Impact of multinational corporations on traditional local economies

Global Economy vs. Traditional Economy

An economy can be described as closed or open. A closed economy is one where all the earnings and income flows are locally generated. This does not involve the issue of importation or expectation. On the contrary, an open economy is one that encompasses trade with other countries and the local traders. In the recent past, international companies have invaded the local markets and are bringing serious economic concerns to many nations. States are interested in stabilizing their economies and safeguarding them from the invasion of the international companies. This has been the center of discussion for most government leaders and has contributed to the political process of nations.

Effect of multinationals

Multinationals have proved to be more effective and efficient as well as providing better quality products than most local companies. For instance, McDonald's is currently one of the most sought after company by most consumers in the world, regardless of the country. This American-based multinational producer of hamburgers gets to convince many people to buy their products through the application of proper marketing skills as well as maintaining high-quality standards in their products. Other multinationals such as coca cola have also invaded virtually every country in the world today.

Multinationals thrive on the fact that they have better financial muscle than the local companies hence can Marshal better strength to advance the marketing agenda as well as to obtain a competitive advantage. Other factors that have contributed to the multinationals standing a better chance than the local companies have is the euphoria that most local consumers have for products that have been originate from international markets. This belief has made it more appealing.

The Economic Impact of a Thriving Global Economy

To the global economy

The world economy harbors everything positive from a thriving international economy. One is that there will be stability of the frequently used currencies such as the dollar. The dollar, being stable, will ensure that countries have stable economies as well. The importance of a thriving global economy can be demonstrated using the financial crisis of 2008. From the 2008 financial crisis, a general meltdown of the economy was an ordinary thing. This destabilized the dollar, which is the commonly used currency in the world presently. Instability of the dollar also made the inflation rate to rise above the officially recommended level. There was a massive unemployment all over the world as well as an increase in the cost of living. A stable and thriving international economy aimed at protecting the local economies is required. The reason the latter case happened is that virtually all countries around the globe pursue an open economy. This shows the interrelation among global economies.

Ways of safeguarding the traditional economies

Although the international markets are important, their influence on the local traditional economies has to be tamed. This is achieved through a policy popularly referred to as a protectionist policy. A protectionist policy is one where the government chooses to adopt measures that will also promote the local industries from the adverse effects of an overzealous international economy. There are several measures used during the exercise of a protectionist policy. Taxation is one avenue through which the local industry is saved. With excessive tax on imports, a country can block too much importation, which is the negative impact that leads to the collapse of local industries. Secondly, the governments can protect the local industries by charging high registration fees as well as business licensing fees to external-based companies than the local ones. In this case, markets become favorable to the local industries.

The two protectionist measures are reactionary in nature. Other measures entail the promotion of the local industries to counter the rise of multinationals. One way of promoting the local industry is giving government incentives to encourage them. Incentives include charging low registration fees, giving partial or full funding for the growth of local industries as well as providing an enabling environment for the operation of the business locally. Other measures include the creation of a government-to- business interaction program where small local business can seek information relating to the investments that happen locally. They can also be advised on best practices and how they can boost their earnings. Such interactions also give them the chance to ask questions that they may be having regarding their business endeavors. This nature of the interaction gives them an upper hand in exploiting the local market more than the international companies exploit since they will be operating in the market that they know. The foreign firms will have to learn the market then take a step to use it.

Japan exemplifies dome of the countries that have killed many of their traditional markets. Japan has shifted to the west on what it believes as the need to safeguard its tradition of assembling vehicles. For instance, they have established several assembling plants in the U.S. mainly. In this case, they assemble vehicles and sell both to the local and international markets. Research shows that Toyota Company, a Japanese company operating the U.S., sells more vehicles in America than all the other local assembling companies in the country do. This is a clear example of how internationally-based companies have contributed to the death of local industries.

Conclusion

Both traditional and global economies play a significant role in the overall welfare of the people. However, too much dominance of the global economies can kill the traditional industries. Traditional industries are the closest industries to the people. Consequently, they have the best chance to improve the welfare of the people than the global economy. For this reason, they have to be protected at all costs. Global economies too have a role to play in the attainment of a stable local economy. As such, a tradeoff has to be performed to ensure that both the traditional and global economies relate optimally.