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notebook April 19, 2009
Multinationals: Help or Hindrance?
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• A multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or
enterprise that manages production establishments or delivers services in at least two
countries.
• Very large multinationals have budgets that exceed those of many countries.
• Multinational corporations can have a powerful influence in international relations and
local economies.
• Multinational corporations play an important role in globalization ; some argue that a new
form of MNC is evolving in response to globalization: the 'globally integrated enterprise'
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Multi nationals.notebook April 19, 2009
What is globalisation?
Globalization is the process by which the world is becoming increasingly interconnected as a result of massively
increased trade and cultural exchange. It is the result of technological changes that enable people, goods, money
and above all information and ideas to travel the world much faster than ever before, and the liberalisation of
world markets, greatly increasing levels of trade between different parts of the world
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The majority of MNCs come from more economically developed countries
such as the US and UK. Multinational corporations invest in other MEDCs ‐
the US car company Ford, for example, makes large numbers of cars in the
UK. But MNCs also invest in less economically developed countries ‐ for
example the British DIY store B&Q now has stores in China.
Factors attracting MNCs to a country may include:
• cheap raw materials
• cheap labour supply
• good transport
• access to market, where the goods are sold
•friendly government policies
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Positive impacts of globalisation
Globalisation is having a dramatic effect ‐ for good or ill ‐ on world economies and on people's lives.
Some of the positive impacts are:
• Inward investment by MNCs helps countries by providing new jobs and skills for local people.
• MNCs bring wealth / foreign currency to local economies when they buy local resources, products
and services ‐ providing resources for education, health and infrastructure.
• There is far more mixing of people and cultures from all over the world, enabling more sharing of
ideas, experiences, and lifestyles. People can experience foods and other products not previously
available in their countries.
• Globalisation can help make people aware of events in far‐away parts of the world. For example,
people in the UK were quickly aware of the impact of the 2004 Tsunami tidal wave on countries in SE
Asia, and were therefore able to send help rapidly.
• It may help make people more aware of global issues such as deforestation and and global warming ‐
and alert them to the need for sustainable development.
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Negative impacts of globalisation
However not all people think that globalisation is such a great idea. Critics include many different
groups such as environmentalists, anti‐poverty campaigners and trade‐unionists.
Some of the negative impacts they point to are:
• Globalisation operates mostly in the interests of the richest countries which continue to dominate
world trade, and at the expense of developing countries ‐ whose role in the world market is mostly to
provide the North and West with cheap labour and raw materials.
• There are no guarantees that the wealth from inward investment will benefit the local community.
Often, profits are sent back to the MEDC where the MNC is based. Multinational companies, with their
massive economies of scale, may drive local companies out of business. If it becomes cheaper to
operate in another country the MNC might close down the factory and make local people redundant.
• Lack of strictly enforced international laws means that MNCs may operate in a way that would not
be allowed in an MEDC ‐ for example polluting the environment, running risks with safety or imposing
poor working conditions and low wages on local workers.
• Globalisation is viewed by many as a threat to the world's cultural diversity ‐ drowning out local
economies, traditions and languages and re‐casting the whole world in the mould of the capitalist
North and West. An example is that a Hollywood film is far more likely to be successful worldwide than
one made in India or China, which also have thriving film industries.
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For Multinationals
Offers employment to local workers
Promotes peace internationally
Creates sense of community crossing international borders
Allows entire world to improve standard of living
Gives access to quality products regardless of location
Promotes economic stability
Raises standard of living for regions involved in production
Gives local economies new economic opportunities
Fact of life which needs to be accepted
Reflects global economy
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Against Multinationals
Ruins local economies
Depletes local work forces by drawing to metro centres
Stifles cultural growth and expansion on local level
Provides little help with problems which are local in nature
Creates cultural homogenization
Too big, little interest in the individual
Gives political power to outside interests
Creates economic unstability by being subject to the whims of the global economy
Replaces traditional values with materialistic values
Makes local economies subject to mass layoffs
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Economic activity and the environment
Any large‐scale economic activity may have a negative impact on the natural environment,
for example manufacturing industries can cause air, water and noise pollution. Industrial
pollution can intervene in the environment in a number of ways:
• it may damage the wellbeing of humans and other species ‐ for example by polluting
drinking‐water supplies or poisoning plants or animals
• it may interfere with natural processes ‐ for example, changing local climatic conditions or
destroying wildlife habitats, and
• it may impact on people's livelihoods ‐ for example, pollution of the sea will hurt people
who are involved in fishing and tourism.
Exam tip
Use casestudy examples, perhaps from the news, to show how economic
activity can have different impacts on the environment. If possible tie case
studies into different areas of geography.
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Food multinationals threaten fight against poverty
Multinational food companies are growing too big and powerful and are threatening the fight against poverty in
developing countries, says a new report by development agency ActionAid.
The report – Power hungry: six reasons to regulate global food corporations – reveals that the activities of
multinational food and agribusiness companies and their subsidiaries, such as Nestlé, Monsanto, Parmalat, Syngenta
and Unilever, threaten the livelihoods of hundreds of thousands of poor farmers and undermine basic rights.
ActionAid’s evidence from Brazil shows that 50,000 dairy farmers have been forced out of business, after a series of
takeovers by Nestlé and Parmalat. In India, an estimated 12,000 children worked last year on cotton seed farms
supplying subsidiaries of Bayer, Monsanto, Syngenta and Unilever. Many children were also exposed to dangerous
pesticides.
In the Indian tea sector – where two big companies control more that half the market – thousands of small‐scale tea
growers and plantation workers are struggling to earn enough to feed their families.
These cases provide condemning evidence of the impact of increasing corporate power within the global food chain.
The statistics are alarming:
• trade within multinationals accounts for about 60% of all global trade
• three companies control 85% of the world’s tea market
• two companies handle 50% of the world’s trade in bananas
• in Côte d’Ivoire, four multinationals control 95% of cocoa processing
• in Peru, Nestlé controls 80% of milk production.
"From our morning tea, to the cotton in our T‐shirts or the chocolate bars we eat – a few multinationals are
reaping benefits from the products we buy every day," says Julian Oram, policy officer from ActionAid. "Our
research shows that the world’s poorest farmers are in effect subsidising the world’s largest food companies, and
in many cases are paying with their health, livelihoods and basic rights."
ActionAid calls on the UK to help MAKEPOVERTYHISTORY in by:
• holding multinational companies legally accountable for their impacts on human rights and the environment
• reforming global agri‐food markets to protect and promote the rights of rural communities in poor countries
ActionAid recognises that multinational companies can bring benefits to poor communities. Unfortunately, even the
most progressive multinationals are not fully accountable for their social and environmental impacts.
"Current UK law puts the interests of shareholders above the rights of the men, women and children who grow
the food we eat," says Ruchi Tripathi, head of ActionAid’s food rights campaign. "The government must turn this on
its head and introduce regulation that puts the rhetoric of corporate responsibility into legal practice."
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Globalisation and environment
Top of Form 1
1 . Which of these factors have influenced globalisation?
a) Communication systems
b) Television
c) Telephony
d) Internet
e) All of the above
2 . Pick the factor that might attract a multinational corporation to a country:
a) Good tourist attractions
b) High average monthly wage
c) Cheap raw materials
d) The requirement to build a transport system
e) Lack of raw materials
Bottom of Form
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