International Business:Develop a four to six (4-6) page proposal for a MNE conducting FDI - Essay Example

As a concluding point the paper will hypothesize on the future of the MNE. Fictional MNE For the purpose of this paper the fictional MNE is called Extreme Apparel Group (Extreme for short) which designs, manufactures, markets and distributes athletic apparel for high performance athletes. Although it is the case that most athletic sportswear companies manufacture a wide spectrum of products the focus of Extreme is on high performance base-layer apparel. Much of the market is dominated major athletic players such as Addidas, Under Armour, Nike, Asics etc.

the product lines are dominated with garments made of polyester and cotton. The niche that Extreme competes in is the incorporation of the highest quality fabrics and materials such as hydrophobic fabrics (Which would be incapable of absorbing moisture through silica treatment), or anti-microbial fabrics which would be unable to develop smells from perspiration. Extreme has been operating in the market for about ten years and has been public for about five years. Because of the nature of the apparel industry it is the case that Extreme has business operations in a number of nations insofar as the company may purchases fabrics from some countries, and produces garments in other countries (Mainly in South and East Asia).

Up until now Extreme has been subcontracting garment production from a number of independent manufacturers in Asian nations however this has left the company vulnerable to disruptions in the supply chain and occasional poor garment quality. Business Plan The flagship product that the company is looking to introduce into the market is the ExtremeX line of baselayer clothing which is worn underneath athletic uniforms (Hockey, football, lacrosse or baseball jerseys etc.) that is used to wick moisture off the body and keep athletes cool and comfortable.

The product will be extremely light weight, antimicrobial as well as completely hydrophobic. The company is based Boston, Massachusetts in the United States of America, and the target market for the product lines remains in the United States however Extreme is looking to set up their own manufacturing and production facility in Mexico. Although there is a lower cost of labor in many East Asian nations production in Mexico would significantly reduce the transportation costs, and there exists some favorable government policies that have been instituted to encourage foreign direct investment.

The business plan involves purchasing an existing 150,000 square foot manufacturing facility which had previously produced designer jeans for a now defunct apparel company, establish consistent supply chains, recruit a suitable workforce and begin manufacturing the ExtremeX product line. Benefits and Costs of FDI to the Home Country In regards to benefits for Extreme and the United States of America it has been argued by Rodriques (2010) that there are three basic advantages. Firstly there are cost advantages which would give advantages to Extreme become more competitive in the American Market.

Secondly, FDI would open the nation to new and emerging markets, insofar as having operations in Mexico the host nation could be an excellent market for ExtremeX baselayer products. A third advantage would be the simple exposure to other nations. The final example that was provided by Rodriques (2010) is that FDI may act as a pillar for stronger international relations, because