Impact of MNCs

MNC - business that is operated in one country but has assets in more than one country

• Dominant players in the market

• Complex structures

• Grow through both types

• Heavy investment in R+D

• Globally recognised

Impact on local economy:

Advantages

• Creating employment and training opportunities

• Push wages up improving standard of living (depends on business)

• Skills development

• Better work conditions as business looks to maintain reputation

• Help local businesses - improved infrastructure, spending power, support services

• Help benefit local community and environment - employment, funds from government, projects to improve environment for business

Disadvantages:

• Wage inflation

• May look to exploit cheap workers

• Bring in own managers only offering low skilled jobs to locals

• Working conditions may be poor depending on regulations

• Less rights due to lack of union representation

• Environmental disasters due to lack of consideration e.g. Rana Plaza - loss of cultures (Shell), damage to traditional industries and land, pollution.

• Increased costs - loss of talented workers and sales from substitutes

Impact on national economy:

• FDI flows - cost of setting up abroad likely to be large

• After initial investment, profits are likely to flow back to domestic economy

• Balance of payments (value of exports different to value of imports)

• Technology skills transfer

• Consumers benefit - wider choice of products, access to global brands, better quality, may lose local businesses

• Business culture - introduce more aggressive cultures, encourage entrepreneurship

• Tax revenues - tax paid in host country will boost governments revenue (keep in mind tax avoidance/dodging)