Grade 8C
A large, capital-intensive German company producing electrical goods decided to establish a factory in Indonesia.
Discuss how might the establishment of the factory will affect existing Indonesian companies and the Indonesian economy?
Time Duration for submitting the Article is:
October 21st to October 27th, 2013
Write here your answer in 500 Words.
Write here your answer in 500 Words.
The establishment of a German company in Indonesia will have benefit and disadvantages to the existing companies and the economy in Indonesia. German company in Indonesia is known as MNC or multinational company. It is the growth and efficiency of Indonesia which have opened its door to the MNCs. It is important to note the long-term effects because they suggest how a developing country like Indonesia will either improve or decline its position on the world market.
ReplyDeleteEstablishment of this German company might affect Indonesia’s capital. By means of production, is the basic need of an underdeveloped or developing society. It allows for improvement in the structure of the economic system. Through foreign direct investment, companies in Indonesia are able to diffuse much needed resources and an inflow of capital towards Indonesia’s economy.
Technology is also brought in to existing companies in Indonesia with the MNCs. The benefit of this matter is the movement of technology in Indonesia to produce goods as well as for communication purposes. This is important for the development of Indonesia’s local companies. In fact, the introduction of technology to the developing world can lead to cleaner, more efficient technologies.
Another effect is the skill level of workers within Indonesia which would also increase because the German company can and do educate them in the job skills needed to produce efficiently, benefiting both the firm and Indonesia as the host country. One of the most important disadvantage of this establishment of German company might be integration, specifically economic integration is the globalization of a less developed country through FDI.
The number of exports of Indonesia will grow exceptionally as well, their GDP and GNP will also reflect the growth of industry. These changes will potentially attract more investors in the same industry as well as in others, this is known as the multiplier or ripple effect. The multiplier effect is essentially described as all of the good things that could happen as a result of the infusion of capital, technology, skilled labor and exports.
Welfare of the citizen in Indonesia can be greatly improved by the infiltration of German company as MNC. Foreign firms bring with them the promise of jobs. Indonesia as the host country will usually stipulate that the investing company use local labor which will help boost the national economy. They are used to having to pay more to skilled workers in more advanced economies, as well as the fact that they will be using cheaper labor and increasing their products just by moving to Indonesia.
Another benefit is the political improvements that can be facilitated more easily if Indonesia is integrated into the international scene. Governments will agree to change if it means continued investment by German company and the home country of that company. To do this, it is easier to a liberal, capitalist state because they are intrinsically more stabile.
In conclusion, MNCs are beneficial to a less developed country as it is such as German company in Indonesia. They improve the foundations of a backwards economic environment through capital, technology, skills, and exports. They also have a direct effect on the development of citizen welfare conscious government. Number of job increases, as well as consumer spending, tax and health care grows and is more widely accessible. However, in the end there really is no other reliable way to improve social, economic, and political environment of Indonesia than by allowing the German company to invest in.
The establishment of the German company in Indonesia would affect advantages and also disadvantages.
ReplyDeleteSome disadvantages would include decrease in popularity. Since the German company is a large company, it might affect other companies in Indonesia. Especially, usually foreign companies have a high utility of goods and services. Therefore, the problem is that this new company would steal more customers to themselves. And that would create more problems towards the society.
Other advantages would include an increase in joy (welfare). Due to the advance in technology from the German company, it would also affect the less economic developed country (LEDC) and become economically improved. This is because of the new advanced technology will affect the people as well.
More advantages include increase in job opportunities. More local workers would increase. This is because German company would prefer having workers that have a good specialization that would fit the type that they are looking for. But, they would also hire more workers and make them specialize at the specific job.
Also, not only would the local workers increase, but their skills as well. The percentage of workers in Indonesia that used to not have a good specialization will increase because now they have experience from working in the German company.
This German company represents an example of a multinational company.
An advantage for the company itself is that it will earn more customers globally. And it will also earn more profit in the company’s home country.
A disadvantage for the workers that are working in that company would include trade union. Multinational companies do not collide with trade union. Therefore it is a disadvantage for the workers because if they are fired than it would be hard for them to find a new job.
Conclusion, it would include disadvantages and advantages for a German company to establish in Indonesia.
