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Read the following extracts (E to G) before answering Question 2 - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Question 2
Read the following extracts (E to G) before answering Question 2. Write your answers in the spaces provided. **Extract E** Pfizer merges with Allergan In 2015,... show full transcript
Worked Solution & Example Answer:Read the following extracts (E to G) before answering Question 2 - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Step 1
Decision for
Answer
Foreign-owned multinationals, such as Pfizer, can bring significant benefits to the economy. They introduce new skills and technologies not typically present in the host economy.
These advantages can extend to local businesses in Ireland through technological transfer, enhancing innovation and productivity in local sectors.
Dublin pharmacies could see increased competition from drug manufacturers, leading to reduced costs and improved choices for healthcare products for Irish consumers.
Furthermore, existing multinationals in Ireland cover various sectors, including IT and construction, which can bolster the local economy by broadening the employment base and reducing sector dependency.
Increased local spending may drive consumer expenditure and contribute positively to Ireland's GDP.
Additionally, the Irish government stands to gain from increased corporation tax revenues as the merged entity declares profits, alongside other revenue sources like Value Added Tax (VAT) from heightened consumer spending.
Step 2
Decision against
Answer
Irish businesses may struggle to compete with Pfizer's ability to offer higher wages. This could result in a loss of skilled staff and scientists necessary for the healthcare sector.
Moreover, the potential for a skills gap may arise, limiting the benefits that local employees can derive from Pfizer’s operations.
Pfizer, being a majority-owned US company, may distribute profits to shareholders abroad, leaving Ireland's economy susceptible to external influences and potential drawbacks.
The reliance on multinational corporations, such as Microsoft, reinforces the vulnerability of the Irish economy, particularly if they withdraw operations without adequate replacements.
Lastly, while the expertise and growth from multinationals is primarily found in IT sectors, it may not translate effectively to support Irish workers in healthcare, hindering local entities from gaining sufficiently from Pfizer’s presence.
Step 3
Potential Judgements
Answer
The Irish government should have supported Pfizer's decision to locate in Ireland. The influx of corporation tax revenue and potential new job opportunities could fuel further economic development in the country.
This additional revenue could be utilized to invest in other sectors, fostering new areas of specialization and supporting educational initiatives that align with local needs.
On the contrary, the government might have been prudent to reconsider its unfettered support due to the potential volatility associated with multinational firms.
Companies like Pfizer hold considerable power in determining local economic dynamics, which may lead to instability for Irish workers and consumers, especially if decisions are made predominantly with shareholder returns in mind.