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Multinational corporation (MNC)
a business that is registered in one country but has manufacturing, operations and outlets in different countries e.g. starbucks HQ is in Washington, USA but has 32,000 in 80 countries
impact of MNCs on the local economy
increase in jobs
good wages and improved quality of life
more local businesses involved e.g. construction of factories
may provide additional infrastructure e.g. schools, hospitals, local amenities etc
impac tof MNCs on the national economy
FDI flows
balance of payments
technology and skills transfer
consumers have increased choice
business culture
tax revenues and transfer pricing
business ethics
refers to the principles and norms that govern business behaviour. the ethics will determine how they operate and their decision making process
ethical pay
MNCs often operate in countries which have different employment regulations and working conditions. the MNCs decide if they will comply with the regulations of their base location or the country abroad
ethical working conditions
some MNCs behave unethically by providing poor working conditions in order to cut costs. factories and warehouses with poor working conditions are referred to as sweatshops (profits before people)
ethical environmental considerations
waste management and emissions
ethical waste management
developed countries have regulations about how businesses should dispose of their waste
LDEs have less enforcement and fewer regulations
MNCs often dispose of waste in LDEs at cheaper costs allowing high profits to be maintained
ethical emissions
emissions are often relased from factories or from products made by MNCs
the emissions produced have negative impacts on local communities causing health issues such as asthma, cancer and skin conditions
ethical supply chain considerations
MNCs have supplies around the world and are increasingly held accountable for the working conditions of these suppliers
ethical marketing considerations
misleading labelling
inappropriate promotional activities
misleading labelling
labelling must comply with the regulations of the country with correct information not including false information aimed at generating higher sales
inappropriate promotional activities
promotional activities should not be offensive or illegal
Controlling MNCs
Political influence
Legal control
Pressure groups
Social media
Political factors
When MNCs establish themselves in a new country, they must work within the institutional framework of that country
Political factor benefits
MNCs may wish to get political approval from the gov of host nations → help trade and setting up in a new country
If the MNC gains political approval → trading mat be smoother and less troublesome
Political factor drawbacks
Politicians can be bribed, not such an issue in the UK but quite common in other countries
Some MNCs bring so much wealth and employment into an economy that a weaker government might ignore unethical activities e.g. Brazil, Nigeria, Mali
Legal controls
Governments can enforce legislation and regulations to control the operations of MNCs
Legal controls benefits
Laws can be passed at any point to control the actions of a MNC which are already established in a country
Laws mean that consumers have some rights against the MNC
Legal controls drawbacks
The MNC may simply move production to a country where there are less laws and restrictions
The host nation does not want to lose the economic input of the MNC so this deters laws being passed
MNCs can afford expensive legal defence of any challenge
Pressure groups
Organisations which campaign for changes in the law or new legislation in specific areas such as Greenpeace. They can have a strong influence on public opinion and behaviours of MNCs; if they want to avoid a PR disaster
Pressure group benefits
Pressure groups can raise public awareness of MNCs activities in host countries
Pressure groups can create PR problems for MNCs peacefully, which can lead to a change in their behaviour
Social media
can turn a product scare into a national crisis within hours. It can be used to orchestrate a boycott which will affect the sales and reputation of the MNC
Social media benefits
Can be very powerful way to change the behaviour of MNCs
Social media drawbacks
Can only affect short term change. The internet is dynamic, customers become bored easily and move onto next scandal
A MNC can just dust itself down and carry on with very little impact on their activities