Multinational companies (MNCs), like the German company, are key players in international business; also defined as large companies with facilities in at least one other country than its home country. Multinational companies expand their business overseas through globalization and their investments in the developing world may open up new horizons for the development of economy in a country.
ReplyDeleteThe establishment of a large, capital-intensive German company in Indonesia may help Indonesia’s economy in some particular ways. Clearly, a large multinational company will be able to provide Indonesia with a critical financial infrastructure for economic developments. Inward investments from the German company might help the country’s balance of payments situation.
Multinational companies developing in Indonesia, like the German company, might be a source of tax revenue to the Indonesian government. Profits of the company will be subject to local taxes and may provide a valuable source of revenue to the domestic government.
Besides that, the German company may bring with them new technologies and production methods to Indonesia, and this will be able to help Indonesian companies to improve their techniques and productivity. Indonesian workers may be trained to use the new technologies and domestic firms will be able to see the use of the technologies.
Lastly, the establishment of a German company might be bringing Indonesia a better national reputation. The presence of a multinational company, may improve Indonesia’s reputation and other large companies might start thinking of establishing their companies in Indonesia.
The presence of a multinational company is not always a good sign to a developing country like Indonesia, though. Many of the companies take advantage of the political system because they have such a strong impact on Indonesia’s economy, and it would be devastating to the domestic government to lose the company’s large investments in the country.
Large, multinational companies are not always punished for breaking the laws. Billions of dollars are stolen each year through tax evasion from the developing countries, like Indonesia. Many MNCs cheat the developing country from so much money, which could have been invested in education systems and healthcare, to improve the lives of many citizens in Indonesia.
The environmental impact these large companies have is another big negative downside to the Indonesians. The development of multinational companies and industries creates pollutions that the local people are forced to deal with. Not only that, these companies only need to pay a small amount of money for the damages caused by their company, whilst the people living in the area are suffering.
Concluding all the statements above, I would have to say that the German company would do both good and bad impacts to Indonesian companies and economy. The German company will help the development of the Indonesian companies through new technologies and investments they might bring. But unless the government let them play it fair, the Indonesians may be suffering the costs.
Anabelle - 8C
The establishment of german company in Indonesia will have advantages and disadvantages to Indonesian economy and companies. German company that will established their company will known as multinational company. Multinational company is a company that works in more than 2 countries.
ReplyDeleteThe advantages of german established in Indonesia are :
The investment level, unemployment level, and income level increases. The german company will increase the investment level of the country because the german company invest on Indonesia, the german company will also increases the unemployment level when the german company open the business of course they will find workers for themarketig of their goods and services which will reduce the unemployment person in Indonesia, and the income level in Indonesia will increases because less people are unemployment.
Indonesia also will got the newest technology from german through the german company. For example the german company have a technology that can produce 1000 goods daily, it can encourage other local company in Indonesia to buy that technology and that technology will be well known in Indonesia and many rich company want to have that kind of technology.
Indonesia also can got more tax from the german company because all income that got from vompany in Indonesia must pay tax and Indonesia can got more money from thetax they got.
Level of industrial and economic development can increases also dutto the growth of MNC in Indonesia. It happen because for example the german company are the best seller in Indoneisa, production will also want to established their company in Indonesia because they think they will got many profit and there will be more esport goods in Indonesia than the local goods produce by the national comapny.
The disadvantage of german company established in Indonesia :
The german company may transfer technology that have been outdated in the home country. It happens when the german company bring their technology to Indonesia then the Indonesian company saw the technology and all Indonesian company want to buy it but actually thet technology has been outdated in the home country.
They can pose threat to the economic and political sovereignty of host countries. Those things can happen because the german company doesn’s operate with the national autonomy.
The german company can kill the domestic industry by monopolising the host country’s market. For example the german company arebest seller in Indonesia it can make all people in Indonesia want to buy the goods or services they provide and no one want to bye the national industry in Indonesia, and it will make the Indonesian company can go bankrupt.
The german company also can wasted the natural resources provided in Indonesia for their company which will cause depletion of resources.
