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International Business Environment Assignment - Essay Example

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The strategy behind any entrepreneurship to relocate his/her business in another country for the purpose of enjoying a comparative advantage is what is referred to as locational flexibility. This is made possible by the mobility characteristic of capital where a firm can move it to new location where labour is cheap and available.
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International Business Environment Assignment
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Download file to see previous pages Outsourcing is viewed by some countries as labour exploitation but a closer look at the impact this practice have to the host country, it is beneficial to the host country in many ways.
To start with, there is creation of employment to the host country's population who could otherwise be unemployed if the firm did not relocate to host country. This in turn means there is improved standard of living to the employed individuals as they can now afford a decent life and meet their basic and other needs such as education, health and food. Through employment, people can afford to support themselves and pay taxes to the government through income tax which would be used for social welfare and development purposes. This is the case with American textiles firms in China where they have been able to provide employment to thousands of unemployed Chinese in their factories thus, a source of livelihood. The same case applies to Bangladeshis in Korea who are happy to have found job in American textiles firms in Korea which they save and send some to their family back home.
The firm's investment to the host country requires business registration, and meeting other legal requirements which are source of revenue to the host country's government. ...
Other countries where firms have been outsourcing labour confirm the positive contributions of these multinational firms to government revenue collection.
Multinationals have a tendency of contracting local firms to do for them a number of businesses such as supply of vital locally produced raw materials, transportation, insurance and other services. This in turn has increased the volume of trade in host nations which translate to increase GDP. Shell Oil Company in Nigeria apart from having its own trucks now and then it hires the services of local transporters for critical supplies. This way the firm saves on insurance cost and transport logistics which are the responsibility of the contracted transporters. This is just an oil drop in the sea, there is much more business partnering with local firms where foreign firms are located across the globe.
In addition, outsourcing earns the host country foreign exchange through exports of products produced by these companies. The realisation of this venture is of great importance to the host country in improving its balance of trade than when these companies are out of the country. Countries like china, Korea among others, will tell of increased earnings from foreign exchange through exportation of foreign firms products to their home countries markets or elsewhere since most of the products are not meant for local markets.
Furthermore, the multinational firms may direct some of their product to the local market thus providing the local consumers with a wider consumer basket to choose from. Variety of goods in the market is a positive business environment and the country may diversify in its consumption thus real socio-economic development. It is a clear phenomenon when we see ...Download file to see next pagesRead More
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