An Examination of a US Based MNE and Potential Expansion Opportunities in an Otherwise Unrepresented Market - Coursework Example

Section/# NetApp: An Examination of a US Based MNE and Potential Expansion Opportunities in an Otherwise Unrepresented Market For purposes of this analysis, the company that has been chosen is that of NetApp. According to information researched with reference to the firm, it has little if any exposure within the markets of Eastern Europe and specifically Ukraine. Although individuals may not necessarily consider Eastern Europe or Ukraine to be a market that has a high level of potential within the given market sector, the fact of the matter is that a high number of potential clients as well as a stratified workforce of high tech employees exist within this region and provide for a level of potential development with which the firm could hope to engage. Such an engagement with the given market would necessarily translate to a means of development both market presence as well as an increase in overall profitability. As a function of defining and exhibiting this level of opportunity, the proceeding analysis will attempt to categorize the key and potential benefits that such an expansion might necessarily entail to the firm. Moreover, the analysis will seek to quantify key challenges and advantages of FDI for the firm as a function of the region/nation selected. Lastly, an examination of the means by which the firm can seek to integrate financial management, operations, marketing, and human resource needs within the market under discussion will also be discussed and analyzed. NetApp, an American firm founded in 1992, has its base within Sunnydale California and is considered one of the top 25 multinational IT industries in the world (NetApp 2012). As such, the firm specializes in data management and storage. A little known fact concerning the scope and range of the firm is the fact that its products provide data storage for 96% of Fortune 100 companies. Such a statistic helps the analyst to realize the true range and scope that the firm enjoys with respect to being able to provide services for some of the most demanding clients within the industry. Such a market niche has enabled the firm to grow and develop in ways that not only set the firm apart from the competition but provide an impressive array of clients which only serves to open to the door to further opportunities within the field of data management and storage needs. With respect to the challenges and advantages of FDI within the country that has been chosen there are several. Firstly, with regards to the challenges, one can quickly and correctly note that Ukraine offers a high level of risk as it is a post-Soviet nation with a developing democracy and developing free market sector. A further concern is the level of corruption that exists within the nation (Hitch et al 2011). Due to the fact that the country is listed as the 32nd most corrupt nation on earth, a high level of governmental corruption stifles much of the life from the economy. Conversely, the existence of a highly trained and exceptionally gifted workforce with relation the technical fields which firms such as NetApp could draw from are exceedingly high. Due to the economically depressed situation that has exhibited itself within for the past two decades, the nation itself is ripe for foreign direct investment; yielding a situation in which every dollar of foreign direct investment will likely translate into a higher yield than what one could hope to glean from a more developed nation. It should not be inferred by the potential investor however that merely because the nation itself experiences a degree of corruption and economic difficulty that there are few if any opportunities for revenue generation therein; quite the contrary. Google and Microsoft as well as HP have recently announced expansions within the nation and the existence of headquarters of several large telecommunications firms provide a litany of clients with which the firm could hope to engage as a means of broadening its international scope and client list. Naturally, one of the key concerns that such a firm would face with regards to seeking to expand into such a market is concentric upon the level of risk exhibited via foreign exchange rate fluctuations. Due to the fact that the nation itself is highly dependent upon an export economy, the level to which currency fluctuation can easily be translated to the economy as a whole is rather high. For this reason, the author would recommend development of a foreign exchange contract as a means of hedging risk with relation to the level to which foreign currency exchange rates could foreseeable move against the firm in the future. Such a Deliverable Foreign Exchange Contract or (DFEC) requires that a FX Contract Limit is agreed upon and booked in a way similar to forward contract. Such a mechanism is not dissimilar to the means whereby a firm would seek to lock in a spot price and/or a future rate for the foreign currency exchange rate as a means of hedging their bets with regards to the direction that the currency might move within the near future (Davies et al 2010). A secondary mechanism whereby the firm could seek to minimize risk with regards to the ways in which foreign exchange rates may move against them would be to book a NDF or (non deliverable foreign exchange contract). This particular type of contract is one which is utilized when currency requirements that cannot be physically delivered offshore due to local and foreign exchange rates. Furthermore, this is also a mechanism whereby firms seek to protect themselves when they believe that the exchange rate is likely to move against them in the future. Lastly, with regards to the different ways in which a firm can seek to minimize its exposure to the fluctuations of international exchange rates, entities can purchase what is known as a currency option. These currency options are designed to allow holders to buy or sell currency holdings while keeping a chance to benefit when the currency shifts in one’s favor. In this way, the option provides you with the right to a certain degree of protection with regards to a specified foreign exchange rate and specific forward rate. Meanwhile, a key way in which the MNE could leverage governmental policies as a means to maximize profitability would be to look for economic incentives for expansion within the given region. As is oftentimes the case, even if incentives are not advertised, they are nonetheless an option for the would-be investor providing that the firm or entity meets a given level of capital investment expenditure or a given threshold of new jobs created. As a function of fleshing out these details, it will be incumbent upon the firm to meet with and discuss these topics with the relevant economic development authorities. Lastly, with respect to the human resources needs, this is one of the largest contributing factors that have driven the analyst to recommend the given geographic region in the first place as fertile ground for an international expansion. Due to the latent levels of programming and IT talent that lie within the region, the firm will have the ability to draw upon a knowledgeable talent base which can help to further the goals of the firm. According to such an eventuality, it should be the express focus of the firm to seek not only to develop new clientele within the region as a direct result of the new presence there but also a there should exist a primary focus upon seeking to employ some of the most talented individuals with a background in IT and data management as a way to boost the expertise that the firm can apply to both the regional and international marketplace. Finally, such a strategy will need to be made in multiple parts and developed over a range of time so that the key growth mechanism, projected targeted clients and talent acquisition all line up so as to provide a seamless entry into an otherwise unreached and untapped marketplace. As has been exhibited within this brief analysis, there are a number of factors that must be carefully considered prior to NetApp determining precisely what market approach they will seek to employ with regards to expanding into Ukraine. Externalities that must be considered will necessarily include the degree and level to which corruption can be tolerated, the level and extent to which the firm is able and willing to expose itself to currency fluctuation, the level and extent to which the firm will be able to extract favorable economic incentives from the local, regional, and federal government, as well as a host of other issues. References Davies, R. B., Egger, H., & Egger, P. (2010). Profit taxation and the mode of foreign market entry. Canadian Journal Of Economics, 43(2), 704-727. doi:10.1111/j.1540-5982.2010.01590.x HITCH, I. T., & KUCHMA, Y. (2011). Ukraines New Anti-Corruption Law: Will it Really Stop Corruption in Ukraine?. International Lawyer, 45(3), 839-855. NetApp, Inc. SWOT Analysis. (2012). NetApp, Inc. SWOT Analysis, 1-9. Read More