Global economy Essay Example | Topics and Well Written Essays - 2500 words

Global economy - Essay Example These opportunities are found in major developing countries like India and China, where a large population results in excess of labor demand over supply; leading to comparatively cheap skilled and unskilled labor being available (Dominguez, pp. 5, 2005). At a superficial glance, when a multinational invests in a country overseas, the partnership seems beneficial. Both the parties seem to profit. The multinational company finds a new domain to practice business on, while the country involved benefits due to the creation of jobs in its economy as well as the expansion in the consumer market due to the addition of the MNC’s product. There is however, a more deep-rooted impact of this operation, which implies increased benefit for the MNC and less benefit for the developing country. The nation state, which allows the multinational to operate within its borders, seldom sees the profit from the company’s operations (Chen, pp. 136, 2003). Multinational company, upon earning th is profit, will whisk the profit out of the country to its own origin and home. Resultantly, even when million-dollar companies enter a developing country’s market, the million-dollar profit is not beneficial to the country itself in any way. If evaluated by the subjective eye, the situation can appear as if the MNC exploits the hosting country for its cheap labor and consumer market, while paying back only the bare minimum in the form of wages, while earning a massive profit as well as a beneficial expansion in operations. The operations of a multinational consist of combining the expertise (especially new technology) and the stock capital of the multinational with any opportunities the MNC may find in other countries in the form of cheap labor and other resources, leading to an increased output (Toyne, pp. 42, 2009). The result is often a substantial profit that the investors in the multinational divide amongst themselves and take home. While arguments both favor and oppose this distribution to solely the owners, the unbiased spectator has to admit that there is no legal ground upon which one can object to this distribution. The question that follows is that is there no way out of this redundant cycle for the developing countries? Will they continue to serve the multinationals with their cheap labor without ever seeing a reasonable share of the end profit? To answer this question, one has to evaluate the situation objectively. Since only the investors of a business are entitled to profits, the only way a nation state can fairly demand a share of the profit is by being one of the risk takers of the business. Investors in the MNC who belong to the hosting country share the profit of the company, and it is their decision whether to keep their share within the country, or to send it elsewhere (Nagle, pp. 104, 1998). If the nation state makes investment attractive for these stakeholders, they are tempted to keep the profits within the country to invest. Th is is often not the case in developing countries, where the government policies underestimate the importance of investment. In a country where the government policies promote investment using fiscal and monetary rewards, the country’s economy gains much more benefit through the operations of multinationals. Not only does investment from several sources increase, MNC operations in the country have a two-fold favorable impact

Brazilian Offshoring Sector Essay Example | Topics and Well Written Essays - 1250 words

Brazilian Offshoring Sector - Essay Example According to the Milken Institute’s latest Capital Access Index, Brazil has improved capital access for its entrepreneurs with the intent to stimulate the nation’s economic growth (LBC para. 1). In addition, the Brazilian offshoring sector is characterized by better access to human capital. The case study clearly indicates that the country’s ICT-related technical and graduate courses generate nearly 100,000 graduates annually. According to official data, Brazilian universities produced over 220,000 graduates in 2008. Access to R&D and Technology The Brazilian government gives special concessions to the country’s R&D and technology sectors. To illustrate, the government provides companies with 50% excise tax reduction to purchase R&D equipment and 100% reduction to import software development materials. Brazil’s R&D expenditure in the 1997–2002 period was greater than that of India. The Brazilian Federal Government gives particular attention t o technology and considers software and IT services industry as strategic. In addition, the Brazilian Development Bank offers extensive credit facilities to foster technology projects. Capabilities Brazil has a fast growing economy capable of making the country an attractive destination for global investors. Information technology has been well developed in Brazil and it represents approximately 7% of the country’s GDP. ... nline business sector, Brazil is the largest market in Latin America and the country’s online market grew by 20% over the last year to 40.5 million users (European Travel Commission para. 11). The case study reflects that the country’s total ICT market reached $139.1 billion in 2008. The Brazilian market is export oriented and pays specific attention to global brand performances. The government places great emphasis on the country’s domestic market so as to ensure the sustainability of its traditional industrialists. Regulatory Framework While analyzing the country’s regulatory framework, it seems that Brazil adopts a friendly approach to foreign companies. The case study notes that Brazil has the highest Regulatory Quality index as compared to other emerging economies such as India and China. This situation provides outsourcing firms with a favorable business environment in the country. In addition, the country’s lowest FDI Restrictive Index Scores claim that it is one of the most open economies for FDI. Culture While considering Brazilian culture, it is observed that many Brazilian companies face challenges in handling the country’s English proficiency. This situation persuades Western companies to refrain from outsourcing jobs and businesses to Brazil. From the case study, it is clear that the Brazilian culture attaches great importance to teamwork in software development projects. In addition, Brazilian culture is closer to that of the West in terms of race, religion, and family lifestyle. Hence, Brazilians can better understand Western business rules and market environments (Case Study 8). 2. Unlike the case of India, Brazil developed its software sector mainly to meet the needs of its domestic firms. Evidence suggests that Brazilian IT companies have