Type: Discussion Board
Unit: Foreign Investment Decisions Part 2
Due Date: Tue, 6/12/17
Length 2-3 paragraphs
Course Comprehensive Project
Collaboration in a business environment is a best practice that leverages the collective knowledge of the team assembled. Peer evaluation and support, provided in the spirit of continuous improvement and organizational success, result in higher quality deliverables than generally possible by the efforts of an individual. Please describe the process you plan to use to conduct research, identify findings, and develop the Comprehensive Project due in Unit 5 and present a preliminary outline indicating how you intend to organize the project deliverable.
Unit 5 project below:
International Business Acquisition and Expansion
American InterContinental University
International Business Acquisition and Expansion
Company Acquisition in the European Union
As an investor and a corporate head of Fauna Investment Company in Europe, I would prefer acquiring a company from the European Union borders as compared to any other region in the international business community. The European Union as a unified state of the European nations has a lot to offer as compared to any other country/union of countries in the world. The first reason for the choice of the European Union comprises of the superior dominance of the Union in the international business and socio-political sector (James, Debra, & Paul, 2010). Europe has a major influence on the rest of the world, and having a company in a European nation serves Fauna Investment Company with a powerful position to run its operations in the international market. I believe that Europe will provide my company with the right political platform to expand its business operations in the region and the rest of the world.
The second factor for acquiring a company in Europe is the language and culture. Most European countries speak English, practice democracy, and have a culture similar to that of the United States. Conducting business in Europe equates to launching a product in the United States. It will not be difficult to operate a company in Europe because of the similarity the region has with the United States of America (Merkert & Morrell, 2012). The customers in Europe have more so the same purchasing power and preference for products and services as those found in America.
Europe also comprises of good investment and company acquisition policies and regulations as compared to regions such as Africa, South America, and Asia. The investment policies are friendly and are open to new multinationals venturing into the countries’ business market. Europe also comprises of many laborers from foreign Asian countries and the domestic workers from the European countries which make it easy for any company to acquire its objectivity and boost its financial potential.
Disadvantages and Advantages Investing in the European Union
Several advantages and disadvantages exist regarding the choices I have made about my company acquisition in Europe. The following include the advantages and disadvantages of carrying out business in Europe:
Advantages of Company Acquisition in Europe
Europe was from the first region to establish and implement the Industrial and Agrarian Revolutions. The two revolutions have endowed the continent with the right skills and human resources to support the growth and development of any business. Business has expanded and grown in the European countries due to a stable political and security system (Capaldo, 2015). The banking sector in the country continues to thrive with much investments by financial institutions going to support growing companies and businesses. I choose Europe because my company may acquire financial assistance to expand and reach other European nations. I also do not need to worry about financial crisis due to the stability of the European Union economy. The region has a strong currency as compared to the United States (James, Debra, & Paul, 2010). The European Union uses Euro while Britain uses the Pound which is very strong as compared to the dollar in the international market. The above factor makes it successful for my company to make huge profits as compared to the United States of America.
Disadvantages of Company Acquisition in Europe
As much as the business in the European Union may be lucrative, it comes with its demerits. The European Union comprises of a highly developed status as compared to other regions of the world which may have a negative impact on any new company venturing into its business sector. The first disadvantage includes the high cost of living in the continent. Renting a company’s operational office, leasing a production facility, and developing a store for any company is very expensive (H, T, & D, 2000). Anyone with the hope of starting a company/acquiring one needs to prepare on how to meet the costs of settling before identifying the operational cost of the company. The European Union also lacks enough support for businesses and companies from the government (Capaldo, 2015). The governments of the European countries view the companies as more of profit making than them needing any assistance from them. The above-stated factor influences may companies to fall because they fell to meet their financial objectives.
Disadvantages and Advantages of Investing in Other parts of the World and not Europe
The other regions in the world also possess their advantages and disadvantages as compared to the markets in the European Union. The following include the merits and demerits of investing in other international markets other than the European Nation:
Merits of Investing in Other Countries and Regions in the World
Continents such as Africa and Asia experience a potential business growth and development as compared to the European Union and other developed markets. The continents are endowed with more than enough natural resources that are fit for any business wanting to expand into the international market. The regions also have good business environments to incubate new and diversified business ideas and implement them to their full potential (Colakoglu & Caligiuri, 2008). The other key advantage of the regions is that they have huge populations that may offer unending skills and manpower to the multinationals and foreign companies that invest in their borders. The nations found in Asia and Africa are also new in the field of business and continue to open up to the outside business world to enable them to develop their infrastructure and nurture their growing economies.
