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Determine the key reasons why economic freedom is so critical to multinational companies(MNC’s). Provide one (1) example on how google could end web censorship in China to support your response.
Expert Answer
Economic freedom reflects the government interventions in economic affairs of the country and it is the country specific index. Each country vary in their economic freedom and it is an important consideration
for MNCs as they operate in multiple geographical locations across the globe. So, economic freedom becomes a critical factor for MNCs due to following reasons:
1. Economic freedom decides the approach, method and choice of production related activities, opted by MNCs. A high degree of economic freedom will let MNCs to do what they want to do within the set laws and regulatory guidelines. It is the preferred criteria by MNCs as they try to reduce the cost and bring efficiency in operation.
2. MNCs make different arrangements among their different subsidiaries in different countries. It means that the output of one subsidiary company in a country can be the input of another subsidiary in another country. It makes payment to move from one subsidiary to another subsidiary. Though, it is decided by the economic freedom. High degree of freedom will let MNCs to do this and it is preferred by MNCs. So, it becomes an important consideration before MNCs decides to make FDI in a country.
3. Supportive government policy and nonrestrictive and commitment of minimum or no censorship. It will improve the quality of economic freedom and MNCs will be encouraged to start operations as they get the government support. It is a huge boost to the management of the company.
Google provides a search engine besides other product and services to people and in China, people can find out the best opportunities, information and products using Google. It will break the web censorship as authorities in China want people to see the content on the internet what is permitted by the government of China.
So, it is the economic freedom that decides Google to operate at this level to let people see what they want to see. But, controlled economic freedom will not let Google to do it.