German company in Indonesia is known as a multinational company or MNC. A multinational is a firm that has business operations or manufacturing its production in more than one country. As shown in the New Trade Economic Theory, there are two main frameworks, the vertical multinational and the horizontal multinational. This German company is part of the vertical multinational as it separates the stages of production geographically and circumscribe labor-intensive activities in developing countries to take advantage relatively abundant unskilled labor. The establishment of the German factor may cause advantages and disadvantages to Indonesia’s economy and companies.
ReplyDeleteThe establishment of this German company might increase Indonesia to be known at a better national reputation. The existence of a MNC wanting to open a business operation may improve Indonesia’s reputation as other large companies all over the world might reconsider an option of establishing their companies in Indonesia.
A multinational like this German company, can pay taxes on their profits which helps the Indonesian economy to grow. Also, when this company wants to build a factory. It would need a local contractor and would require investments for them. The local contractor will receive payment and would pay tax. As most MNCs would be asked to pay higher tax, this and taxes from German’s company investments will provide an overall increase of Indonesia’s tax revenue.
Establishment of a multinational might increase employment of local workers. As building a factory would require a number of people to work on the project.
The German company may bring new technology, production strategies and skills to Indonesia. This will help Indonesian companies as it will improve their method in doing its work and increase the level of its productivity.
This multinational is a capital-intensive company, this means that it has its own disadvantages brought to Indonesia. A capital-intensive firm is one that invest heavily in capital equipment and machinery and employs relatively less workers. As proved, unemployment in Indonesia is high, having this Germany company settling down in Indonesia will not solve this problem.
The establishment of this German company will not be beneficial for Indonesia as it might damage the environment. Factories built by this company will pollute the air even more. The factory being built will not help reduce the amount of pollution. Instead, it will increase the level of pollution, which may cause greater global warming and harm everyone.
Some multinationals will often move their profits from their business units in the host countries to those countries with the lowest taxes. They may also avoid taxes altogether in some less-developed economies with poor tax-collection and legal systems like Indonesia.
To sum it all, the establishment of this German company can benefit and have disadvantages to its host country, Indonesia. These factors might influence Indonesian companies and Indonesia’s economy.
Monique 8C
There are some advantages and disadvantages of MNC. MNC is a company that are located in more than two countries. The advantages for the other countries or not the home country are technological advancement, more money to the other country, unemployment level decrease , etc. The disadvantage for the other countries or not the home country are people tend to buy to the mnc companies rather than local companies, etc. The advantages for the home country are more profit, more popular, etc. The first advantage of the other countries are technological advancement , in germany the technology is very advance, so when it have store in a country, so the country will start to try to make the duplicate of that technology or machine, so it could be categorised as raw model for the other countries. The second advantages for the other countries are more money to the other country, because when the mnc company pay tax, the tax will be more expensive than the tax for local companies, so the miney of that tax can be used to subsidy the local companies, so that it will not lose from the mnc companies. The third advantage for thevother countries is the unemployment level will decrease, one big company Can hire over one thousand people as their workers, so every big companies are created, the less the unemployment level will be. The first disadvantage of the other countries is people are tend to buy products from the mnc, because they think that every international products are better that the local products are worst, for example indonesia. Hire over one thousand people as their workers, so every big companies are created, the less the unemployment level will be. The first advantage for the home country or mother country is more profit, they will get more profit, because just like what we discuss before that local people trust mnc more than local companies, because they think mnc products have better quality than local. The conclusion is that there are some advantages and disadvantages for the other countries, but there are only advantages for the home country.
ReplyDeleteA company that is runned in more than one country but still usually have headquarters in its home country is called a multinational company (MNC). An MNC, like the German company, is an extensive corporation which carries out and sell goods or services in many countries. Like other types of companies, their may aim may be to prosper in size and profit and therefore open new branches in many areas of the world. They are fully responsible on more than two thirds of trading worldwide and global corporations by the control of these giants.
ReplyDeleteThe installation of a capital-intensive is Indonesia can greatly affect changes, especially to it’s economy. Firstly, they bring new knowledge and more skills into Indonesia which can help local firms improve their own productivity. By sharing ideas, this can benefit the corporation and local firms. With more upgraded technologies for the country, it shouldn’t shatter them from making better goods and services that can improve Indonesia’s economy.
Another impact is that MNCs increase their investment on new business premises, more modern equipment and cutting edge technology, kown as direct inward investments. Significantly, Indonesia’s capital may face further improvement in their system and discharge errors. It can focus goals in rising Indonesia’s GDP levels.
