Acme - a U.S. Multinational Enterprise

Business, Finance - Year 3

As part of its international expansion program, Acme, a U.S. multinational enterprise (MNE), is currently in the planning stages of establishing a greenfield

As part of its international expansion program, Acme, a U.S. multinational enterprise (MNE), is currently in the planning stages of establishing a greenfield (see text glossary for definition) production facility overseas. You have been asked to present a proposal to the steering committee comparing the advantages and disadvantages of starting operations in one of two selected foreign countries.

The steering committee has determined that one alternative must be a member of the European Union (EU) while the other cannot be a member of the EU. Subject to these conditions, you may choose any two foreign countries, except China, Czech Republic, and Romania for comparison.

Deliverable: There are many factors to consider in your comparative analysis. Please be sure to include, among other topics, a discussion of the different countries' currencies, trade policies and cultural variables that may affect operations and profitability in each country. Your report should conclude with a recommendation and supporting rationale as to which country should be selected for the new facility.

Acme, a United States firm, has been in acquisition talks with two different European firms. JEL Industries is headquartered in a country that is part of the European Union (EU), and uses the Euro, while DBC Industries is headquartered in a European country that does not belong to the Union and does not use the Euro as their primary currency.

Based only on the knowledge of whether or not the firm is located in a country within or outside of the European Union, recommend one of the organizations and explain why you selected that organization. In your response be sure to describe the implications of running a business in a country that is within or outside of the European Union.

Describe the advantages and disadvantages of the choice you made.

Attachment(s):

none

Created:

Oct 08, 2007 8:31 am

Solution By OTA:

105119, Sandeep Bardia, MBA Remember This OTA

Solution

go to problem

For the purpose of our analysis, we will compare France, which is member of the European Union and India, which is located in South East Asia. For Acme Corporation, which is looking to set up a Greenfield project in a foreign country, my choice would obviously be India as compared to France because of the tremendous business opportunity offered by Indian markets.

In the last few years, India has emerged as one of the fastest growing emerging markets and is already one of the largest and fastest growing market in the world due to its large population and tremendous growth across all sectors and per capita income.

There is a huge inflow of foreign direct investment in India in all the sectors and more and more global companies are pumping money into the Indian economy to take advantage of the comparative advantage offered by India. India has already emerged as a global player in information technology and outsourcing related activities due to the significant comparative advantage offered by the country in terms of low cost of production, adequate availability of qualified and skilled english speaking population and host of other factors such as locational advantage, which really makes it a unique country to set up operations.

Indian stock markets have risen like anything in the past few years and economists have no fear in saying that India wil come on par with US economy on the likes of China.

For Acme corporation, India offers significant comparative advantage as compared to a country like France in the following ways:

1) Huge market size: India has not only a signifiantly larger population size as compared to France, but also has increasing market demand for products and services due to strong growth in the GDP, per capita income and due to significant improvement in the standard of living of the people. Further, the locational advantage of India provides a strong base for companies who wish to explore the fast growing markets of South East Asia which