6.2

Globalisation and multinational companies

9 flashcards to master Globalisation and multinational companies

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Definition Flip

Define globalisation and provide an example of how it impacts consumers.

Answer Flip

Globalisation is the increasing integration and interdependence of national economies. Consumers benefit from greater choice, lower prices, and access to goods and services from around the world. For instance, consumers can buy clothing manufactured in Bangladesh at lower prices than locally produced clothing.

Definition Flip

Explain what is meant by a Multinational Company (MNC).

Answer Flip

A Multinational Company (MNC) or Transnational Company (TNC) is a company that operates in multiple countries, with its headquarters usually located in its country of origin. An example is McDonald's, which has restaurants in over 100 countries.

Definition Flip

What is Foreign Direct Investment (FDI)?

Answer Flip

Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. This could involve establishing a new company or acquiring an existing one. Toyota building a factory in the UK is an example of FDI.

Key Concept Flip

Identify two potential advantages of MNCs for host countries.

Answer Flip

MNCs can create jobs, boost economic growth, and bring in new technology and skills to the host country. They also often pay taxes, increasing government revenue.

Example: Unilever expanding production facilities.
Key Concept Flip

Identify two potential disadvantages of MNCs for host countries.

Answer Flip

MNCs may exploit resources, harm the environment, and exert political influence in host countries. They may also repatriate profits back to their home country, limiting the benefits for the host nation.

Example: pollution or tax avoidance.
Key Concept Flip

Describe how globalisation can lead to increased competition.

Answer Flip

Globalisation reduces trade barriers, allowing more foreign firms to enter domestic markets. This increases competition, forcing domestic firms to become more efficient or risk losing market share. E.g. Local retailers competing with Amazon.

Key Concept Flip

Explain how FDI can impact the balance of payments of a host country.

Answer Flip

FDI inflows initially improve the financial account of the host country's balance of payments. Subsequently, outflows of profits and dividends can worsen the financial account, while increased exports may improve the current account.

Example: A new car factory boosts exports initially.
Key Concept Flip

Discuss one way that MNCs can contribute to economic development in developing countries.

Answer Flip

MNCs often invest in infrastructure, such as roads and ports, which benefits not only the company but also the wider economy. This improved infrastructure facilitates trade and investment, promoting economic development. E.g. Mining companies building roads.

Key Concept Flip

Explain one way governments might try to attract more FDI.

Answer Flip

Governments might offer tax breaks or subsidies to MNCs to encourage them to invest in their country. They may also reduce regulations and improve infrastructure.

Example: Offering a 10-year tax holiday.

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6.1 International specialisation 6.3 Free trade and protection

Key Questions: Globalisation and multinational companies

Define globalisation and provide an example of how it impacts consumers.

Globalisation is the increasing integration and interdependence of national economies. Consumers benefit from greater choice, lower prices, and access to goods and services from around the world. For instance, consumers can buy clothing manufactured in Bangladesh at lower prices than locally produced clothing.

Explain what is meant by a Multinational Company (MNC).

A Multinational Company (MNC) or Transnational Company (TNC) is a company that operates in multiple countries, with its headquarters usually located in its country of origin. An example is McDonald's, which has restaurants in over 100 countries.

What is Foreign Direct Investment (FDI)?

Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. This could involve establishing a new company or acquiring an existing one. Toyota building a factory in the UK is an example of FDI.

About Globalisation and multinational companies (6.2)

These 9 flashcards cover everything you need to know about Globalisation and multinational companies for your Cambridge IGCSE Economics (0455) exam. Each card is designed based on the official syllabus requirements.

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