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Assess the possible impact of multinationals, such as Nike, on the economy of Indonesia. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1
Question 2
Assess the possible impact of multinationals, such as Nike, on the economy of Indonesia.
Worked Solution & Example Answer:Assess the possible impact of multinationals, such as Nike, on the economy of Indonesia. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1
Step 1
Positive impacts
Answer
The establishment of manufacturing plants, like Nike in Indonesia, can stimulate the local economy. By purchasing land and building factories, jobs are created in both construction and ongoing factory operations, generating a multiplier effect. Workers at Nike may receive wages that enhance their spending power in local businesses.
Furthermore, suppliers of Nike, including textile and rubber manufacturers, may also experience growth, leading to an increase in employment opportunities within these sectors. This employment surge can positively influence local communities by increasing disposable income, which might be redirected towards essential services such as healthcare and education. Educational programs supported by Nike can also enhance the local workforce's skills, leading to improved productivity and quality.
Step 2
Potential counterbalance
Answer
However, the presence of multinationals such as Nike may exacerbate land shortages in urban areas of Indonesia, raising costs for local businesses that wish to expand. The benefits derived from using local suppliers are contingent on their capacity to compete with suppliers from other countries. Additionally, Nike's operations may lead to poorer health and safety conditions if they prioritize low operational costs over worker welfare. If Nike has a preference for imported materials, this could stifle local production, further challenging local businesses.
Step 3
Potential judgement
Answer
Ultimately, the impact of Nike's presence in Indonesia is likely to be positive if it complies with local regulations, pays equitable wages, and supports community development. It is essential that Nike collaborates with local suppliers to optimize mutual benefits. If the focus shifts to minimizing costs at the expense of worker welfare and environmental sustainability, the overall impact may become detrimental. Thus, the Indonesian government plays a critical role in ensuring that multinational investments contribute positively to local economies while maintaining regulations and tax protocols.