot compete
Large MNCs
Achieved EOS and offer goods at low price
Push domestic producer out
Sweatshops
Poor work cond
Low wage
MNCs to Home country
Benefits*
UE -<
MNCs produce cheap goods
Profits
Job Opp->
Employ rate ->
Improve skills
MNCs learn valuable skills
exposure to foreign market
Bring back skills to home country
BOP surplus
MNCs produce in host country
Profits
Profit bring back to home
BOP surplus
Costs*
BOP deficit
FDI into other countries
Set up MNCs
Capital outflow
BOP suffers
UE->
MNCs
Capital outflow
Decrease domestic production
Job Opp in Home -<
UE in home ->