A New Factory Is Not Difficult For Many Multinational Corporation

774 Words Nov 29th, 2016 4 Pages
For the past 30 years, deciding where to build a new factory is not difficult for many multinational corporation. Because China is undoubtedly the most sensible choice, where there is sufficient supply of “cheap labor”, low exchange rate, and the government also provide some benefits laws to attract foreign companies.
With the increasing of economic globalization, that’s starting to change. Multiple risks cause of multinational corporation began to seriously consider the question about “Build a new factory in China”. The risks are as follows:
Labor costs is rising: “cheaper labor” is the main reason that why China became the first choice for multinational corporation. When the labor costs increasing, the costs of overseas construction is also increasing. So, the risk for foreign company is “Investment costs were higher than expected”. For this risk, the company need doing “Multinational Capital Budgeting” before making the decision, it can help the manager to evaluate the plan and decrease the risk.
The lack of economic knowledge and experience. With the change of Chinese economic system, just based on the past knowledge and experiences are not enough. As I mentioned before, at the early stage of “Four special economic zones”, the government provide some benefits law in order to encourage foreign company entry into China. However, with the gradual improvement of Chinese economic system, the “extra bonus” for foreign company become less and less. Collecting economic…

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