EduNinjaDefinition of multinational corporations (MNCs):
• definition of foreign direct investment (FDI)
• reasons for emergence of MNCs/FDI:
- to benefit from economies of scale
- to access natural resources/cheap materials
- lower transport and communication costs
- to access customers in different regions.
• advantages and disadvantages of MNCs/ FDI:
- creating jobs
- investing in infrastructure
- developing skills
- developing capital
- contributing to taxes
- avoiding paying taxes
- environmental damage
- moving profits abroad.
Introduced in 1935, Inca Kola is a yellow-gold coloured, fizzy, soft drink that is popular all over Peru. By 1995, Inca Kola had grown to become a strong competitor
of Coca-Cola. Inca Kola had a 32.9\% market share compared to Coca-Cola's 32.0\% in Peru.
By 2014, Coca-Cola owned 48.5\% of Inca Kola shares.
With reference to the data above and your knowledge of economics, analyse the possible reasons for Coca-Cola purchasing shares in Inca Kola.
What is meant by the term multinational corporation (MNC)?
With reference to the data above and your knowledge of economics, analyse the benefits of FDI for a country such as Ireland.
A firm is described as a multinational corporation (MNC) if it
has shareholders in many countries
exports goods to other countries
is owned by the government
operates in more than one country
Which one of the following is a disadvantage of multinational corporations (MNCs) operating in a country?
Developing capital
Investing in infrastructure
Creating jobs
Environmental damage
Which one of the following is an advantage of multinational corporations (MNCs) operating in a country?
Avoiding paying taxes
Environmental damage
Developing skills
Moving profits abroad
The price of a basket of goods and services used to calculate the Consumer Price Index (CPI) in an economy, rose from € 1250 to € 1300 in one year.
According to the UN there are now over 63,000 multinational corporations (MNCs) and the number is growing daily. Many well-known MNCs, including PepsiCo, the Tata
Group and Microsoft, are expanding in India.
Explain one possible reason for the emergence of MNCs in a country such as India.
State one possible advantage of foreign direct investment (FDI) for an economy.
Which one of the following is an example of Foreign Direct Investment (FDI)?
An Indian garment factory selling clothes to the UK
The Indian Government investing in the Indian rail network
The construction of a factory in India by a Chinese firm
An Indian supermarket opening new stores in India
In 2021, the UK Government investigated multinational corporations (MNCs) suspected of moving profits made in the UK to other countries. It threatened large penalties for firms that were found guilty of not paying business taxes that were due.
The Government estimated that 2,000 large firms with operations in the UK may owe as much as £ 34.8 bn in tax in the 2019-2020 financial year. This was up from £ 29.9 bn in 2018-2019.
With reference to the data above and your knowledge of economics, assess the drawbacks for the UK of having MNCs located within the country.
Which one of the following is an example of foreign direct investment (FDI)?
A Japanese car company buying an Indonesian car company
An Indonesian supermarket buying produce from a farm in India
A Malaysian gift shop selling souvenirs to a Malaysian tourist
An Australian mining company selling coal to an Indonesian power station