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Consider Social Economic And Political Effects Of Company Relocation (Essay Sample)


Political Effects Of Company Relocation


Benefits and Drawbacks of a Company Moving Its Production Operations to a Developing Country: Social, Economic and Political Effects of Company Relocation
Institutional Affiliation
Benefits and Drawbacks of a Company Moving Its Production Operations to a Developing Country: Social, Economic and Political Effects of Company Relocation
While developing countries are characterized by low economic, technological, and living standards, they are vast with huge population, abundant natural resources, and unexploited markets. Developing countries have a tremendous potential for agricultural production and are seeking technological solutions to become more socially and economically advanced. This makes developing countries a huge market potential that could attract more companies to invest in these areas. Companies often move operations to developing countries when the conditions are tight to thrive, considering political, social, and economic factors that influence business operations to remain competitive. There are two motivations directly related to a company’s decision to move its production operations to a developing country. The first one is the need of the company to minimize operation costs and the other is the company’s need to take advantage of the opportunities for collaboration and bring forth new ideas (Balbontin & Hensher, 2018). This paper reviews the motivations for business relocation by analyzing the benefits and drawbacks for a company moving its production operations to a developing country. Therefore, companies should move their production to a developing country when the economic, social, and political conditions will allow that company to thrive.
It is common for developing nations to lack the production capacity, but the attraction of more investments significantly improves the growth prospects and requires incentives to achieve production potential. For instance, developing nations have readily available cheap labour and copious resources that attract more foreign direct investments to spur and sustain growth. According to Cai, et al. (2018), countries with less environmental regulation policies mainly attract outside companies to improve the export capacity. In relation to attracting investments, companies also relocate and exploit the resources abundant in developing countries at a lower cost. Coyne and Moberg (2015) argue that some developing countries are well endowed with labour and natural resources, but lack investments to maximize their potential. Due to lack of capital needed for processing and manufacturing of the raw materials to finished goods, developing countries have become an investment hub that provides raw materials such as agricultural produce for manufacturing industries in developed countries. At the same time, companies respond to incentives, where they can expand operations in new areas, and serve a larger customer base. For instance, according to Coyne and Moberg (2015), firms will tend to emphasize on how fiscal incentives will influence their decisions and governments bid to get such incentives. Overall, if properly implemented, the decision of a firm to relocate to a developing nation and international product will be a win-win situation for both the home and host country.
A firm’s relocation decisions can be influenced by its ability to solve a number of productive problems in developed countries and the zeal to improve the welfare of the local citizens. Studies show that most companies choose to relocate to areas where there are lax regulations because there are risks associated with their failures to address the environmental problems associated with their production. Cai et al. (2018) has shown that 22 developed countries today use China as a pollution...

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