Government charges MNCs, such as the German company, to pay taxes continually based on their fair share of profits. This boosts government revenues and pay as subject and gives the nation as more sources.
The present of a multinational company in a country may promise the need for more workers. Multinationals assures the providing of new jobs with satisfactory income for local workers or the unemployed. However, the German company may not be adherent to this statement as they are capital-intensive; they do not need as much workers as to capital.
Despite of their size as powerful companies, a German MNC can create disadvantages to the host country. A multinational can make full use or exploit workers in countries with low wages. For instance, paying a worker far less to do the same or more work in a country, than workers in an economically developed countries. To make profit, MNC's raw resources of the host country unsystematically, causing depletion of resources. Laws and regulations protecting the natural environment may not be well enforced in developing countries.
Secondly, MNC's may slowly kill the domestic industry by taking over the host country's market. The impact on local industries can be severe and can force them out of the business since large, newly present MNCs like the German company increases competition in the economy. MNCs should be capable of producing at lower costs.
Some multinationals often switch their profits from their business units between countries to those with the lowest taxes. This way, that will avoid on paying taxes to the government. Large, multinational companies are not always punished for breaking the laws. MNCs may also prevaricate taxes and keep large amount of money to themselves, especially in weak economies. The government will face unwanted loss by an MNC presence.
Multinationals may interfere and some use their power to receive generous subsidies and tax advantages from local government. Because they provide jobs many government provide incentives to encourage them to remain in their national economies, such as generous grants to pay for new factories and tax concessions.
To summarize the above, a German company opening in Indonesia may provide many advantages and disadvantages to the nation and their home country, and can also boost national economies.
A company like the German company is a multinational company (MNC). A multinational company is a firm that has business organizations in more than one country but will usually have its headquarters based in it country of origin. Usually multinational companies were built in developing countries like Indonesia. Most multinational companies are the largest joint stock companies in the world. The establishment of the German company factory in Indonesia will have both advantages and disadvantages for existing Indonesian companies and Indonesia’s economy.
ReplyDeleteMultinational company like the German company will also pay taxes and the Indonesians governments are making them as their source of tax revenue to help increase Indonesia’s economy.
The German company will also give employment benefits for Indonesia because there will be more Indonesian employees that are likely to be hired. Usually national governments will provide land for the multinationals factories in places where unemployment is high so that they may hire and give incomes to local workers.
The German company may bring new knowledge, skills and technologies to existing firms in Indonesia. They may also provide existing firms in Indonesia with new productions methods that may help them to increase their productivity. Local employees will also have a chance to use the new technologies and production methods.
Although the German company is providing advantages for Indonesia, as it is a large company, it may also create some problems for Indonesia. Some multinationals are investing in many countries just to get access to natural resources or raw materials that their origin country are not able to provide. And this will make the host country to have lack to natural resources.
Another disadvantage that the German company may bring is that they increases the competition of the local companies in the economy and also the German company should have produce their goods and services t a lower cost compare to the local companies. This also makes local companies to reduce their market share and also decreases the local companies’ profits.
Most multinational companies are aiming for profits, not environment or social considerations. So they might pay local workers lower wages than the amount of money they should receive. They may also reduce their costs of raw materials to increase profits and this sometimes could not be environmentally friendly.
So, the establishment of the German company to Indonesia may help Indonesia in some ways but also may give bad impacts. It brings economic benefits such as increasing Indonesia’s economy, jobs, introduction if new technology to local workers, etc. The bad impacts that they might bring are that they may reduce local companies’ market shares, profits, revenues, customers, local companies lacking of raw materials, etc.
Multinational companies are among the highest types of companies. A Multinational company is a company that is registered in more than one country or that has operations in more than one country Establishing of a multinational company will bring impact on the country. It can either be a benefit or a loss. There are advantages and disadvantages of forming or establishing multinational companies. There are advantages to the host country, and disadvantages to the host country.
ReplyDeleteMultinational companies bring advantages to the host country (Indonesia). The investment level, employment level, and income level of the host country increases due to the operation of MNC's. Since MNC’s are more worldwide, they will increase job opportunities/employment in that country. Local people from Indonesia will find it easier to get a job. They’ll invest more for the company and also receive more income.
