Chapter 81- Controlling MNC’s

Question 1

Political influence

Answer 1

• Corruption can be a problem as SOEs might favour powerful politicians
• State owned operations may soak up the capital that other firms might better employ – this is because politicians or regulators, rather than the market, decide where funding should go. Consequently, inefficient businesses may be given more money than they need while also not being subjected to competitive forces that would otherwise drive down price and improve efficiency.
• Shareholders’ and other investors’ rights may be reduced or ignored because they are not the true beneficiaries.
• Even where a firm is not owned or controlled by the state, political influence will nevertheless still be important.

Question 2

Competition policy

Answer 2

A government policy that exists to promote competition and ensure that firms don’t abuse their market power, do not attempt to fix prices or use any pricing strategies to drive out competition

Question 3

Direct Action

Answer 3

The use of demonstrations, protests, strikes or even sabotage to achieve political or social goals

Question 4

Tax avoidance

Answer 4

Using legal methods to reduce the amount of tax you pay.

Question 5

Tax evasion

Answer 5

Using illegal means to avoid paying tax.

Question 6

Pressure groups can:

Answer 6

• Name and shame – involves publicising behaviour that is
considered to be unethical as widely as possible and thereby
threatening the business’s reputation
• Use direct action – use of demonstrations, protests or strikes.
• Lobby- take the issue to the government.