Demerits of Investing in Other Countries and Regions in the World
The demerits of the countries found in continents such as Africa and Asia include high instability status and insecurity rates that may affect any businesses operating within their borders. An example may include Somali, South Sudan, Iraq, and Ukraine which experience high instability in security. Such countries act as a havoc to the growth and expansion of businesses and companies. The continents also experience low literacy levels and unskilled labor which may affect the delivery of key objectives belonging to any company. The continents also tend to experience a lot of corruption and embezzling of funds which put the economy at the risk of falling. Kenya, Brazil, and North Korea among others are named as one of the countries with high corruption levels in the world which affects foreign investments (Campbell & Keys, 2002). The leaders are brutal and may close any company that fails to meet their needs.
Reasons for MNC investing in External Financial Markets
Foreign markets have some benefits to multinationals as compared to the domestic markets. The foreign markets tend to offer the multinationals with higher interests funds on their funds which they invest in the markets. The multinationals may be used to their domestic markets such that they may be limited to earning huge profits due to the unstable status of the markets. Foreign markets possess a high availability of financial resources and cash flow which may stimulate the fast growth of the multinationals’ operations. An example of a foreign market may include the People’s Republic of China which is currently the largest country regarding foreign capital (Rivoli, 2003). The thriving international economy supports any growing multinational through providing the nutrients for business growth. The growing status of a nation such as China presents a large status of available investable capital that allows any multinational to expand into its borders.
The availability of the large financial resources and deposits may influence a growing class of individuals with wealth which may lead to foreign investments in other international markets. Another key reason may involve the hope of having the exchange rates for the new markets appreciating as compared to their current status (Narayanan, Desiraju, & Chintagunta, 2004). The appreciation rate of the exchange currency rates makes it stable for multinationals to sell their products and services in the new markets since they reduce risks of financial crisis and inflation. The foreign markets also comprise of several multinationals that offer a thriving platform for international and domestic competition.
It influences the multinationals to develop high innovative products/services to meet the needs/interests of the markets and also to beat the competition. The new markets may also possess high developed infrastructure, better skills and productivity levels, availability of resources, and a good supply chain that may influence business growth and development (Colakoglu & Caligiuri, 2008). The above-stated factors may influence lower transactional costs due to market stability which may influence a multinational company to meet its profits.
Motives in the Provision of Credit in the Foreign Markets
The aspect of providing credit to companies by some financial institutions possess a tricky status. Some of the financial institutions have a preference for providing credit in foreign markets due to some reasons. The financial institutions may perceive that they may acquire huge returns due to the interest rates found in the foreign markets. As per the business needs and interests of the financial institutions, they may invest in markets that possess higher interest rates as compared to their home markets. They may also invest in credit in the economic conditions that have a stronger status as compared to those found in their home markets (Sinclair, 2014). They may perceive the above-stated markets to possess the low risk of default on credit by the borrowers from the foreign markets.
They tend to believe that due to the stable economy, high financial returns, and a faster flow of currency in the foreign markets: their financial systems will work well in the new markets. The financial institutions may also believe that the new markets have good policies that allow the diversification of credit and also support the credit system to expand and meet the market needs (H, T, & D, 2000). Therefore, the above-stated factors influence the financial institutions to feel secure in the foreign markets as compared to their home markets.
Campbell, T., & Keys, P. (2002). Corporate governance in South Korea: the chaebol experience. Journal of corporate Finance, 8(4), 373-391.
Capaldo, J. (2015). The trans-atlantic trade and investment partnership: European disintegration, unemployment and instability. Economia & lavoro, 49(2), 35-56.
Colakoglu, S., & Caligiuri, P. (2008). Cultural distance, expatriate staffing and subsidiary performance: The case of US subsidiaries of multinational corporations. The international journal of human resource management, 19(2), 223-239.
H, G., T, G., & D, S. (2000). “Explaining the Low Taxable Income of Foreign-Controlled Companies in the United States,”. (G. A, G. H. R, & Slemrod, Eds.) Studies of International Taxation Journal, 55-73.
James, C., Debra, P., & Paul, T. (2010). Business Analysis Techniques: 72 Essential Tools for Success. windon: The Chartered Institute for IT. Retrieved February 2nd, 2017, from http://www.bcs.org/upload/pdf/business-analysis-techniques.pdf
Merkert, R., & Morrell, P. (2012). Mergers and acquisitions in aviation–Management and economic perspectives on the size of airlines. . Transportation Research Part E: Logistics and Transportation Review, 48(4), 853-862.
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Narayanan, S., Desiraju, R., & Chintagunta, P. (2004). Return on investment implications for pharmaceutical promotional expenditures: The role of marketing-mix interactions. . Journal of marketing, 68(4), 90-105.
Rivoli, P. (2003). Making a difference or making a statement? Finance research and socially responsible investment. Business Ethics Quarterly, 13(3), 271-287.
Sinclair, T. (2014). The new masters of capital: American bond rating agencies and the politics of creditworthiness. Cornell: Cornell University Press.
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Type: Discussion Board