The industries of host country also will get latest technology from foreign countries through MNC's. The host country's business also gets management expertise from MNC's. Multinational companies can bring key skills to the host country. For example, this multinational company is from Germany, specializing in electrical goods, they can bring their skills or share their knowledge to Indonesia, which could help them.
The domestic traders and market intermediaries of the host country gets increased business from the operation of MNC's. MNC's break protectionalism, curb local monopolies, create competition among domestic companies and thus enhance their competitiveness. There will be more competition between companies if there were multinational companies in a particular country because multinational companies are worldwide, which means that they’re more likely to be more competitive than the rest of the companies.
Domestic industries can make use of R and D outcomes of MNC's. The host country can reduce imports and increase exports due to goods produced by MNC's in the host country. This helps to improve balance of payment. Level of industrial and economic development increases due to the growth of MNC's in the host country. Multinational companies help in equalizing of cost of factors of production around the world. They provide an efficient means of integrating economics
Multinational companies will also result in loss or disadvantages in the host country. MNC's may transfer technology which has become outdated in the home country. So the technologies isn’t always updated in host countries. As MNC's do not operate within the national autonomy, they may pose a threat to the economic and political sovereignty of host countries. Sovereignty is the quality of having independent authority over a geographic area, such as a territory.
MNC's may kill the domestic industry by monopolishing the host country's market, or acquiring or maintain a monopoly. In order to make profit, MNC's may use natural resources of the home country indiscriminately and cause depletion of the resources. It causes the resources to be less. A large sum of money flows to foreign countries in terms of payments towards profits, dividend and royalty.
My conclusion is that forming a multinational company could be bad and could be good because there are benefits and losses of setting MNC’s.
Kevin 8C
Multinational companies are enterprises operating in several countries but managed from one home country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational company. Now I will discuss some of the advantages and also some of the disadvantages that the multinational companies will feel the affect and their effect to the other people that surrounds the multinational companies.
ReplyDeleteNow I will discuss the advantages first and after that the disadvantages. I will discuss two advantages and also two disadvantages of being a multinational companies. The first advantage is about the welfare. Welfare is the availability of resources and presence of conditions required for reasonably comfortable, healthy, and secure living. Another meaning of welfare is government support for the poor and otherwise disadvantages members of the society, usually through provision of free and/or subsidized goods and services. The second advantage is about the job vacancy. Multinational companies are made for those people who is still in need for jobs, so they can have a job. There will be very many job vacancies that will appear in the multinational companies. Now I'm going to discuss about the disadvantages. The first disadvantage is that they must compete with other local firms. They must survive in that area because maybe the other firms will be more powerful than them, they can survive by lessing the price of their products first so many people want to buy their product and so they can survive. The second disadvantage of being multinational companies are the toxic wastes. They must throw the waste that they produce to the lakes or bodies of water that is near them which can affect pollution and harmful water near that area which can cause sickness or even death of people.
So the conclusion is MNCs can yield some benefits for Indonesia, but Indonesian government has to ensure that local companies do not lose out to MNCs investing in Indonesia.
Multinational companies are companies that have branches all over the country. They are very powerful in the economy because they're well known and usually hold a large percent of the market. Examples of them are like Nike, Adidas, Apple etc.
ReplyDeleteSince multinational companies are strong in the economy, they will have an impact on the host and parent country. The host country will depend on how efficient and open it is to the market and etc.
When a multinational company starts in a country, the country's capital may increase. When the capital increases, the economy status of the country increases. The reason to this is the investors from other country may want to invest their capital and it brings more capital to the country.
Another thing a multinational company may do is it may affect the technological advancements and welfare of the country. When a multinational company moves to a country, it brings along its technology and product to the country. The country will benefit from it and this will increase their welfare and technological knowledge.
Another thing that may occur with multinational company is that it will make the people in the country become more skilled. Multinational companies make product that is new in the country. To make this product, it usually requires a higher amount of skills and new knowledge to make it. It will provide education and training to the people and that's good.
Their will also be an advantage from the result of technology, investors etc. When a company go to a country, they will attract investors and their exports will increase. This will cause other benefits to happen in the future