Nowadays organizations are setting up factories in countries that are different from where their head office is situated. Are the advantages more than the disadvantages?
In contemporary times, the business units are spreading to various parts of the world. This phenomenon carries benefits and drawbacks, but it remains to be seen which aspect overshadows the other.
To embark upon discussion, the advent of multinational organizations and global brands has created an upsurge in the bundle of opportunities. The establishment of their branches is advantageous to both the host and the country of origin – the creation of employment opportunities in the former and inflow of money into the latter, eventually boosting both the economy. This will subsequently help in alleviating poverty from the developing nations and promote prosperity, grant them free infrastructure and increase the choice of goods and services. Local populace will gain a wider choice of goods and at prices relatively lower than the imported substitutes. Profits of these plants will be subject to local taxes in most cases, which will provide a valuable source of revenue for the destination governments.
Having said that, this notion is associated with some drawbacks – unemployment in the native country; closure of manufacturing units as they are shifting to the international market for cheap labor, resources and profits, will cause joblessness. Products manufactured by multinationals are often considered superior in quality and more affordable. This will cause local establishments to go out of business, killing the home-grown entrepreneurial skills. Consequently, making poor nations dependent on companies and vulnerable to interference in the governance. This could bring back colonolism.
To conclude, despite choosing to construct the plants in different locations from the headquarters of having certain pitfalls, the advantages easily overshadowed them. This will create employment bags, infrastructure and also allow companies to exploit cheap labor and resources in the host country.
