Question

1. What are the drawbacks and benefits associated with moving business unit HQ and corporate HQ to another country?

2. ON ETHICS: If you were a CEO or a business unit head, under what conditions would you consider moving HQ?
3. If you were a government official in the MNE’s home country, what can you do to discourage such moves of multinational HQ out of the country?

Answer 1

Answer;

Benefits and Drawbacks

1. The benefits of moving a business unit to extra country include lower tax rate, lower labor cost, lower rent, improved production quality, improved goodwill over bringing jobs, and consolidated operations where the headquarters moves to the location of an offsite business unit.
2. Drawbacks contain language issues, cultural issues, reduced goodwill through exporting jobs, increased latency in responding to problems at distant business units and markets, increased transportation and telecommunication costs, and running 24 hours to support business units and markets in different time zones.

UNDER WHAT CONDITIONS WOULD YOU MOVE YOUR BUSINESS OFFSHORE

1. If I were an American manufacturer and determined that I could not meet my production quality goals due to the dictates of a labor union, I would consider taking my factory to another country.
2. This determination would be made over a period of years where data driving revenue such as labor costs and production costs would be juxtaposed against comparable data from competitors.
3. If I were losing market share due to high production costs while running a union shop, I would assert that as an executive, I cannot work sufficiently "smarter" to carry a workforce that is not also working "smarter".
4. If I found myself in an adversarial relationship with organized labor, as has been the experience of the American automobile industry where a worker discharged for cause could win back his job,
5. I would certainly explore the possibility of having a pristine labor environment, such as General Motors' Saturn Project, or a union-free environment by moving offshore.
6. If I were losing market share while running a non-union shop, and were simply being undercut on lower cost foreign labor, I would move my operations offshore in order to stay in business

WHAT CAN GOVERNMENT DO TO RETAIN MULTINATIONAL HQ

1. If I were a government official facing no revenue versus reduced revenue from a company considering moving offshore,
2. I would gather and publish information on cities with no employee tax to help the principals explore the effect on revenue without employee tax expense.
3. I would explore legislation making clean air credits available to non-manufacturing businesses whose workers commute at a certain level. For sunny, southwest locations,
4. I would explore and publish information about the costs and benefits of solar energy generation as an alternative to one of the components of overhead.