Multinational companies are becoming increasingly common in developing countries. What are the advantages and disadvantages of this?
It is argued that a number of transnational companies are opening their production plants in poor countries. This approach helps the companies to take advantage of the cheap labour although, it may lead to poor quality products which affect their sale.
Undeveloped nations provide labour at affordable rates as compare to workers in the developed world. This is to say that there is a huge difference in the currency exchange rates between affluent and poor nations. In addition, there is no standard wage setup system in developing counties which provide the opportunity of paying less wages and employing more workers to get advantage from economies of scale. For example, according to the survey by WorkTech, the Swiss Medicines had employed ten workers in India for a price of single Australian worker on daily basis.
Overseas manufactured commodities are often sub-standard and result in the poor sale. In other words, every nation in the world has its own requirements for quality assurance and what is acceptable in one country may not be acceptable in others. This difference is a major risk when products produced in developing nations are transferred to developed countries as they fail to satisfy the customer needs thus reduces sale. For instance, in a recent report by Clinical Laboratories, lead and cadmium traces are found in Swiss energy tablets, which are produced in India. These chemicals are banned to be used in medicines in Australia whereas Indian authorities have no objection as the percentage is minimum. This report brings the outrageous response from Australians and company lost a major stake of its customers.
In conclusion, production of goods in developing countries provides the benefit of saving on labour cost but it also results in the compromise in quality of these.
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