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Assess the likely impact this decision of the merger of Pfizer with Allergan could have on the Irish government, had they received and supported the decision or not. - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Question 2
Assess the likely impact this decision of the merger of Pfizer with Allergan could have on the Irish government, had they received and supported the decision or not.... show full transcript
Worked Solution & Example Answer:Assess the likely impact this decision of the merger of Pfizer with Allergan could have on the Irish government, had they received and supported the decision or not. - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Step 1
Decision for
Answer
The merger of Pfizer with Allergan could bring various benefits to the Irish government. Firstly, foreign-owned multinationals like Pfizer introduce skills and new technology that may not be prevalent in the local economy. This influx can lead to technological transfers, enhancing local businesses' productivity in Ireland.
In addition, Dublin's pharmaceutical sector could experience more competition, potentially driving down prices for healthcare products. This increase in competition helps in making choices more favorable for consumers in Ireland and the EU, benefiting their interests.
Furthermore, the existing multinationals in Ireland come from diverse sectors, broadening the employment base and reducing reliance on a limited number of industries. Additionally, local businesses in Cork may see increased demand for supplies as a result of Pfizer's operations. This rise in demand can lead to greater local spending, contributing positively to Ireland's GDP.
The Irish government could also expect a surge in corporation tax revenue from the profits declared by Pfizer, along with VAT and other consumer spending-related revenues.
Step 2
Decision against
Answer
Despite the positives, there are several critical considerations against the support of this merger. Irish businesses may struggle to offer competitive wages to the highly skilled employees recruited by Pfizer, making it challenging to attract top talent in the healthcare sector. This tight labor market could lead to skill shortages, particularly in critical areas needed by Irish businesses.
Moreover, since Pfizer remains a majority U.S.-owned company, it may prioritize shareholders' profits, which could detract from supporting local Irish businesses. The Irish economy, while benefiting from investments, remains vulnerable to external decisions that affect its stability, particularly if companies like Pfizer decide to relocate operations.
New businesses entering the market, like Microsoft, could escalate competition for skilled labor, further limiting opportunities for local firms to thrive and impacting their overall sustainability. Thus, the pressure from multinational corporations on the Irish labor market may not translate into long-term benefits for the Irish economy.
Step 3
Potential Judgements
Answer
In assessing the Irish government's position on the Pfizer-Allergan merger, it could be argued that they should have supported the decision due to the anticipated gains in corporation tax revenue and potential for local employment. The enhanced tax revenue could help in developing crucial sectors within the Irish economy and promote further job creation.
On the flip side, opposing the merger might be justified if the government considers the increased vulnerability of local industries to global corporate dynamics. Such a stance could preserve the integrity of Ireland's economy in the face of unforeseen relocations by large multinational entities that prioritize profits over local engagement. Thus, the decision remains complex, necessitating a balance between immediate financial gains and long-term economic stability.