HookRana Plaza collapsed in ninety seconds
On 23 April 2013, cracks appeared in the walls of Rana Plaza, an eight-storey commercial building in Dhaka, Bangladesh. The shops and the bank on the lower floors closed immediately. The garment factories on the upper floors ordered their workers back in the next morning. On 24 April the building came down, killing 1,134 people and injuring around 2,500 — the deadliest disaster in the history of the clothing industry. In the rubble were labels destined for Western brands, among them Primark, which went on to pay around $14m in compensation and aid.
Rana Plaza is the darkest version of this section's question. Multinationals now command revenues larger than most national economies, and their supply chains reach places their headquarters' laws do not. What do MNCs actually do to the local and national economies that host them — the jobs and technology they bring, the taxes they do or do not pay? Where do the ethical lines run? And when an MNC crosses one, who — government, regulator, pressure group or hashtag — can actually make it stop? Within months of the collapse, more than 190 brands had signed a legally binding safety accord for Bangladeshi factories. It took 1,134 deaths to get the signatures.
DataCompanies the size of countries
Start with scale, because scale is the whole control problem. Walmart's revenue in its 2024 financial year was about $648bn — larger than the GDP of Norway. Apple's stock-market value passed $3 trillion in 2022, bigger than the annual GDP of all but a handful of countries (an imperfect comparison of a stock with a flow, but the scale point stands). By one widely cited 2016 estimate, 69 of the world's 100 largest economic entities were corporations, not countries.
A multinational corporation is simply a business operating in more than one country, but the ones this section cares about operate in dozens — shifting production, profits and jobs between jurisdictions faster than any single government can respond. That mobility is the source of both the benefits and the dangers: an MNC can bring FDI, technology and jobs almost anywhere, and it can also leave, or play governments off against each other for subsidies and tax deals. Keep that asymmetry in mind through every leaf that follows: states are territorial; MNCs are not.
ModelThe local ledger — jobs, high streets, environment
Assess local impact on the spec's three lines. Labour: MNCs create jobs and frequently pay above the local going rate — studies of foreign investors typically find a wage premium — but working conditions can lag far behind head-office standards, as Rana Plaza proved. Local businesses: a new plant feeds a supply chain — Nissan's Sunderland factory, opened in 1986, supports an estimated 30,000 supply-chain jobs beyond its roughly 6,000 direct employees — but an arriving retail or logistics giant can also crowd out local firms that cannot match its prices or wages. The local community and environment: the upside is amenity, sponsorship and business rates; the downside, at worst, is catastrophic. In the Niger Delta, decades of oil spills around Shell's operations left Ogoniland so polluted that a 2011 UN Environment Programme report said the clean-up could take up to 30 years, and in 2021 a Dutch appeals court ordered Shell to compensate Nigerian farmers.
The exam skill is running both columns honestly for the case in front of you — the same industry, even the same MNC, can be Sunderland's anchor employer and the Delta's polluter. Blanket verdicts that MNCs are 'good' or 'bad' for local economies are level-1 answers.
ModelThe national ledger — FDI, technology and the tax question
Nationally, count the spec's five effects. FDI flows strengthen the balance of payments when the investment arrives — though profits repatriated to the parent flow back out for decades afterwards. Technology and skills transfer: Nissan imported lean production into British manufacturing, and its methods spread through the supply chain and its rivals. Consumers gain choice and lower prices. Business culture shifts — continuous improvement and just-in-time logistics arrived in Britain largely aboard Japanese FDI. Tax revenues and transfer pricing are where the argument sharpens. In October 2012 Reuters revealed that Starbucks had paid £8.6m in UK corporation tax over 14 years on more than £3bn of sales — legally — partly by routing a roughly 6% brand royalty to the Netherlands and buying beans through Switzerland at a markup. After a bruising Public Accounts Committee hearing and customer protests, Starbucks volunteered £20m of extra tax over two years: a payment produced by reputation, not by law.
