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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 influx of multinationals like Nike into Indonesia can have several positive effects on the local economy.
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Job Creation: The establishment of Nike's factories can create numerous job opportunities for locals, leading to increased employment rates.
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Supplier Benefits: Local suppliers, particularly those providing textiles or rubber, may gain from partnerships with Nike, potentially increasing their revenues and facilitating local business growth.
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Multiplier Effect: As workers are employed in Nike’s factories, they can spend their earnings on local businesses, such as healthcare and education, thus stimulating the local economy.
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Skills Transfer: Employees may acquire new skills and technology from Nike, which could enhance productivity in Indonesia over time.
Step 2
Potential counterbalance
Answer
While Nike's presence can be beneficial, there are also potential downsides to consider.
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Land Shortages: The need for land to establish factories may lead to competition for land, driving costs up for local businesses wishing to expand.
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Supplier Reliance: If Nike relies heavily on foreign suppliers rather than sourcing locally, the expected economic benefits could diminish.
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Health and Safety: If working conditions in factories do not meet international standards, this could create health risks for workers.
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Environmental Concerns: Increased industrial activity could lead to environmental degradation, thereby impacting local communities negatively.
Step 3
Potential judgement
Answer
The overall impact of Nike’s operations in Indonesia will likely hinge on their commitment to responsible business practices. If Nike respects local laws, pays fair wages, and contributes positively to the community, their presence can be tremendously beneficial. Conversely, if they prioritize profit over sustainable practices, the implications for local communities could be adverse. A balanced partnership involving effective regulations and engagement with local suppliers is crucial for maximizing the benefits while minimizing the drawbacks.