Question

subject: International business

Q. No. 3

Analyze the following situation and answer the questions given below

Max Marks 10

Should We Allow Global Corporation to Set Up a Factory in our Country?

About the business.  Global Corporation is applying for planning permission to build a factory in your country. The factory is expected to be very profitable. 1000 new jobs should be created for assembly-line work. Many of the goods made could be sold abroad. Some of the supplies for the factory will come from your country.

About your country.  In your country unemployment is high, especially amongst skilled workers. The government cannot afford any new building projects. There are several local competitors producing goods similar to the Global Corporation. Import levels are very high. Land for new building is very limited. New developments would have to be built in beautiful countryside.

Questions

i. List three groups in your country who may benefit from allowing the Global Corporation to build the factory.(1.5)

ii. List three groups in your country who may lose from the building of the factory.(1.5)

iii. Would you advise your government to allow the new factory to be built? Explain your answer by judging between or evaluating all of the evidence.(3)

Answer 1

i)

The three groups which may benefit from the factory set up are:

• The unemployed. In a factory there is a need for both skilled and unskilled labor. Since the unemployment is high in the country, a 1000 new jobs being created is a respite nonetheless.
• The local suppliers. We have been said in the passage that the factory needs some of the supplies from the local market, meaning a business transaction takes place between the suppliers and the factory. So, the local suppliers will be very keen for this factory to be set up.
• Local government. A factory set up means that there is an output being produced, which translates to the growth of the nation having said that the factory is very profitable. To add on to this, a slight decrease in the unemployment is a welcome effect by the government

ii)

Some of the groups which may not want the factory to set up are:

• Local competitors. They won't be amused by the idea of the factory as it could dent their profits. And moreover these local competitors in most of the cases don't have capital power to compete against giants like Global corporation.
• The nearby residents of the land allocated for factory set up. Since space is limited in the country, the only way government can ensure the factory is set up is by exploiting the country side. The residents won't be conceding to this as the factory disrupts the environment there by exhausting out gases and other undesirable substances which can cause health issues if it goes unregulated. The natural resources are scarce as well, and the factory could pose a shortage for the people .
• The farmers and businesses depending on these resources. When a massive factory is set up, it is likely that they tend to take away most resources thus leaving out the earlier businesses to suffer.

iii)

Frankly speaking, I wouldn't advice the government to set up this factory as the opportunity costs involved in this case are serious and greater in magnitude which affects the economy in a considerable scale. Without proper funds, the government venturing into this activity will cause long term effects to the economy including destruction of local businesses, indigenous cultivation, pollution levels, etc. As a government, the holistic development of the people should be the concern but not just about 1000 people getting jobs and reducing the trade deficit. Employment being provided through other means is the onus of the government, and entertaining Global Corporation in these circumstances isn't a wise choice.

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