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Multinational financial management theory and practice
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Foreign exchange rate policies during a financial panic
In order to avoid further down-turn, the central bank should carry out the following payment mechanisms that will keep the economy intact. First and foremost, the central bank should prevent panic sparked off by bad companies from getting to good banks. This implies that the central bank must give sufficient reserves to good banks to meet the withdrawal of deposits but not enough for them to extend new loans to help speculation against currency. Another step is for the central bank to ensure that customers, especially exporters, for the banks which have failed continue to receive credit so as to keep the production going on. This means that the functions of failed banks must be kept alive by the central bank as it restructures the balance sheet for their final sale. The central bank should allow for currency depreciation by floating the currency so as to avoid capital inflow. If the amount of working credit remains unchanged, domestic firms will take an advantage of the depreciating currency and increase their exports CITATION Par01 l 1033 (Park, 2001). The resulting increase in exports will bring about a recovery from the economic down-turn. The growth will restore confidence in the economy, prompting domestic firms to repatriate their capital from abroad. The result will be an appreciation in the value of currency from its depreciated state, although not often to the pre-crisis state CITATION Lee11 l 1033 (Lee & Lee, 2011).
Asian financial crisis in Thailand
Thailand reduced its liquid foreign exchange reserve in a bid to protect its currency. When the Thai baht fell against the dollar in value, regional currencies increased in value, causing the cost of foreign debt to skyrocket. This triggered the financial crisis whereby most countries of the South East Asia were rendered bankrupt. Therefore, these countries could not be able to pay their financial debt and required a lot of financial aid from multination financial aid organizations such as the IMF. Thailand’s baht lost 52 percent of its pre-crisis value against the dollar CITATION Bat08 l 1033 (Batum Corporation, 2008). IMF provided financial support to these countries with the aim of restoring investor confidence and removing Thailand from the hook of the crisis. However, the funds seemed to exacerbate the flight instead of reducing its effects. This is because it served to emphasize domestic financial weakness hence diminishing investor confidence. The economies that suffered the economic crisis are now teaming up to self insure themselves against the consequences of balance of payments difficulties experience earlier. The country has managed to reserve foreign currency so as to avoid another financial turmoil. The regional policy makers and firms were avoiding unbridled financial liberalization and therefore issued few external bonds.
Thailand was praised by the World Bank for being receptive to foreign investment, having market friendly philosophy and being outward looking. Its reception of foreign investment made it a home for many Japanese manufacturing companies. However, this was the main contributor to its collapse when the financial crisis hit Asia. The bank of Thailand tried to maintain the baht-U.S dollar peg by buying currencies that were being traded. This was done by use of official foreign reserves. By the end of July, 1997 the remaining option for Thailand was to replace the fixed exchange rate with a managed float since it could tap no more reserves. A request for loan by Thai’s finance minister was turned down which led to his call for IMF’s assistance. This had been fifteen years since the last call on IMF for assistance. The government was forced to set as its economic objective a budget surplus of 1% of its GDP CITATION Man03 l 1033 (Manuer & Ayatolla, 2003). This was as a result of the restrictions imposed by IMF following their financial aid. The expected revenue was expected to fall to a certain value which forced the Thailand to cut its spending and increase taxes. This further brought down the economy. This saw a decrease in the decrease in employee salary and even laying off of workers. There was a nationwide decrease in retail sales by four percent in the first three-quarters of 1997. Import for consumer goods reduced by one percent during the same period. The investment by private institutions shrank considerably by during the year. The heavy depreciation of baht led to an increase in the amount of export by 26%. The increase in exports was seen as a possible turn from the downturn of the financial crises CITATION Lin10 l 1033 (Lindsay, 2010).
The stiffening of the monetary policy in order to raise interest rates to curtail further currency depreciation, the sudden closure of poorly performing financial institutions, a significant cut in budget outlays and the increase of prudential ratios created a huge credit crunch that deepened the financial crisis in Thailand. To honor its exchange rate commitment, Thailand depleted its foreign exchange rate reserve. The move was to defend its overvalued currency. With the fall in reserves, foreign creditor companies panic and demand an immediate repayment of their loans. It is evident that the Asian financial crisis brought the economy of Thailand to its knees CITATION The07 l 1033 (The Economist, 2007). Multinational companies in Thailand were not spared in its wake. The measures that the country took to control the crisis served to worsen it as its economy deteriorated further. The call for aid from the IMF to cushion their down-turn attracted stiffer restrictions from IMF. The limit by IMF was to see a cut in their financial budget by a certain percentage. This further depreciated baht hence leading to a further financial turmoil. Multination companies in Thailand suffered a big blow as most of them registered a loss. It is estimated that a single multinational company registered an abnormal (-1.43%) loss in its monthly income. Currency derivatives use and potential working hedging strategies did not protect firms from the Asian financial crisis. IMF ordered the closure of up to 58 companies in Thailand. Multinationals were not spared. This is probably due to the magnitude of the panic and the resultant lack of liquidity in the market of the derivatives during and after the crisis CITATION Mor12 l 1033 (Morodum Inc., 2012).
