Drawbacks and Benefits of moving HQ overseas
This assignment succinctly analyzes that given case study in the “Close Case”. The case study elucidates the relocating decision making of the multinational companies, their business unit headquarters and the corporate headquarters into foreign countries and the pros and cons associated with these decisions. Other questions have also been answered in light of the case study.
Drawbacks and Benefits of moving HQ overseas: The crucial drawbacks of moving the business unit HQ and Corporate HQ encompass various hurdles of logistics that would be a cumbersome process. Another significant drawback would be the increased financial cost of relocation to another country. The benefits associated with the relocation of Corporate HQ encompass various efficiency gains in terms of productivity and efficient communication between stakeholders. Other advantages include increased market capitalization and financial market visibility. Thirdly, the companies could get advantage from new laws of the host country regarding business. Quality of legal affairs abroad in the host country is another key benefit, especially for the nations of emerging economies lacking world-class laws. Fourth, a commitment is evident with the host country when a company moves its corporate headquarters to any other host country. This also creates positive gesture in the mind of host country customers. The last crucial advantage is the increase in bargaining power associated with the home-country and its government as a result of the threat to relocate headquarters to the host country. There are different companies as a case study that are mentioned here to deal with all issues. For example, IBM focusing on relocating its HQ to China,
The second question is related to ethical grounds, and if I were a CEO, then I would only prefer moving the headquarters abroad if there is cheap labour in the host country as compared to the home country but on market-based wages in light of host country’s labor law. I also would have analyzed the market growth prospects for the business before moving overseas. The ethical dilemma associated with MNEs moving overseas is that the companies often do not abide by the local employment laws of the host country. They usually do not demonstrate their corporate social responsibility and are in the limelight of media due to unethical practices such as not respecting local environment, law, and culture. Corruption is another crucial issue overseas. For example, the chocolate industry has been blamed for its involvement in child slavery etc. therefore, I would consider moving HQ overseas only if advantages outweigh the disadvantages while also focusing on organizational ethics.
In the third question, if I was a government official, then I could discourage businesses and their HQ moving overseas by making the business conditions friendly for the firms. This would require taxation rates to be lenient, business conditions in the home country to be made more favorable and by increasing the relocation costs of relocation of HQ abroad.