The economies of the countries over the years have become macroeconomic systems which are interdependent, since the close relationship between multinational companies and the markets of developing countries represent a symbiosis which is essential for the development of the World economy. In a globalized market, these transnationals dictate in many ways the lifestyles and economic quality of many parts of the world.
This is because when a company decides to make an investment, it has to present to the host country government different financial statements which have different advantages and disadvantages. When the company shows its Financial Statement, it has to respond monetarily for everything that the company represents, including the taxes that are credited for being a foreign company.
These multinational companies are always motivated to respond in the best way to the markets and offer the best products that they can receive. For this, in the international market, there are different types of distinctions to which a company can aspire.
Among these are the ISO 9000 standards, which are dictated by a quality control committee of the International Organization for Standardization. They have a certain number of steps to implement these rules.
A basic rule of the ISO 9000 standards is that the manager of the company must know how to prepare an audit, which is key in the process of demonstrating how reliable the company is in the market.
These ISO 9000 standards also have many benefits and characteristics, as well as a series of objectives which serve to encourage companies to generate better products to improve the quality of life of both their employees and their customers.
What is a foreign direct investment?
Sometimes developing countries need economic incentives which facilitate growth and development. They usually do this by allowing multinational companies to establish production bases in the regions that need it most.
This is because the labor of people in developing countries is cheap and easy to pay both in cash and in social security benefits for these companies that are so big.
The main advantages that come with this for companies is that they do not have to pay so many import and export taxes, however, governments usually subsidize these companies in order to generate a benefit for both. For example, there are companies that provide their services to the governments of the countries where they are in exchange for reductions when paying taxes.
By bypassing all economic restrictions in the countries that receive the company, they have unlimited access to the market and therefore can position their product against other national companies.
Advantages and disadvantages of foreign direct investments (FDI’s)
When these companies start production, they open factories whose dimensions are never before seen in developing countries, which allows for a positive technological change in the country, since the government allowed a company to introduce state-of-the-art technology to the market, either with the product itself or with the method used to produce it.
Also, when these big companies open doors in developing countries, the employees end up very benefited. This is because companies make sure they invest well in social security plans for their employees.
In addition to the fact that the presence of a stable source of work allows the economic development of the families of the employees, achieving an improvement in the quality of life of the population of the locality where said company headquarters is located.
However, not everything is perfect and with FDIs come certain key drawbacks. One of these is the monopoly that these large companies can represent for all national companies smaller than these.
This is due to the fact that, as they are such large companies, they overshadow the opportunity of entering the market for several regional companies. Likewise, a very clear disadvantage is the economic adversity that these companies leave behind when they have to close their doors.