The impact of MNC's on the local economy.
Nissan in Sunderland employs 7000 staff directly.
These are high quality jobs offering financial security and the chance to build a career.
The working conditions are favourable, with the latest technology and high health and safety standards.
The factory also supports thousands of jobs in the supply chain.
The economy of the north east of England has been given a considerable boost because of the 'multiplier effect'.
The factory has also provided an opportunity for people to learn new skills.
However, not all MNC employment in the UK could be described as 'high quality'.
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Some MNCs have been criticised for creating low skilled and low paid employment in developing countries.
Local businesses may benefit from the arrival of a MNC, perhaps by supplying components or providing services for employees.
Local businesses may suffer from the arrival of a MNC if they lose customers. More here.
The local community and environment:
Residents are likely to welcome a MNC into their area if the benefits outweigh the drawbacks.
Benefits:
Employment opportunities.
A boost to the local economy.
Improved infrastructure.
Contributions to local government taxes.
Help in local communities.
Some MNCs may have a negative impact when operating overseas.
Mining and oil exploration companies have caused environmental damage.
Poor health & safety procedures have caused accidents.
Bhopal, India. The worlds worst industrial accident in a US owned chemical plant.
Impact of MNCs on the national economy:
FDI inflows.
Higher levels of GDP.
Increasing economic growth and rising living standards.
Increasing tax revenues.
Increasing levels of employment.
Generally positive impact on the Balance of Payments.
FDI inflows when a project is being established will improve the balance of payments.
Any products which are exported will improve the balance of payments.
However....
Any raw materials or components that are imported into the country by the MNC will worsen the balance of payments.
Any profits sent back to the home country will worsen the balance of payments.
Technology and skills transfer:
MNC investment in foreign countries often means that new technologies and modern working practices are introduced to the host nation.
However......
'Reverse engineering' may become a problem for the MNC.
This is when local businesses try to copy MNC products.
Consumers:
This is when local businesses try to copy MNC products.
Consumers:
Consumers are likely to benefit from the arrival of MNCs in their countries.
There should be a wider choice of products or services.
There may be lower prices and improved quality.
Business culture:
As MNC's become more dominant they may change domestic business culture.
The Japanese approach to Kaizen and quality has been adopted by many western businesses.
Tax revenues and transfer pricing:
MNC's are often accused of paying as little tax as possible and seeking out locations where taxes are low.
Transfer pricing involves a MNC selling products to different parts of the business in different countries to minimise the tax bill.
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Business culture:
As MNC's become more dominant they may change domestic business culture.
The Japanese approach to Kaizen and quality has been adopted by many western businesses.
Tax revenues and transfer pricing:
MNC's are often accused of paying as little tax as possible and seeking out locations where taxes are low.
Transfer pricing involves a MNC selling products to different parts of the business in different countries to minimise the tax bill.
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