French Mining Industry Company as a Potential FDI Candidate - Case Study Example

French Mining Industry Company as a Potential FDI candidate Name Institution Date French Mining Industry Company as a Potential FDI candidate Country selection: France The country that has been selected is France. This is one of the largest nations in Europe. The country stretches from North Sea all the way to the Mediterranean. The country has a diverse landscape, having mountains in the East and the South. The political landscape in the country is stable. France joined the European Union in 1952 and has since then been a key participant in the growth of the EU (EUbusiness, 2006). Economic landscape in France France has a sophisticated industrial economy and a farm sector that is efficient. The main activities that are conducted by the country include aerospace, automobile manufacture, chemicals and pharmaceuticals, electronics, fashion ware and information technology. The global competitiveness index of year 2013-2014 ranks France as number 23. While this was a drop from position 21 the previous year, it still indicates a great economic position of the country. There are several competitive advantages that France holds. These include the outstanding transport links, communication and energy infrastructure (World Economic Forum, 2013). France also has a healthy workforce. In addition, the quality and quantity of education in the country is great. A combination of these elements has provided an environment that is ready to adopt new technology and this implies that businesses ready to tap into technology can readily flourish in the country. In fact, France was in 2013 ranked number 17 among the countries that are ready for technology (World Economic Forum, 2013). The business culture in France is highly advanced and professional. This is the reason as to why the country is well placed among the innovative countries in the world, especially in sectors based on science. All these boost the growth potential of the country. However, the country has room for improvement in the labor market. The country needs to inject more flexibility in the labor market since it is performing poorly, ranking position 116 in the world (World Economic Forum, 2013). This is because of the strict rules on hiring, firing and employee relations in the country which is full of conflicts. The country also has stiff tax regulations and this makes it difficult to make decisions on working in France. However, improvement in these areas through tentative efforts that are being made provide hope for further growth of the sectors and growth of the country’s economy (See, 2004). Identity of mining industry in France The mining industry in France had suffered a dip. However, the country has recently embarked on mining to increase its national wealth. MarketWatch (2014) reported that France has forged three great obsessions that include the earth, gold and the state into a one composite as the government strives to resurrect mining in the country. This was equated to a classic icon of the 19th century. France moved to acquire a grip over mineral resources that were strategically important both at home and abroad. The government of France recently moved to invest nearly $548 million in a newly established mining company that is state owned. This demonstrates the growing potential of the mining sector. Nearly 200 years ago, the country had owned mining companies in iron ore and coal mines. The government was therefore making a noble move by investing in the state owned Compagnie National des Mines de France (CMF). Creation of this national mining company provides the government the opportunity to control the prices, quantities and sovereignty of mining in the country. Various minerals exist in the country. In addition to iron ore and coal, France has metals such as gold, manganese and nickel as well as uranium (MarketWatch, 2014). France is also looking to explore the mining industry in other countries, with the particular target being countries in the African continent. A state of national unity has been declared in the country, indicating that there is willingness to venture in the industry among citizens from the country. Reasons for choosing the mining industry, particularly Imerys (France) Mining industry was selected because there is goodwill from the government of France to develop the mining industry. This was demonstrated by the government’s move to revive the industry and as if that was not enough, its establishment of a state owned corporation for miming. This provides a great environment for development of a mining company in the country because there is goodwill from the government as well as the people in the country. In addition, mining was selected because it is a service that can be used in other parts of the world. For instance, the company can move to parts of the world where mining activities are carried out, like Africa, which has been picked out as a target by mining companies from France. Imerys was selected because it is a world leader in providing mineral based solutions in the mining industry. The company handles a variety of minerals in the country and this makes it a great company in the mining industry. The company also provides a true picture of the French mining industry which embraces innovation and use of new technology in its operations. This is the status that the country has assumed globally; hence making the company a great selection from France (Imerys, 2014). Company background Imerys was established in 1880 in France. The company specializes in producing and processing industrial minerals. Its headquarters is in Paris, France. The company operates in 50 countries, having over 16,000 employees. For more than a century, the company’s core business was extraction and processing nickel ore. In 1970, the company was diversified by a holding company and its activities were extended. The company has been undergoing several changes in its operations and structure and between 2000 and 2011; a multi mineral group named Imerys was established. This group refocused the process of its operations and eliminated activities that did not correspond to its core business. The company is arranged into business groups corresponding to the main target markets and the group constantly broadens the range of its products as well as extension of its geographical network to zones f high growth. Through this, the company is able to take up new positions in the market. The company has undergone a series of growth and development in its exploration activities and in 2005, it took up a leadership position in providing refractory solutions. The success f the company has been achieved through restructuring of its operations so as to attain a core business activity and through mergers and acquisitions, the most notable one being the acquisition of Lafarge refractories in 2005 (Imerys, 2014). The environment of FDI in France The industrial superiority of France has created confidence among several foreign companies and this has led to a large of companies investing in