1. 1|Q u az i N a f i u l I sl a m w w w . s t u d e n t t e c h .c o . c cMULTINATIONAL CORPORATIONSOVERVIEW1. BENEFITS THAT MNCS BRING TO HOST NATIONSa. Improvement in the standard of livingb. Employment and economic growth in overseas countries2. POTENTIAL NEGATIVE IMPACTa. Influence on foreign governments to gain concessionb. Exploitation of labour in developing countries i. Implementation of working practices which would be unacceptable in their home countryii. Sale of unsafe products to consumersc. Use of unsustainable resources and the degradation of the local environmentd. Cultural Imperialisme. Footloose Capitalism3. CONTROLLING MNCSa. Pressure groups and public opinionb. Internetc. Self-Regulationd. Political Constraintse. Legal or constraintsf. Competition policyWHAT IS A MULTINATIONAL CORPORATION (MNC)?A Multinational Corporation (MNC) is acompany that operates or has assets in morethan one country.

2. 2|Q u az i N a f i u l I sl a m w w w . s t u d e n t t e c h .c o . c cBENEFITS THAT MULTINATIONAL CORPORATIONS BRING TO THE HOST NATONEMPLOYMENT MNCs bring in FDI and invest into the country; it will need to employ people which willcreate employment. Some jobs may require additional training which will aid in transferring technology andmethods to the host country. MNCs will have a demand for many services such as meals, transport, raw materials,maintenance services that will be provided by domestic businesses, indirectly increasingemployment.WAGES Wages should increase as MNCs will want the best people that the country has to offer. Wages may be lower on international standards but should be higher than the localstandard, as logically the business will pay its workers more in order to motivate them. Often MNCs are criticised for their wage policies but recent research and statistics provethis wrong.SKILL AND TECHNOLOGY TRANSFER Transfer of technology through training and skill will make domestic businesses morecompetitive. Efficiency will rise as new technologies can be availed of. Production of more sophisticated goods and services will make the economy stronger due totransfer of technology.EXPORTS AND TAXES Exports will rise as businesses are producing goods and selling them for foreigncurrency.o This will raise GDP The government will get tax revenue from both exports as well as production. More employment means that the government will get more income tax as wellas having to spend less of unemployment benefits.CORPORATE SOCIAL RESPONSIBILITY AND THE STANDANRD OF LIVING MNCs that offer higher wages will force domestic businesses to increase wages,raising the standard of living. MNCs often help local communities greatly by providing them compensation forthings such as taking up farming land. 3. 3|Q u az i N a f i u l I sl a m w w w . s t u d e n t t e c h .c o . c cPOTENTIAL NEGATIVE IMPACTSINFLUENCE ON GOVERNMENT TO GAIN CONCESSIONS CORRUPTION Multinational companies are often accused of giving bribes to government officials to gain advantage of tax breaks andother forms of financial assistance; they are essentially being subsidised. Governments can often turn a blind eye to these MNCs actions that may exploit theenvironment of use child labour. Either way, these advantages mean that the MNCs will grow inprominence and make more profits as they are getting very cheapproduction costs. This in turn will diminish competition as they cannot hopeto compete. o Increasing unemployment and making the MNC too influential.EXPLOITATION OF LABOUR IN DEVELOPING COUNTRIES AND UNACCEPTABLE WORKING CONDITIONS BAT (British American Tobacco) are accused of using child labour in production;these children are exposed to large quantities of nicotine and can be subject tonicotine poisoning.o This means that the child is also working in harmful working conditions. MNCs such as Nike are accused of paying Chinese workers very little wages inorder to make large profits often referred to as sweatshops. The Bhopal explosion in India proved how unsafe MNCs can be, and how littlerespect they have for human life.SALE OF UNSAFE PRODUCTS Toyota in the year 2010 had to do a massive re-call of the Prius Model hybrid carssold in America because the brakes did not work properly, although this was anunintentional mistake by the company, it had caused injuries and caused massiveoutcry over the scrutiny of safety tests.USE OF UNSUSTAINABLE RESOURCES DAMAGE TO THE ENVIRONMENT Oil companies deforested large areas in order to meet thegrowing demand of bio-fuels. In doing so