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BUSINESS THEME 4 - TOPIC 4.4 - GLOBAL INDUSTRIES + MNC's - Coggle…
BUSINESS THEME 4 - TOPIC 4.4 - GLOBAL INDUSTRIES + MNC's
4.4.1 The impact of MNC's
Employment
The company itself needs local workers to build factories then run them
Local businesses may then be setup to support the MNC
Wages and working conditions
MNC's may pay well to increase motivation, productivity and have a wider choice of workers
But wages can be low and working conditions poor
Local businesses, community + environment
local businesses may setup to support MNC
Training can increase skills in area
But MNC's with power can exploit workers and damage the environment
On the national economy
Higher tax revenue for government
Employment
FDI flows
If one MNC succeeds in a country others might invest there too
Flows of FDI also increases exchange rate which makes imports cheaper
Balance of Payments
FDI into countries can reduce current account deficits
But MNC's may import raw materials and components
Technology + skills transfer
MNC's can train locals and transfer skills
MNC's also bring new tech and methods which can be adopted
But MNC's can bring in workers and not train locals
R+D facilities are also usually kept in host countries
Consumers
If incomes rise, consumers will spend more and increase AD
But income may not be evenly distributed
Business culture
Tax revenues and transfer pricing
more employment and wages increase tax revenue
governments have to pay less welfare
MNC profits can be taxed
But profits can avoid being taxed through transfer pricing
4.4.2 Ethical issues
Stakeholder conflicts
Shareholder pressure may pressure MNC's to make decisions that effect other stakeholders
Many contract suppliers are pressed by MNC's to accept low prices
Ethical decision making may be more costly to MNC's
Pay + working conditions
Environmental considerations
Supply chain considerations
exploitation of labor and child labour
Marketing considerations
Product labelling shouldn't mislead
Should be appropriate
Are MNC's a force for good?
Good
Creates FDI
Brings jobs
Multiplier effect
Skill + tech transfer
Tax rev and local businesses
Export earnings
Bad
illegal and unethical
exploitation of locals
environmental damage
tax avoidance
can push out local businesses
profits repatriated
4.4.3 Controlling MNC's
MNC's are hard to control as they transcend national boundaries and there's no such thing as a national government
Political influence + legal control
Where the legal system is strong + labour law is enforced, action can be taken
The International Labour Organisation (ILO) sets global standards for working conditions
Trade Unions can also confront MNC's in order to protect members
but...
This depends on the size + power of the government
As well as the size of MNC
And the importance of the MNC to the host country
Pressure Groups + Social Media
Pressure groups are organisations that attempt to influence public policy + especially government legislation, regarding their concerns and priorities
Their impacts vary based on the
strength of public opinion
,
The degree to which the MNC cares
and
The strength of the pressure group
Some attempts to control MNC's have been successful, however, others lead to MNC's setting up programs to save their public image but doesn't actually help the problem