Answer to Question #210923 in Management for jai

Question

Covid-19 virus originated from China and spread throughout the world because of Chinese government delay in alarming the world about it. This has resulted in supply chain disruptions for many American and European Multi-national corporations who have world-wide presence but have their plants in China or source raw material from there. So, MNCs are planning to reduce their over-dependence on China. Given this, answer the following with illustrations (Word limit – 150 words for each question):

 

Q. a) What are the various options available for MNCs to shift out of China?     

b) What can Indian government do to attract MNCs? And in doing so, will they jeopardize local home-grown companies? Is a balancing act possible? 

Answer 1

The MNCs should look beyond China. This can be done by finding alternative sourcing options for their materials and establishing supply chains in other countries. Also, delaying tariffs should b done. Due to the government act of putting tariff payment protocols in place, the companies should work to delay tariff payments and exploit the lag by taking orders at the warehouse. Reclassification of p;products should be done whereby companies and organizations have lobbied not to have their products subjected to tariff by recording them to a harmonized tariff schedule (HTS). Another option is preparing customers for the price increase and negotiating with suppliers for a price decrease. This is because as tariffs rise, everyone in the value chain is affected. Therefore, companies should communicate with their customers to find solutions and develop strategies for dealing with tariff costs. Lastly, products made in China should be4 shipped to other countries that are not subjected to China’s tariff levels.

To attract MNCs to India, various strategies can be used. First, planning in the works to approach tese companies and explain to them why India is a better-preferred destination. Second, this can be done by corporate tax cuts. India’s corporate tax rates are comparable to the lowest rates charged in countries such as China. Lastly is privatisation of public sector units. This will decrease the scope for administrative ministries to delay the sale process as it was in the past.

Indian home-grown companies outdo the MNCs. These home-grown companies and organizations identified the potential of the Indian middle class and saw an opportunity to seize the market gap not catered by MNCs in India. Thus a balancing act is possible.