industries in France. One of the factors that make France a great target for FDIs is the fact the country is highly competitive and globalized. A competitive environment provides a great environment for success of businesses. In addition, innovation is on the forefront among industries in France. Through innovation, industries are able to reach greater heights of operation. Another reason for the attractiveness of France is that the country is on the move. The country has a highly competitive cost structure. The country also has a workforce that is highly skilled and productive. It also has a world class infrastructure that makes business in the country easy to conduct. In a report by KPMG (2012), France was stated to be attractive to most foreign companies because of its competitive alternatives. On the cost of setting up a company and operating in foreign countries, France was ranked fourth among the best industrialized countries (KPMG, 2012). Invest in France (2014) states that every year, there are over 600 foreign investors choosing to create new investment opportunities in the country and this is owed to the competitive conditions in France. In research and development operations, France ranks first in the world and sixth in manufacturing operations in corporate tax rates. In addition, the country’s energy market is the most competitive in the world (Invest in France, 2014). SWOT Analysis: Imerys Strengths Large reserves with high quality Expertise in mining and geology Closeness to customers Industrial tools that are optimized Weaknesses Small business units Uncertain future profitability Opportunities Growing economy New markets Constantly increasing income level Threats Global economy Government regulations Growing competition Company strategy The main business strategy that is used by the company is diversity in operations and use of innovation. The company has diversified its market base and the main target is growth markets which are potential high end markets and energizing countries. The company also has a differentiation strategy where it focuses on its core business units only. Sustainable development and commitment on safety, human resources, environment, corporate governance and innovation form the main strategy of the company. The development factors Development of the company is based on innovation. The company has invested in 8 Research and Development enters and has 20 regional laboratories. The company invests a significant amount of its resources on developing solutions that are tailored to the needs of every client (Imerys, 2012). Culture dimension The company has a strong belief that with a combination of many men and women with different abilities, backgrounds, cultures and experiences and working to achieve a common objective leads to growth in the company. This is the reason the company embraces cultural diversity. A diversity charter was signed by the CEO in 2011 so as to embrace increased diversity. The principle was to ensure recognition, respect and valuing of different people with different backgrounds at Imerys. Accounting values Imerys has a culture of transparency, dialogue and openness. This ensures constructive relations with the world over. This implies that the company carries out open business with its clients. Impact of the factors, dimensions and values for FDI risk The company provides an encouraging environment for FDI. The people, company structure and culture provide a great environment for success of any investment. The company also favors cultural diversity and this implies that expatriates can operate in the company. Coupled with the competitive environment in the country, the risk of FDI is worth taking. France adoption IFRS process Adoption of IFRS in France has been adhered to as required by the standards. Companies are expected to prepare consolidated financial statements according to IFRS with financial statement beginning 2005 (Deloitte, 2009). Foreign listed companies in the country were allowed to use IFRS. Presently, there is the option of selecting between GAAP and IFRS. France is presently at the second stage of adopting the IFRS process (Pologeorgis, 2013). The version of IFRS adoption in Imerys At Imerys, IFRS has been adopted and used based on the stated standards. There are no deviations or changes from the IFRS standards. Financial reporting practices – Imerys IFRS has been adopted and is used for reporting of financial statements at Imerys. The statement includes risks and uncertainties associated with evaluation of resources, markets, evolution of estimates based on current geological work. A statement accompanies the report stating the absence of known factors that could affect the estimates in the statement. Impact of the US from the IFRS convergence process IFRS is based on principles while the US GAAP is based on rules. IFRS has less guidance regarding specific application and interpretation of the standards. Therefore, management is required to use more judgment while interpreting some standards and applying them to the business activities of the company. The company’s rationale for their conluciosn has to be documented (Wright and Hobbs, 2010). Conclusion France provides a competitive environment for any business. The FDI environment is also attractive in France. In addition, the move by the government to revive the mining industry provides a great platform for operation of the mining industry. Imerys has also been on the forefront of the mining industry in France. Therefore, the company should invest in France with Imerys. References Deloitte IAS PLUS. (2009). Accounting Standards Updates by Jurisdictions. Retrieved April 28, 2014, from Deloitte IAS PLUS:  http://www.iasplus.com/en/jurisdictions/europe/france. EUbusiness, (2006). France Country Profile. Retrieved on April 28, 2014 from: http://www.eubusiness.com/europe/france/france-country-profile. Imerys, (2014). Company Profile. Retrieved on April 28, 2014 from: http://www.imerys.com/scopi/group/imeryscom/imeryscom.nsf/pagesref/SCOI-8S4DUX?Opendocument&lang=en. Imerys, (2012). Imerys Presents Today its Strategic Development Orientations at Investor Day and Confirms 2011 Annual Target. Press Release, Paris, France. Invest in France, (2014). Why Choose France? Retrieved on April 28, 2014 from: http://www.invest-in-france.org/us. Market Watch, (2014). France Goes Back to Mining as Source of National Wealth. Retrieved on April 28, 2014 from: http://www.marketwatch.com/story/france-goes-back-to-mining-as-source-of-national-wealth-2014-02-24. Pologeorgis, N. (2013). The Impact of Combining the US GAAP and IFRS. Retrieved on April 28, 2014 from: http://www.investopedia.com/articles/economics/12/impact-gaap-ifrs-convergence.asp. See, H. (2004) Economic and Social Conditions in France During the 18th Century. France: Batoche Books Kitchener. Wright, C. and Hobbs, S. (2010). “Impact and Implications of IFRS Conversion or Convergence.” Bank Accounting & Finance, pp. 21-28. World Economic Forum, (2013). The Globval Competitiveness Report 2013-14. 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