The Analysis of the Nestfree Limited - Essay Example

Essay, Business Topic: Expanding an MNC Describe a fictional MNC and describe the type of business your MNC is and the products and services it provides. Nestfree Limited is a multinational company providing hundreds of innovative household electronic appliances including washing machines, microwaves etc. It was founded in the year 1988 by Terry Neston. Its headquarters is in California USA. In 1996, the company merged with Care-sum Company and became registered as Nestfree with factories in United States, United Kingdom, Canada etc. Since its incorporation, Nestfree has made a reputable position in the market with major competitors such as Haier, LG, Panasonic etc. Nestfree expanded its products range to include household items such as home furnishings as well. However, it was unable to compete with the already established competitors in the market and therefore, the company is now entirely focused on domestic devices required for household work. Overall, Nestfree has around 200 factories in the above mentioned countries with around 150,000 employees worldwide. The range of products provided by Nestfree is as follows: 1. Electronic laundry lines 2. Air care products including air conditioners, splits, air coolers etc 3. Televisions 4. Music systems 5. Washing machines 6. Microwave ovens 7. Refrigerators 8. Gas and electronic stoves and other such appliances. However, the company is now seeking to expand its markets in emerging countries of the world. The emerging markets of China, India and Brazil. The information and relative factors of these countries is provided below. 2. Create a matrix that compares three (3) emerging market countries across the following seven (7) elements: a) economic system b) political environment c) legal and regulatory environment d) technological environment e) ethical system f) social responsibility indicators g) cultural dimensions 3. Evaluate each country in the matrix as to its suitability for your MNC. China: The economic system followed in China is a modern one which is supported by a strong financial services sector. One of the major advantages is that the government has zero debt and the Chinese citizens are savers as compared to the borrowing nature of the citizens of United States. The savings by consumers result in high amounts of capital available for banks to invest. This further boosts up investments in the economy which results in economic growth. The political environment in China is relatively stable as compared to other emerging markets. The political risk involved is quite low however; lower transparency in legal and regulatory policies is a big hurdle for foreign companies. The stability in the political environment is brought about by the one party system which results in lower arguments and therefore, greater peace. The business rules and regulations are not very effective with serious transparency issues. Especially for high tech and commodity companies, the regulatory transparency becomes a major issue as well as a big challenge. The Chinese technological environment is quite advanced and the government plans to make china a world leader in the field of science as well as technology. The aim is to make china self sufficient in terms of technology as a result of effective policies designed by the government. The Chinese society is a collectivist society with a strong focus as well as belief on ethical values and systems. Three main ethical systems followed in China include Confucianism, legalism and Daoism. The nature of most Chinese people is structured by the teachings of these ethical systems. Employee welfare and environmental protection are two of the social responsibility indicators which can be used in terms of emerging markets in China. These factors indicate the social responsibility indicators which are to be used as corporate social responsibility features. A research done on cultural dimensions by Geertz Hofstede includes five major dimensions of culture as the influence values and practices in companies. The first dimension is power distance for which 80th rank is given to China showing that there are vast differences in power between superiors and subordinates. Chinese culture is highly collectivist one and high importance is given to work. The Chinese workers focus on a long term orientation with more focus on high term goals. The above mentioned information regarding the emerging market of China shows that one billions consumers in China provide a huge market especially for consumer items and household electronics. Also, these consumers are savers which mean they have enough money saved to spend on new and innovative products which satisfy their needs. However, low transparency in regulatory and legal policies provides challenges for foreign companies. These characteristics of China make it a highly suitable emerging market for Nestfree Company. The market will provide huge opportunities to the company and it will help the country in becoming a market leader by attracting maximum number of customers. India: India is considered to be one of the fastest growing nations of the world and is the third largest country in terms of purchasing power. It has been predicted that India will be the third largest economy by the year 2035. It is currently in the process of high growth and will soon touch new peaks in the world. Generally speaking, the Indian government is quite stable but there is a high amount of corruption which is prevalent in most of