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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 factories like those of Nike in Indonesia can significantly boost the local economy. The purchase of land and the construction of factories may create numerous jobs, positively affecting local businesses and contributing to the overall growth of the economy.
Workers at Nike might receive wages that are higher than the local average, enhancing their spending capacity in local businesses. This influx of income can lead to increased demand for goods and services, fostering economic development. Additionally, suppliers to Nike, such as those producing textiles or rubber, could also benefit, leading to a more robust supply chain and economic interconnectivity.
Furthermore, the increase in employment rates stemming from these factories can lead to improved social spending on healthcare and education, thus benefitting the local communities. With Nike’s potential investment in technology and skills training, workers can acquire valuable skills that may raise productivity and quality of life.
Step 2
Potential counterbalance
Answer
Despite these positive impacts, the presence of multinationals like Nike can also create challenges. Land shortages may become exacerbated in urban areas, driving up operational costs for local businesses. Additionally, whether local suppliers benefit from Nike’s choice of sourcing depends greatly on how much of their supply chain is maintained within Indonesia.
If Nike primarily imports materials from abroad, local suppliers may miss out on the opportunity to grow and prosper. Health and safety regulations pose additional challenges; if Nike operates in a manner that prioritizes low costs over worker welfare, this could lead to poorer working conditions and potential exploitation within the labor market, undermining local economic benefits.
Step 3
Potential judgement
Answer
In conclusion, the impact of Nike's operations in Indonesia involves a complex balance of benefits and potential downsides. If Nike adheres to fair labor practices, respects the local economy, and mitigates negative externalities, its presence is likely to be positive. However, it is crucial that Nike employs local suppliers and invests responsibly to ensure that its operations yield long-term benefits for Indonesian society.
The Indonesian government also plays a vital role in fostering a conducive environment for ethical multinational investment through regulations and enforcement, ensuring compliance with labor laws and tax obligations.