Expanding an MNC - Essay Example

? Expanding an MNC Question Fictional MNC and its business Excellent Motors, a multinational company of US is an automobile manufacturer. The company has various automobile brands that have been launched in the domestic markets and also in the worldwide markets. The company has established a brand name all over the world due to its customized automobiles that fits the requirements and demand of the markets, culture and the per capita income levels of the countries. The post sale services offered by Excellent Motors are aimed to provide comfort and delight to the customers with warranties provided on specific automobile parts. The company has a mission to satisfy the requirements of its customers. The cars manufactured by Excellent Motors are mainly light machine vehicles. The company offers cars within a wide range of price, targeting customers from middle income groups to high income groups as well. Excellent Motors have reported revenue growth over the years. In order to increase its business operations, the senior management of the company is considering expansion of the business into emerging markets. Question 2: Comparison Matrix for 3 emerging markets The three emerging markets chosen for expansion of business of Excellent Motors are China, India and Brazil. The comparison matrix for the three emerging markets is given as below: Environment China India Brazil Political The political environment in China is quite stable and has a political consensus for encouraging foreign automakers to invest in the Chinese economy. India has a multi-party political system with several opinions and intervention on the policies of the government. Thus the political risk for expansion of the business is moderate. The political environment in Brazil is turbulent for the foreign automobile investors to invest in the country. The political risk of Brazil is on a higher side for expansion of the business. Economic China's economy is open to foreign investments for which it has been achieved high rates of economic growth. India has also achieved high rate of economic growth after economic reforms. The foreign investments by the automakers have been significant in the economy of India (Government of India, 2013). Brazil has attained economic stability with the measures taken to stabilize the currency and interest rates. Due to the diverse set of sophisticated services, the foreign automakers have favored this destination. Legal & Regulatory China's legal and regulatory system has excessive number of clauses to be fulfilled by the foreign automakers which requires high startup cost and compliance cost. The legal and regulatory system of India allows moderate incentives for the foreign automakers to invest in India. There are several regulatory policies and laws on taxation for foreign automakers to invest in Brazil. Technological China is a country that has advanced technologies which would be beneficial for foreign automakers to invest in the country. India has made rapid progress in technological development due to the investments of foreign capitalists. The process for technology transfer required for investment by the foreign automakers in Brazil is relatively cumbersome. Ethical Chinese government has made ethical practices for business as mandatory criteria. The land has specific requirements for foreign investors on ethical reporting and disclosures. The ethical standards for foreign investors in the automobile markets of India are moderate with requirements of true disclosure of business events. Brazil has also strengthened its requirements on ethical conduct of business by the foreign investors. Social responsibility The social responsibility activities of the foreign investors in China are viewed as positive contribution to the society in which they exist. The social responsibility acts of the foreign investors go a long way in creation of brand value for the companies in India. The social responsibility of the companies has helped the companies to increase their profitability in the long run. Cultural The Chinese culture has specific distinctions with that of the foreign investors with differences in language and other habits. However, the country is open to international trade. India is a land of diverse culture with English as corporate language which is favorable for the foreign automakers to invest in India. The country has a diverse cultural environment with barriers in language for the foreign investors. The country, however, embraces multiple cultures from different countries. Question 3: Evaluation of the emerging markets The Chinese economy is open to international investments and has the political will to encourage foreign investments in the automobile sector for economic growth. The start up, regulatory and compliance costs are, however, high for the expansion of business of the foreign automakers (China Government, 2013). The Indian economy has political distortion to the profit motives of the foreign investors in the automobile market. The country has also made advancements in technology which is favorable for the business. The various tax incentives encourage foreign investments in the automobile sector. Brazil has a set of diverse and sophisticated services in the economy of the country. Although the country accepts multiple cultures, the political risk for expansion of business for foreign investors is high (Brasil Gov, 2010). The numerous clauses in regulation of foreign investments and restriction on technology transfers are intricate for foreign investments. Question 4: Determination and justification The emerging economy of India has been chosen as the destination for expansion of business of Excellent Motors. The business of Excellent Motors is concentrated on mainly light machine vehicles. The company has the prospects of tapping the opportunities of rising lifestyle and living standards of the middle class society. The customers in the Indian automobile markets comprise a large section of the middle class society. Due to the rise in income level of the Indian middle class society, the prospects of sale of cars of Excellent Motors would be high. Also, unlike China and Brazil, the regulatory and legal formalities are nor much cumbersome. The start up and regulatory costs are comparatively low. Although, the political interventions and the labor laws are a challenge for the business in India, Indian markets appear to be the desired one for expansion look at the opportunity cost for investment of the company. References Brasil Gov. (2010). Brazilian Economy. Retrieved from: http://www.brasil.gov.br/para/invest/brazilian-economy/economic-overview/br_model1?set_language=en. China Government. (2013). Report on China's economic, social development plan 2012. Retrieved from: http://english.gov.cn/official/2012-03/16/content_2093432.htm. Government of India. (2013). Current State of the Indian Economy. Retrieved from: http://business.gov.in/indian_economy/economics_state.php. Read More