International business strategy case - Essay Example

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Running head:   INTERNATIONAL BUSINESS STRATEGY CASE   International Business Strategy Case Insert Name Insert Insert 15 April 2011 1) Discuss the factors that influence the country selection decision of multinational firms; b) Compare the relative attractiveness and riskiness of Brazil and China to multinational car manufacturers…
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Download file to see previous pages Hence, the theory of comparative advantage, which focuses on the fact that a country should produce the goods and services that are of an advantage to business compared to other countries, applies. This is the case with China, since their low cost and highly demanded machinery are of absolute advantage to the country and it is able to attract major nations like Brazil. A country should hence focus on those goods that are demanded for trade by other countries so as to improve on its economy and gain a comparative advantage (Lasserre, 2007). The diversity of a country I terms of competition can also influence whether a firm’s selection decision. The size of a country’s market is also important since it represents the quality of products being produced in that country. A favorable market, should be able to grow fast due to demand of its products and services, implying that it is the best market for business since it has a competitive advantage. The taxes and interest rates are a major concern to multinational firms who want to venture in business in other countries. These firms will always opt for the low interest rates and low taxes on their goods. ...
These incentives are offered by foreign countries so as to attract investors (Lasserre, 2007). Absolute advantage theory applies in the case of Brazil, which seems to have been keen on the selection of multinational firms; this occurs when it comes to the advantage of one country compared to another in the production of goods and services (Lasserre, 2007). Countries like china have an advantage of cheap and skilled labor and low interest rates over other countries; in this case, Brazil buys raw materials and components from china like windows, which are reassembled in other firms around the world to produce complete busses. The main aim why Brazil relies on China for its raw materials is because of their friendly price, thus enabling Brazil to make profit on the end product. However, Brazil and China are not the only car manufactures. General Motors was experiencing losses before the year 2007 but suddenly made profits as a result to major sales made in the china market in 2006, whereby, it was able to invest more than $2million, which resulted to major profits through the sale of 7.2 trucks and automobiles in China. In addition, General motors acquired the second highest market share in China in 2006. Moreover, car manufactures like the Ford, Honda, and Volkswagen produce economy cars that can compete with the china’s current vehicles. It is evident that car manufactures like the GM are a threat to the Brazilian bus maker Marco Polo. Generally, the reason why Marco Polo does not produce complete busses in China is that, there is a requirement of $100 as an investment, which is very difficult for this company to afford. Whereas, the GM car manufactures were able ...Download file to see next pagesRead More
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