The measures taken by Thailand are not very attractive taking into consideration that it is still grappling with the then financial crisis. It has never returned to its initial state. The financial bailout from IMF was a good turn for them which saw them bend their knees further. This serves as a lesson to Thailand and other countries. The slow recovery of Thailand from the turmoil is reflected easily by the slow growth of the multinational companies still present CITATION Wes02 l 1033 (Weston & Allayannis, 2002).
Asian financial crisis in Malaysia
The Malaysian experience from the crisis shows that Asian countries have liberalized their financial sector and still contain their financial flows through selective capital regulations or control in order to prevent speculation. Malaysia resorted to a controversial capital control as a result of the crisis. Domestic coalitions between the private and the public sector in Malaysia have had a significant contribution to the economic growth of the country between 1998 and 2007. When financial crisis hit South East Asia, Malaysia responded promptly by embracing IMF-like measures (Gitman & McDaniel, 2009). Tight monetary and fiscal policies were implemented in order to defend the Ringgit, limit interest rate hikes and slow credit growth. The first policy, macroeconomic, implemented by the government under the guide of the then Deputy prime-minister Anwar Ibrahim failed to exude confidence in investors and hence exacerbated the crisis. Owing to the worsening crisis, the tight fiscal policies transformed to an expansionary one with higher capital spending and tax reductions in the month of August 2008. The shift was not enough and the country embarked on the controversial exchange and capital controls. The main aim of this was to remove speculations against Ringgit, limit capital flight and gain monetary independence for Malaysia (Hansen & Guan, 2009). The measures taken were: the Ringgit was pegged at RM 3.8 per US dollar, investors were refrained from withdrawing their financial investments in Malaysia for at least one year, Ringgit trading outside the country was prohibited so as to cut down on offshore Ringgit trading market, the transfer of funds outside the country was subject to approval, trade settlements in Ringgit, as well as international lending and borrowing were prohibited, and export and export of Ringgit banknotes were restricted CITATION Nau74 l 1033 (Nauman-Etienne, 1974).
This decision was contrary to international financial market’s expectations. In fact, rating agencies downgraded Malaysia, its sovereign bonds were increased relative to those of Korea and Thailand and Malaysia was gotten rid of from major investment indices. This was as a result of the measure it had taken which brought uncertainty on their influence on direct foreign investment. Initially, financial sector regulation was better established in Malaysia than most of its neighbors. This was because of the central financial reforms Malaysia had undertaken CITATION Sha02 l 1033 (Shapiro, 2002).
Capital controls in Malaysia was met with a lot of resentments as multinational companies and other foreign investors thought that Malaysia was going to experience extreme slowdown and hence would not be able to recover from the financial crisis. However, after its absorption in September 1998, Malaysia experienced a strong and fast recover y from the economic meltdown. The ban of offshore trading brought a stop to capital flight which allowed a decrease in interest rates and business expansions (Field, 2009).
The capital control policy by Malaysian government greatly impacted on the business of multinational companies. The uncertainty in the measures taken by the government led many multinational companies withdraw their investment in Malaysia. This was brought about by the fear for any further economic melt-down. The declines in exports, as well as consumer confidence were among the biggest setbacks for multinational companies as their product could not gain the wider market and hence registering huge losses. The financial crisis led to many workers being laid off. This negatively impacted on multinational companies because the government policy preferred the laying off of a foreign worker to a local worker (Moss, 2007). However, the reduced interest rates attracted other multinational companies. Investors were attracted by the cuts on their investment charges. The country did this in order to regain its image economically as investors would bring an economic through reduction of unemployment and payment of taxes to the government. Portfolio investors who had been denied the chance to withdraw their finances were worst hit because reinvestment on their part could not be realized. This meant that they had to wait for a year or more in order to make huge investments from their finances in the Malaysian banks CITATION Bha00 l 1033 (Bhalla, 2000). Multinational companies which also had their finances banked with Malaysian banks could not invest in other better performing economies as they were financially tied. In a general perspective, multinational companies were negatively affected by the financial crisis. The companies made huge losses, laid off most of its workforce and others opted out of Malaysia immediately CITATION Lip11 l 1033 (Lipson, 2011). It is of importance to note that Malaysia recovered fast from the turmoil and hence those multinational companies present then also experienced a strong economic growth too CITATION Zum08 l 1033 (Zumkehr & Edo, 2008).
Multinational companies in Eastern Asia generally faced negative and significant effects from the credit crunch. The response strategy by Malaysian government was the best choice in the case for it speeded up the recovery of the state from its state of bankruptcy. For multinationals in Malaysia, the experience was the same. The recovery of the country brought a simultaneous recovery in the multinational companies. The companies’ growth was significant, although they were not reinstated. Malaysia is one of the economies to emulate in South East Asia as it took a very different approach towards managing the crisis. Unlike other countries, it did not subscribe to borrowing from IMF. It adopted a capital policy which saw it rise faster than other countries like Korea and Thailand CITATION Ril12 l 1033 (Riley, 2012).
References
BIBLIOGRAPHY Batum Corporation. (2008). Internation Monetary Funds. International Monetary Funds Policies .
