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1 EAS6212 Final Essay Author Affiliation Course Instructor Due Date
2 EAS6212 Final Essay 2. Why have multinational corporations created extensive global value chains in East Asia, including South East Asia? There are various multinational corporations (MNCs) that have created extensive global value chains in East Asia, including South Asia. These corporations are attracted by various factors that contribute to economic value in the region. As a result of these MNCs' attraction in the region, East Asia has achieved advanced technology and economic growth and development. Arguably, cost efficiency is a key factor influencing MNCs to create a global value chain in East and South East Asia. Most countries in this region offer lower labor costs as a strategic incentive approach to help organizations optimize production and minimize costs. For instance, there are multiple young people in China available to work for transnational corporation factories ( Chang, 2009). Consequently, MNCs take this cost advantage to maximize profits and help them acquire market competitiveness internationally. Availability of labor and MNCs in the region makes East and South East Asian populations to increasingly gain purchasing power as they progress to middle social class status due to economic improvement, making the region a better target market to consume the MNCs' products. In this regard, MNCs acquire easier access to a fast-growing and broader consumer base ( Gotoh, 2020). This is a strategic approach that aligns with various MNCs' long-term objective of attracting the rapidly growing population in the middle-income class. East and South East Asian countries have significantly improved their infrastructural development in the region, attracting MNCs investments. According to Brown (2016), infrastructural development is essential in influencing MNCs' decision-making. Typically, effective logistics and transportation networks play an essential role in facilitating global value
3 chain effectiveness and significantly reduce the cost of operating the business. Therefore, the East and South East Asian region attracts MNCs’ long-term investments due to improved and advanced infrastructure that facilitates better transport and supply chain management. Additionally, the broader spread of innovation and technology enhances an essential role in facilitating MNCs' investment in the East and South East Asian region. MNCs and East Asian and South East Asian countries collaborate effectively in enhancing innovative ideas essential for corporate business world enhancing competences that facilitates technology transfer between the businesses and the region’s population (Brown, 2016). Consequently, this approach facilitates these communities produce an innovative environment, helping the MNCs achieve effective operational efficiency to facilitate profit maximization. Thus, the East and South East Asian population develops effective significance in influencing MNCs' achieve a productive innovative network internationally. Moreover, MNCs’ are attracted by the East and South East Asian government business regulatory rules and regulations that attract foreign investment. For instance, the region’s government's decision to implementing industrial rules and regulations that attracts foreign companies in the region and implementing laws that reduce total tax liabilities facilitates an enabling environment for the MNCs' investments ( Brown, 2016). Thus, MNCs are attracted by government policies that help them develop global value chains and support their business operations. Therefore, cost efficiency, increasing population in middle-class income, improved infrastructure, innovative technology, and investment-friendly government policies play an essential role in attracting multiple MNCs to invest in East and South East Asian regions creating
4 an effective global value chain. In this regard, the region attracts foreign investment in the global economy. 3. State interventionism in both China and Japan created excess corporate debts resulting in major corporate bankruptcies, discuss whether you agree with this view and why. Notably, state intervention played a significant role in controlling trade and industries in China and Japan. These state interventions purposed to enhance trade and regulate the economies to enhance effective developments and economic stabilities. Nonetheless, the two economies’ strategic approaches and economic policies implemented in East Asian countries had both positive and negative impacts on the economy. For instance, the major role of the state in facilitating economic growth and development in China especially through the provision of cheap credit and state-owned-enterprises (SOEs) expansion influenced the corporate sector to reach an overleveraging situation ( Yeung, 2017). In this regard, high growth rates of SOEs, under the control of Chinese state policies led the nations’ industries to become indebted to various financial institutions and organizations. Consistently, the corporate borrowing rate increased uncontrollably due to the provision of cheap credit by state-controlled financial institutions. Consequently, multiple Chinese companies became distressed financially due to the burden of excessive debts from various financial institutions. This approach caused some Chinese companies to experience crucial bankruptcies, incapacitating them from running the businesses further. Therefore, the state’s intervention in China influenced excess indebtedness among corporate businesses despite its effort to facilitate high economic growth in the country. In the same way, the Ministry of International Trade and Industry played a significant role in facilitating state intervention in Japanese companies by implementing industrial policies
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