1.6 Multinational Companies

What you should know

By the end of this subtopic, you should be able to:

• define the following terms: (AO1)

  • • host countries

    • multinational companies (MNCs)

• explain the reasons for the growth of multinationals (AO2)

• examine the positive and negative impacts of multinationals on the host country (AO3)

Day 1: 

Discussion Questions: Agree or Disagree

1. Profitable MNCs have an ethical obligation to support the poor, beyond employment, as a natural consequence of their business activities

2. Multinational corporations should maintain the same ethical practices anywhere they operate around the world

3. Multinational corporations are solely driven by profit and do not genuinely care about the well-being of host countries.

4. Multinational corporations: Destroyers of local cultures 

Or

Multinational corporations: Enrich local cultures with multiculturalism and globalization 

5. Multinational corporations are good for the local population of host countries they operate in.

6. The benefits of technological advancements and money brought by multinational corporations in host countries outweigh the negative impacts on traditional cultures and local customs.

7. The employment opportunities created by multinational corporations in host countries often come at the expense of job losses in developed countries.

8. The presence of multinational corporations in developing countries perpetuates colonialism and exploitation.

9. Multinational corporations have a responsibility to prioritize the well-being of the communities in which they operate.

Case Study: Canadian Cobre (copper) mine, Panama

$10 billion USD Copper mine by a Canadian Mining company in the tropical forests of Panama wanted to expand. Panama was receiving $375 million USD in annual payments.  Was instead shut down because of concerns around:

• Large protests across the country closing roads and schools

• Protecting Environment

• Panama losing resources to foreign companies

• Panamanian Sovereignty over land

• Presidential election

Video: https://youtu.be/eV6_LeIUtF8?si=VL9JYjE15WsvbuqR 

Reuters News: https://www.reuters.com/markets/commodities/panama-copper-drama-another-esg-flash-point-miners-2023-11-14/ 

Leonardo DiCaprio against mine: https://www.instagram.com/leonardodicaprio/reel/Czyr-WIu_Md/?hl=en 

Questions:

What are the positive impacts of a mine in Panama for the host country?

What are the negative impacts of the mine in Panama for the host country?

Option 1: Case study - UAE

The United Arab Emirates (UAE) has become an attractive country for tourists, investors and multinational companies. The country provides tax incentives for multinationals and offers a luxurious lifestyle for their highly paid employees. It has one of the lowest corporate taxes globally and has become a tax haven for many multinational companies along with the Bahamas, the British Virgin Islands, Guernsey and Jersey. The country also has a large supply of low paid migrant labour, largely from South Asian countries.

Recently, to further boost economic growth, the country introduced regulations that made it simpler to set up businesses. The impact of multinational companies on the UAE has been massive, with global expertise in sectors such as manufacturing, technology, energy, food and beverage, automotive and allied industries, energy, consumer goods, health care, insurance and retail. This has increased job opportunities and enhanced skills. Multinational companies have to abide by the minimum wage regulations set by the UAE government. Consumers enjoy a wide variety of products and increasing competition among businesses which can lower prices.

However, the attraction of MNCs has raised sociocultural issues, with many locals switching to more international cuisines and clothing. Increasing globalisation is sometimes seen as a threat to the values, beliefs and culture of the host country. Local businesses might see a fall in demand for their goods and services as demand shifts to the products provided by multinational companies. Examples might include food multinational chains such as McDonalds and Pizza Hut. The popularity and demand for local cuisine has decreased as a younger generation is attracted to global brands.

Questions

1. Outline one negative impact the UAE faces from multinational companies setting up in the country. [2 marks]

2. Explain two positive impacts for the UAE due to MNCs expanding in the country. [4 marks]

Option 2: Choose a Multinational Company (more challenging option)

1. What is your chosen multinational company?

2. Why did they go global? 

3. What are some negative impacts of your chosen company on a specific host country/local community?

4. What are some positive impacts of your chosen company on a specific host country/local community?

5. Discuss whether you think stakeholders within the host country are better off with the multinational company

Examples: Apple, Amazon, Google, Shell in Nigeria, Tesla, Coca Cola

Day 2:

1) Mind Map: Get a piece of paper and write  everything you know and also want to know more  about on Unit 1.

2) Reflection Questions: 

1. What did you learn and why is it important? What is something you found interesting?

2. What is something you want to know more about?

3. What is something you wish everyone knew about the content you learned in Unit 1?

4. What is something you found challenging? What strategies, skills, and procedures did you use or think you can use next time?

5. What is something that you're proud of?

3) Share on the White Board for each section: Why is it important to learn Unit 1/ What was the most important or interesting thing you learned?

https://quizlet.com/pa/724169534/16-multinational-corporations-flash-cards/?i=4jrhob&x=1jqt 

Foreign direct investment (FDI)

This refers to cross-border investment in which a foreign company establishes an ongoing and significant stake (financial interest and degree of influence) in its operations in another economy.

Host country

This is any nation that allows a multinational company to set up in its country.

Globalization

Refers to the process of greater integration and interdependence of businesses and economies throughout the world.

Gross domestic product (GDP)

GDP is a measure of the monetary value of a country’s annual output or its national income. MNCs contribute to the host country's GDP.

Multinational company (MNC)

A business that operates in two or more countries or is legally registered in more than one country.

Protectionist policies

These are measures imposed by a country to reduce the competitiveness of imports, such as tariffs (import taxes), quotas, and restrictive trade practices.

Synergy

This is a key benefit of growth through multinational companies and occurs when the whole is greater than the sum of the individual parts. A larger MNC, with synergy, perhaps through a merger or acquisition of another business located overseas, creates greater levels of output, and improved operational efficiency.

1.6 Exam Practice Questions

https://docs.google.com/document/d/1ivRxUPjekTmC29sl6lyWwhHjUmvrZvr4hBnlleb-aQs/edit?usp=sharing 

1.6 Case Study Answers

https://docs.google.com/document/d/1U69xEq6V_yr6RN-VB-wdVqztvWMjBwlVhc1mx-w8VPQ/edit?usp=sharing