the public offices. However, there are many political divisions within the country along with a number of hostile neighbors and these factors could have a huge impact on the overall political environment of the country. At the earlier stages, foreign companies have to face a number of challenges of doing business in India in terms of regulatory and legal environment. The taxation environment is highly complex and may have to be assessed and studied thoroughly before starting off a business. Furthermore, the Indian government has placed caps on the maximum amount of investments in some sectors such as insurance and telecommunications. The Indian government has also taken a number of steps to promote technology in the country. These steps include establishment of technology and research institutions all over India, positive policies for technology and providing incentives for promotion of technology in the country. It should also be noted that the IT sector of India is growing at an increasing rate of 35%. The Geertz Hofstede analysis for India shows a high power distance which indicates higher inequality between the population and this inequality is accepted as a cultural norm by the citizens of India. The long term orientation in Indian culture also shows a perseverant nature of the Indian citizens. The information above shows that India also has a large population which provides unlimited opportunities for foreign companies providing goods which fulfill the needs of the population. Therefore, Nestfree Company can benefit by opening its company in the market. The amazing success of the IT industry in India has attracted many foreign countries and is still continuing to do so. However, a major chunk of the Indian population lives under the poverty line and belongs to a poor background therefore, the multinational would have to focus on major urban centers only. This is because the rural population will not be considered as a target market for the products of Nestfree. Brazil: The economy of Brazil is one of the largest economies of the world of the world which is larger than all other economies of South America. Even after being hit by the global financial crisis, Brazil overtook the economy of United Kingdom. The economy has strong and developed sectors such as manufacturing, mining, service etc. One of the major attractive factors of Brazil is its stable political and economic environment as well as public and private sectors. However, some drawbacks include corruption, complex tax polices along with other regulatory issues. The legal framework of the country is better than other countries of BRIC region but the legal process is quite low as well. The technological environment of Brazil has improved as its international standing has improved from 61st position to 56th position. Brazil has a central science and technology body which define and implement development policies in the field of science and technology. Ethics in Brazil have been widely focused upon and there is a belief that there needs to be strong policies regarding principles, ethics and values in the fields of science, education, philosophy etc. Brazil has also shown an increased interest in responsibility indicators. Brazil has a large power distance and a long term orientation. Along with this, the country also has high individualism and most citizens are interested in true information. The promising success of Brazil`s economy is a major attraction for most foreign countries and its ability to come out of the financial crisis further proves this point. Brazil also promises to provide opportunities to foreign companies including Nestfree. However, given the high level of distortion and setback the country faced due to the financial crisis, there are high chances of the same happening again. This would affect the foreign companies negatively as it did in 2007. 4. Determine and justify your recommendation for which emerging market your company should consider expansion. According to the above mentioned information regarding emerging markets, the economy of China seems to be the best market for Nestfree. Since Nestfree provides home appliances and electronic appliances, the large population of China will provide endless opportunities for the multinational. Furthermore, China is a growing country and one of the leading countries of the world. Therefore, affiliation with a prospective world leader is going to be beneficial for the company as a whole. 5. Provide at least three (3) qualified sources (i.e., peer-reviewed journals, government, or a professional organization Website). Works Cited 1. Ethics in Brazil | United Nations Educational, Scientific and Cultural Organization. (n.d.). Ethics in Brazil | United Nations Educational, Scientific and Cultural Organization. Retrieved October 30, 2013, from http://www.unesco.org/new/en/brasilia/social-and-human-sciences/ethics/ 2. Science and Technology Policy in Brazil | United Nations Educational, Scientific and Cultural Organization. (n.d.). Science and Technology Policy in Brazil | United Nations Educational, Scientific and Cultural Organization. Retrieved October 30, 2013, from http://www.unesco.org/new/en/brasilia/natural-sciences/science-and-technology/science-and-technology-policy/ 3. Sources of Chinas economic growth 1952–1999: incorporating human capital accumulation. (n.d.). Sources of Chinas economic growth 1952–1999: incorporating human capital accumulation. Retrieved October 30, 2013, from http://www.sciencedirect.com/science/article Read More