How transfer pricing moves profit. An MNC's UK subsidiary earns £400m of revenue with £360m of genuine local costs — a true profit of £40m, which at the UK's 19% corporation tax rate (as it was until 2023) means £7.6m of tax. Head office then charges the UK arm a 6% brand royalty (£400m × 6% = £24m), booked in a lower-tax country, and routes supplies through a trading hub whose markup adds £10m of cost. UK profit falls to £40m − £24m − £10m = £6m; UK tax falls to £6m × 19% = £1.14m. Some £6.46m of tax has legally migrated to wherever the royalty lands. Now you can see why the OECD's 15% global minimum tax — in force in the UK from the start of 2024 — was designed to make profit-shifting less rewarding, and why 'transfer pricing' appears by name on your spec.
MechanismEthics — where the conflicts live
Every ethics question is a stakeholder conflict in disguise: shareholders want returns, workers want pay and safety, communities want clean air, customers want low prices — and the low prices are usually the pressure squeezing everything else. Map the spec's list onto cases. Pay and working conditions: Bangladesh's garment minimum wage was raised in late 2023 to roughly £90–£100 a month at prevailing exchange rates — that is the cost base underneath a £4 T-shirt. Environmental considerations — emissions and waste disposal: Volkswagen admitted in September 2015 to fitting defeat devices to around 11 million diesel cars to cheat emissions tests; the scandal has cost it well over €30bn in fines, settlements and buy-backs. Dieselgate doubles as the spec's misleading labelling case, because 'clean diesel' was the marketing. Supply chain considerations: exploitation and child labour persist deep in outsourced tiers — the Democratic Republic of Congo mines around 70% of the world's cobalt, some of it in artisanal pits with documented child labour, and it ends up in the batteries of respectable global brands. Marketing considerations: Nestlé has faced a consumer boycott since 1977 over the promotion of infant formula in poor countries.
Notice the recurring structure: the unethical act usually sits with a supplier, a subsidiary or a product claim — exactly where accountability blurs. That blur is what leaf 4.4.3 is about.
MechanismControlling MNCs — law, shame and self-restraint
The spec's control toolkit has five parts, and none works alone. Political influence runs both ways: governments pressure MNCs, but MNCs lobby governments and play them off against each other for tax deals and subsidies. Legal control is the sharpest tool where jurisdiction exists — the EU fined Google €4.34bn in 2018 over Android, and in September 2024 Europe's top court finally ordered Apple to pay Ireland €13bn in back taxes, eight years after the original ruling. Its weakness is that law is territorial and MNCs are not, hence coordinated fixes like the OECD's 15% minimum tax. Pressure groups: in 2010 Greenpeace released a viral parody of KitKat's 'Have a break' advert linking Nestlé to deforestation for palm oil; within weeks Nestlé committed to removing deforestation from its supply chain. Social media turns every customer into a monitor — Dolce & Gabbana lost much of its China business in days in 2018, and Starbucks' tax story was amplified by protest and boycott. Self-regulation — codes of conduct, CSR reports, supplier audits — is the cheapest and least trusted control, though the post-Rana Plaza Accord shows a stronger variant: more than 190 brands signed a legally binding safety agreement, self-regulation with teeth.
The evaluation: control works when the tools stack — law setting the floor, activists raising the cost of breaches, and reputation making compliance profitable. Any single tool on its own, an MNC can usually wait out.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
This section supplies the essay heartland of Papers 1 and 3 — 'Evaluate whether the growth of MNCs benefits a host economy such as Bangladesh' is close to a banker question. Structure the balance sheet the way the spec does: local impacts (labour, local firms, community, environment) against national ones (FDI, balance of payments, technology transfer, tax), and separate the short run (jobs arrive) from the long run (profits are repatriated; standards are raised — or undercut). Named, dated evidence transforms these essays — Rana Plaza, Starbucks' £8.6m, Nissan's 30,000 supply-chain jobs — because examiners reward candidates who ground stakeholder arguments in real cases rather than moral assertion.
On 'controlling MNCs' questions, resist both the counsel of despair ('nothing can be done') and the fairy tale ('CSR will fix it'). The level-4 evaluation is about stacking: legal control sets a floor but stops at borders; pressure groups and social media raise the reputational cost of breaches; self-regulation works only when it is verifiable — and the strongest recent shifts, the binding Accord and the 15% minimum tax, came when several tools moved at once. Conclude by weighting the tool that fits the case: consumer-facing brands fear hashtags; business-to-business commodity firms mostly fear the law.