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Globalisation/TNC/MNC 1.6 (2) (Advantages (Local firms will benefit from…
Globalisation/TNC/MNC 1.6 (2)
An organisation who has operations in 2+ countries e.g C&A, Zara, Coca Cola, Staburcks etc.
Advantages
Local firms will benefit from supplying resources to the TNC
Tax revenues to the government will be boosted from any profits made by the TNC
Employment opportunities will be created and trining programme initiated which will improve the quality and efficiency of the workforce
The total output of the economy will increase = increase in GDP.
Inward investment to a country that is not og = if they choose to invest in infrastructure or other.
MNC's bring with new ideas and new techniques can help boost the quality of production in the country.
The investments from the TNC can help a country out of poverty.
Disadvantages
Local competing firms may be forces out of business due to lack of competitive edge = inferior equipment, much smaller resources than the MNC.
Pollution from plants might be at higher levels than allowed in other countries. This could be due to slack rules or as the host government is afraid of driving the TNC away. A demonstration of the influence TNC's have on the foreign country.
Exploitation of the local workforce. Due to the absence of health and safety workplace laws or labour, TNC's can employ cheap labour for long hours under poor conditions.
Bad press = some large Western company's (Coca Cola) have been accused of imposing or influencing he Western culture on the society due to advertising and promotion.
Profits made in the host country may be sent back to the og country = a leak in the money in the economy.
Depletion of natural resources - they have no motivation to concern these as they can simply move on to the next host country/resources.
Why become
Closer to main market
= lower transport costs, better info about consumer tastes due to closer operation, may be seen as a local company and gain customer loyalty.
Lower costs of production
= lower labour rates, cheaper rent costs (due to lower demand for commercial property), tax incentives and grants designed to encourage industrialisation in such countries.
Avoid import restrictions
= there will be no import duties to pay and no other import restrictions.
Access to local natural resources
= might not be available in the company's main operating country