internationalbusiness - ProFile 3 UNIT 9 International...

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Unformatted text preview: ProFile 3 UNIT 9 International business BR AIN DR AIN For many decades, before it achieved its ‘Celtic Tiger’ status, citizens of the Irish Republic worked abroad, notably in Britain and the United States. Typically in these scenarios, the folks back home relied on the foreign remittances from overseas family members, due to high unemployment at home. Ireland has now turned this situation around, and people are emigrating there to work and to further their careers in such areas as high-tech industries. Ireland is not an isolated case. Frequently, it is the best and the brightest who leave their homelands. This brain drain includes research scientists and doctors lured by better pay, working conditions and research opportunities elsewhere. British universities are now under intense pressure to keep their academic staff, who can find numerous career openings with higher pay in the US higher education sector. California has also welcomed thousands of Indian engineers in recent years. In the US such workers find it comparatively easy to win the coveted ‘green card’: others may win one in a lucky lottery or simply choose to work illegally. An unattractive aspect of the brain drain is that developing countries are often deprived of the skills of doctors and nurses who are assured of a better life overseas. SETTING UP OVERSEAS It is not just staff who seek opportunities overseas: more and more companies are doing the same. The risk is that companies which outsource production are often criticized for exporting jobs. However, the home country’s loss is a foreign country’s gain. Winning overseas investment can see some unseemly behaviour from all parties with multinationals playing developing countries off against each other. Developed European countries compete ferociously for the privilege of hosting operations such as a Japanese car plant on their soil with all the new employment that entails. See the ProFile Student’s site: Governments and local authorities may offer all kinds of subsidies, tax breaks, and incentives to beat their rivals. Many of these advantages will be part of an economic development zone set up in deprived areas. LEVELS OF RISK When opening plants or branches in foreign countries, there are four main categories of risk. • Financial: Will the project be financially viable? In addition, setting up a plant overseas will add a new layer of complexity to its management and administration. There will inevitably be differences in taxation, and very often currency. There are benefits too. Multinational companies commonly show their profits in countries with the lowest rates of corporation tax and taxes on profits. • Political: Companies need to take a long cool look at the political situation of possible countries. What is the level of corruption in the country – how easy is it to get things done? Countries may have insurgency problems which make it difficult for foreigners to work there without being kidnapped or worse. In some countries there is the risk that the industry could be privatized if it is exploiting local raw materials or mineral wealth. • Geographical: Companies thinking of establishing themselves abroad should ask the following: is the site of the projected plant susceptible to natural disasters such as flooding, earthquake, or volcanic activity? What logistical problems will the situation of the plant produce? What are the ports, airports, and roads like? • Reputational: Companies damage themselves by making poor choices about outsourcing production to countries where there is widespread use of sweated or child labour. Many companies set a benchmark for the treatment of their workers which is the standard set by local law, but this may not reflect the standards expected in the home country. Photocopiable © Oxford University Press ...
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