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Reply to discussion (International Factor Movements and Multinational Enterprises)
Q – Please read the discussion Attached and prepare a Reply to this discussion post with comments that further and advance the discussion topic.
The reply needs to be substantial and constructive in nature. it should add to the content of the post and evaluate/analyze that post Discussion
Please provide the references you used.
Ensure zero plagiarism.
Word limit: 200 words.
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Several constraining factors force the expansion of MNEs across international borders. Country
risk is one of the biggest challenges, as it entails political, financial, and economic instability that
MNEs have to face in the new markets. Some of the factors, such as political upheavals,
corruption, and surprise changes in regulatory procedures, are common factors that eventually
raise risks and discourage foreign direct investments (Chen, 2022). Production costs also come
into play because foreign companies have to consider as much as the cost of labour, transport
costs, and tariffs to impose restrictions on further expansion. Also, the regulatory barriers really
are difficult because they impose restrictions on companies from other countries, especially in
sensitive industries such as telecommunications and defence, thus making it costly and timeconsuming to comply with (Narula & Lee, 2020). Above all, market competition from local firms
would serve as a massive hurdle since, in a highly competitive marketplace, MNEs are usually at
a disadvantage while fighting against established domestic players.
The diversified regulations and rules that exist from nation to nation influence MNEs in many
ways. Issues regarding taxation and transfer pricing policies being different in different countries
create confusion and may also raise costs in the value chain. MNEs often have to operate with
varying rates of tax and deal with various regulations in terms of transfer pricing, which directly
affects company profits (Narula & Lee, 2020). Labour laws also vary freely concerning minimum
wage, hours worked, and union rights, which is quite a challenge for MNEs in standardizing their
employment practices across countries. Environmental and safety standards are also different
region by region, requiring the MNE to accommodate such regions’ specific regulations by often
adding operational expenses. This situation does not help along, considering protectionist
policies in the form of tariffs and import restrictions since these policies may have the effect of
promoting domestic businesses over foreign companies, potentially making the latter less
competitive.
Some benefits accrue to a multinational enterprise. Economies of scale are achievable because
the bigger volume of goods produced by an MNE at a lower per-unit cost would give it an edge
as a more competitive global player (Chen, 2022). Also, MNEs gain access to new markets,
thereby capturing new consumption bases and increasing sources of revenue. Typically, the
spread of MNEs is associated with the spread of innovation and technology—they bring more
advanced technologies and methods of management into the host country, contributing to
economic development within that very host region.
The disadvantages brought about by MNEs outweigh their positive side. The major concern of
host countries is the loss of sovereignty in that MNEs can, from time to time, exercise a
formidable influence over local economies and politics, sometimes shifting profits abroad and
evading taxes (Narula & Lee, 2020). To the source country, runaway jobs are an important issue
in that MNEs could make their investment in countries with cheaper labour, which often results
in the loss of jobs at home. They can even build up market power in such a way as to dominate
local markets and, correspondingly, constrain competition, which may have adverse implications
in the form of increased prices and, consequently, an adverse effect on small domestic firms.
While MNEs serve as colossal opportunities for growth and innovation in the global economic
world system, they have to strive through a host of challenges. Some common factors that
restrain the growth of MNEs are country risks, production costs, and variable regulations, which
have to be critically managed (Chen, 2022). Along the same trend, as much as MNEs guarantee
the promise of economic benefits accruing from economies of scale, market access, and
technology transfer, they equally suffer from criticisms over national sovereignty, job
displacement, and market competition. As such, understanding all these dynamics is critical for
the success of MNEs in international markets.
References
Chen, Z. (2022). Research on International Trade Theory and the Status Quo of World
International Trade. American Journal of Industrial and Business Management, 12(6), 1079–
1087.
Narula, R., & Lee, J. M. (2020). The theories of the multinational enterprise. Encyclopedia of
International Economics and Global Trade, 1, 89–114.
Reply to discussion (International Factor Movements and Multinational Enterprises )
Q – Please read the discussion Attached and prepare a Reply to this discussion post with comments that
further and advance the discussion topic.
The reply needs to be substantial and constructive in nature. it should add to the content of the post and
evaluate/analyze that post Discussion
Please provide the references you used.
Ensure zero plagiarism.
Word limit: 200 words.
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