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Trade in the Contemporary World

Multinationals, outsourcing and the new international division of labour

  • 3 things to know
  • Component 02

Overview

Recall questions on multinational corporations, outsourcing and offshoring, why firms locate in emerging economies, the benefits and drawbacks for host countries, transfer pricing, the new international division of labour and the smile curve, call centres in India and the Philippines, labour mobility, the brain drain, the kafala system, and reshoring.

What you need to know

Answer each one before you reveal it.

Your recallNot started
Key term

What is a multinational corporation?

Key term

Explain how a multinational's arrival can create a local multiplier effect.

Evaluation

Give two disadvantages for a country that becomes heavily dependent on foreign firms.

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is a multinational corporation?

    Model answer

    A multinational corporation is a firm that owns or controls production, services or sales in more than one country.

  2. 2

    Define outsourcing.

    Model answer

    Outsourcing is contracting part of a firm's work out to a separate company, frequently in another country, rather than carrying it out in-house.

  3. 3

    How does offshoring differ from outsourcing?

    Model answer

    Offshoring moves an activity abroad but keeps it inside the same firm, whereas outsourcing hands it to a different company, which may or may not be overseas.

  4. 4

    Why do multinationals locate manufacturing in emerging and developing countries?

    Model answer

    To cut wage, land and compliance costs, to reach fast-growing local markets, and to take advantage of tax incentives while still using skilled labour and good ports.

  5. 5

    Name three ways an emerging economy benefits from hosting a multinational.

    Model answer

    It gains formal jobs and wages, tax revenue and foreign currency, and technology and skills transferred to local workers and suppliers.

  6. 6

    Explain how a multinational's arrival can create a local multiplier effect.

    Model answer

    Wages are spent in the local area and the plant buys from local suppliers, so income circulates and further jobs appear in housing, transport, retail and services.

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AThe lower quartile is the 2nd value, 11 cm.
BThe upper quartile is the 6th value, 16 cm.
CThe interquartile range is 16 − 11 = 5 cm.

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The sunspot cycle lasts about 11 years.
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