Revision Resource

4.4 – Global Industries & Companies

4.4.1 – The Impact of MNCs

  • a) Impact of MNCs on the local economy:
    • Local labour, wages, working conditions, and job creation:
      • Explanation: MNCs can influence local economies by offering job opportunities and potentially improving wages and working conditions. However, they might also exploit local workers by offering low wages and poor working conditions.
    • Local businesses:
      • Explanation: MNCs can bring competition to local businesses, which might foster innovation and efficiency but can also lead to the closure of small local enterprises.
    • The local community and environment:
      • Explanation: MNCs can affect the local community and environment positively through corporate social responsibility initiatives but might also have adverse effects through pollution and over-exploitation of natural resources.
  • b) Impact of MNCs on the national economy:
    • FDI flows:
      • Explanation: MNCs can boost the national economy through foreign direct investment (FDI), which can foster economic growth and development.
    • Balance of payments:
      • Explanation: MNCs can affect the balance of payments, potentially improving it through exports or worsening it through imports.
    • Technology and skills transfer:
      • Explanation: MNCs often bring advanced technology and skills to the host country, fostering technological advancement and skill development.
    • Consumers:
      • Explanation: Consumers can benefit from a wider variety of products and services brought by MNCs, potentially at lower prices due to economies of scale.
    • Business culture:
      • Explanation: MNCs can influence the business culture of a nation, introducing new practices and standards.
    • Tax revenues and transfer pricing:
      • Explanation: MNCs contribute to national tax revenues but might also engage in transfer pricing to minimize tax liabilities, which can be detrimental to the host country’s economy.

4.4.2 – Ethics

  • a) Stakeholder conflicts:
    • Explanation: MNCs often face conflicts between different stakeholders, including shareholders, employees, and the local community, requiring careful management to balance diverse interests and expectations.
  • b) Pay and working conditions:
    • Explanation: Ethical considerations in MNCs include ensuring fair pay and decent working conditions, avoiding exploitation, and respecting labor rights.
  • c) Environmental considerations:
    • Emissions:
      • Explanation: MNCs have a responsibility to manage and reduce harmful emissions to protect the environment.
    • Waste disposal:
      • Explanation: Ethical waste disposal practices involve managing waste responsibly to prevent environmental pollution.
  • d) Supply chain considerations:
    • Exploitation of labour:
      • Explanation: MNCs should avoid exploiting labor in their supply chains, ensuring fair treatment and wages for all workers.
    • Child labour:
      • Explanation: Ethical considerations require MNCs to avoid engaging in or supporting child labor in any form.
  • e) Marketing considerations:
    • Misleading product labelling:
      • Explanation: MNCs should avoid misleading product labelling to maintain trust and comply with ethical standards.
    • Inappropriate promotional activities:
      • Explanation: MNCs should steer clear of promotional activities that are inappropriate or could potentially harm the society or specific groups of people.

4.4.3 – Controlling MNCs

  • a) Factors to consider:
    • Political influence:
      • Explanation: Governments and international organizations can exert political influence to control the activities of MNCs and ensure they operate within legal and ethical boundaries.
    • Legal control:
      • Explanation: Legal frameworks at both national and international levels are essential in regulating the operations of MNCs to protect the interests of the host country and its citizens.
    • Pressure groups:
      • Explanation: Pressure groups can play a significant role in controlling MNCs by advocating for responsible business practices and holding them accountable for any misconduct.
    • Social media:
      • Explanation: Social media platforms can be powerful tools in controlling MNCs, as they allow for widespread dissemination of information and can facilitate campaigns to hold MNCs accountable for their actions.
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