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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, such as Nike in Indonesia, can generate numerous economic benefits. Firstly, the purchase of land and the construction of factories lead to job creation in various sectors, including construction and logistics. This can stimulate local businesses and improve the overall economic landscape.
Workers in Nike's factories may earn wages that are competitive or above the national average, fostering increased spending in local markets. This influx of income bolsters domestic businesses, potentially leading to positive multiplier effects on the local economy.
Moreover, suppliers to Nike, like textile and rubber manufacturers, can see growth in their operations, benefitting from demand increases due to Nike's production needs. This could further enhance employment levels, with additional revenue being redirected towards local services such as healthcare and education.
Overall, as employment rises and businesses thrive, communities may experience improved quality of life, with potential knowledge transfer from Nike reinforcing local capabilities and productivity.
Step 2
Potential Counterbalance
Answer
Despite the benefits, the presence of multinationals like Nike could exacerbate land shortages in urban Indonesia, leading to escalating costs for local businesses seeking to expand. The reliance on local suppliers can also introduce vulnerabilities; if Nike's operations prioritize cost over quality, local suppliers might be pressured to cut expenses, which could compromise standards.
Furthermore, if Nike imports materials from outside Indonesia rather than sourcing locally, this can deprive local industries of necessary contracts, stifling potential growth.
Step 3
Potential Judgement
Answer
In conclusion, while Nike establishing operations in Indonesia is likely to yield positive outcomes in employment and economic stimulation, the nuances of its impact depend on several factors. Ensuring that Nike respects local employment laws, provides fair wages, and engages with local suppliers is crucial for maximizing benefits. The Indonesian government plays a pivotal role in this dynamic by establishing regulations that safeguard local interests while attracting foreign investment.