Marketing and Polish Government

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Unit 3 Answers Section A
1. Briefly analyse two reasons why a company such as Dell may wish to relocate its manufacturing operations to another country.

A multinational such as Dell may wish to relocate in Poland due to a variety of reasons of which the main reasons in this case is the subsidy of €52.7, given by the polish government to Dell. With the subsidy the Dells cost of production falls so it is profitable for them to go to Poland. With the subsidy “S” will shift to “S1” as shown below.
Price of computers D S S1

Quantity of computers

Another possible reason for such relocation could be lower wage costs and tax advantages in Poland. Lower taxes and lower wages will reduce Dell’s cost of production. However the impact of
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Dell also then can increase the presence on the world stage. Since protectionism reduces, exporting becomes easier. More quantities can be exported that were previously protected by quotas. Dell can compete with local products in those countries when tariffs reduces Dell’s computers will be cheap and competitive so demand for their personal computers will rise. With reduced barriers Dell can be footloose (relocating from country to country in search of cheap labour) and can adopt transfer pricing. Dell can make lower profits in countries with higher taxes rates and re export and make profits in countries with lower tax rates.

2

Free trade would mean that other multinationals enter countries where Dell is there. This would increase competition for Dell and make it an incentive to increase efficiency. This can however lead to multinationals such as Dell losing part of their market share and market dominance. Countries joining the WTO would mean more markets becoming open up for multinationals such as Dell, e.g. Ukraine in 2008. They joined the WTO so now Ukraine market is open up for free trade. Countries joining the WTO and therefore trade barriers reducing will largely benefit MNCs like Dell. Although there are a few disadvantages like other competitors becoming more competitive, still the advantages to MNCs like Dell outweigh the disadvantages.

5. Explain two likely reasons why India

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