large areas of forestswere destroyed. The Orang-Utan was pushed to the brink ofextinction in Indonesia as large areas were deforested. o Multinational Corporations have a huge appetite fornatural resources and high levels of competition pushthese companies to make money through unsustainablemeans. MNCs produce and pollute on a very large scale. Often miningcompanies end up setting up in very delicate ecosystems, whichlead to the destruction of natural environments. Capital intensive production methods have led to an influx of CO2 in the atmosphere,which has devastated the world with radical changes in climate. BP caused substantial damage to American coast due to its oil spill. Figure 1 - This is what happened to wildlife after the BP oil spill. 4. 4|Q u az i N a f i u l I sl a m w w w . s t u d e n t t e c h .c o . c cCULTURAL IMPERIALISM When MNCs come into a host nation, they bringtheir domestic culture with them. Often thisculture is promoted to a great extent and isartificially injected into society. This results inthe degradation of the host nations culture. Often the younger generation opt for theseemingly more modern culture that is oftenseen to be western. The adoption of a newculture and forgetting the true heritage of anation often leads to the loss of identity for thenation.FOOTLOOSE CAPITALISM MNCs have the power to jump from producing in one country to another, creating and destroying jobs and prosperity in their wake. MNCs can shift production from more developed nations where it is more expensive to produce to nations with cheaper labour. This will leave a large number of jobless people and therefore the govt. has to spend more on unemployment benefits. o Their first priority is profits. o This can put a road block to government plans they rely on the MNC to provide a large part of its GDP. Exports from Dell made up 5% of Irelands GDP, and when they left Ireland for Poland, it had a big negative influence. 5. 5|Q u az i N a f i u l I sl a m w w w . s t u d e n t t e c h .c o . c cCONTROLLING MULTINATIONAL CORPORATIONSPRESSURE GROUPS AND PUBLIC OPPINIONThe combination of pressure groups and media coverage influence public opinion. This has oftenled to dramatic change in consumer purchases. Bad media coverage has led Nike and GAP tochange its suppliers which were convicted of running sweat-shops. Greenpeace fought hard forthe sinking of the Brent Spar oil storage platform owned by Shell; with favourablemedia coverage, they were able to get what they wanted. Public opinion alsoaided them as people stopped getting their cars repaired from Shell garages.INTERNETThe internet has now become one of the main places for all sorts of advocacy.Sites such as Chevwrong (Chevron + Wrong) and Tescopoly (Tesco + Monopoly)highlight what these companies. Nestle bowed down to pressure from thesegroups and stopped using palm oil in making Kit-Kats. This was in response to thisYouTube Video. Nestle stopped buying palm oil from Indonesian producers thatdeforested to make new palm-oil farms.SELF REGULATIONBusinesses have now become far more conscious of how PR (Public Relations) especially with respect tothe environment affects their image. Businesses are now strengthening their CSR policies and some joiningumbrella groups such as ETI (Ethical Trading Initiative) and EITI (Extractive Industries TransparencyInitiative) both of these organisations aims to work towards giving workers better living conditions,making the business more transparent and increasing the priority of protecting the environment. Moreand more companies are using the FAIR TRADE logo on their products to prove that they actually careabout farmers.LEGAL CONSTRAINTSThe legal way of taking a business to court for their alleged wrongdoings can be lengthyand very costly. But there are instances where businesses have been taken to court andmade to pay for their wrongdoings. Daimler (the owner of Mercedes Benz) was finedfor paying bribes to over 22 countries. The consequences of being proven guilty incourt can be very deadly; the Competition Commission in the UK and EU has the powerto fine 10% of the companys turnover.However Multinational Corporations, as they fall under no direct legal system are oftenvery hard to control through law.GOVERNMENT CONTROLStronger governments will be able to enforcetheir restrictions on businesses more effectively.China and India can insist on joint venture andstrict labour laws as well as tight expansion onforeign businesses since theyre both such largemarkets.