Bhalla, v. k. (2000). International Financial Management. Delhi: Anmol Publications pvt. Ltd.
Field, A. (2009). Diagnosing and Fixing Dysfunctional Teams. Harvard Management Update .
Gitman, L., & McDaniel, C. (2009). The future of business : the essentials. Mason: South-Western Cenage Learning.
Hansen, D., Mowen, M., & Guan, L. (2009). Cost management : accounting and control. Mason: South-Western.
Lee, A. c., & Lee, C. F. (2011). Financial Analysis,Planning and forecasting. Francisco: Rutgers University Press.
Lindsay, J. (2010). Investments on Banks. Investment by Financial Institutions .
Lipson, M. (2011). Financial Management. ISI Journal Citation Reports .
Manuer, F., & Ayatolla, G. (2003). Financial crisis in Thailand. Thailand and Financial Turmoil .
Morodum Inc. (2012). The Financial crisis in South Eastern Asia. Joiurnal of Morodum Inc.
Moss, H. k. (2007). Improving Service Quality with the Theory of Constraints. Journal of Academy of Business and Economics .
Nauman-Etienne, R. (1974). A framework for Financial Decisions in Multinational Corporations- A summary of recent research. Financial and Quantitative Analysis .
Park, Y. (2001). Financial Management. An Overview of Financial Management .
Riley, J. (2012). Introduction to financial Management. finance and Accounting .
Shapiro, A. c. (2002). Multinational Financial Management. Prentice Hall of India pvt. Ltd .
The Economist. (2007). How Asia shrugged off its economic crisis. Ten Years On .
Weston, J., & Allayannis, G. (2002). The impact of Asian financial crisis on U.S. multinationals. Intenational Finance Review .
Zumkehr, H. J., & Edo, A. (2008). Malaysia and South Korea: A Decade after. Chulalongkorn Journal of Economics .
Multinational Enterprises
Multinational Enterprises
Table of Contents
Executive Summary—————————————————————————–3
Introduction————————————————————————————–4
MNE Analysis———————————————————————————–5
Industry/Sector Analysis———————————————————————–6
Country Analysis——————————————————————————–7
Analysis of Regional Organization———————————————————–8
FMSS/ Mode of Entry analysis and recommendation————————————-9
Conclusion—————————————————————————————15
Works Cited————————————————————————————-17
Executive Summary
Multinational enterprises are firms that have grown due to the availability of open market entries in many nations. Countries have opened their markets for foreign direct investments, which have encouraged companies to invest in those countries. The reason for this liberalization of markets is because foreign direct investments come with economic development as many locals get employed in addition to improved infrastructure among other benefits (Cantwell). This article touches on multinational business management. It first begins by introducing multinational businesses and their management. It then goes ahead to pick an MNE, Pv Crystalox, and analyzes it. The analysis is based on the current area of operations of the company. The analysis leads to the identification of a new target market are for the business. The identified market for Pv Crystalox is Brazil. Brazil is also analyzed to check inform the mode of entry for the business. After the analysis, it is found that Brazil is a low market region with moderate potential of growth in market. The possible methods for Pv Crystalox to enter into Brazil are analyzed. This is termed FMMS analysis (Eroglu).
There are five identified methods, which include no entry, sole venture, joint venture, exporting, and licensing. Each of these methods is examined and after a considerable deliberation of Brazil’s economic situation and government policies, sole venture is chosen as the mode of entry for Pv Crystalox. Sole venture is chosen because is seen as the most appropriate method for business that wants to exercise full control of their activities. The method offers Pv Crystalox high level of control for its businesses in Brazil. Moreover, it encourages it to apply experience gained in other countries in Brazil. Another thing that motivated this choice was that Pv Crystalox will integrate itself into the economic system of Brazil and develop at a fast pace and generally maximize profits. It is concluded that sole venture is the best methods of entry for Pv Crystalox and was to be adopted by the firm. The paper recommends Pv Crystalox to adopt sole venture in its mover strategy to Brazil. After this analysis, that summarizes the content of the article. Lastly, the various works cited in the articled are referenced.
Introduction
Multinational enterprises are businesses that operate in many nations. Most multinational enterprises operate in neighboring countries within a single continent. However, some large multinational enterprises exist in more than one continent. These enterprises get into new economies at a fast pace and grow depending on the government policies of the concerned nations. The main reason for the spread of multinational enterprises all over the world is the liberalization in many countries. Many nations have opened their markets for foreign direct investments. This implies that companies can move from one nation to another and establish their businesses. One thing that encourages many companies to invest in other nations is the availability of grace periods and the equal government duties and subsidies for new businesses (Dunning and Sarianna). This paper explores a multinational enterprise, Pv Crystalox. It assesses the strengths and the weaknesses of the company, examines its area of operation, and identifies a country that the MNE is supposed to extend its operations. After identifying the nation, it goes ahead and analyses the existing market of the country and business feasibility in the region. It then recommends the best move that the enterprise can use to get into the nation. Brazil has been chosen as the area of expansion for Pv Crystalox (Willeke).
MNE analysis
Pv Crystalox is a multinational enterprise based in the United Kingdom. The company produces and supplies multicrystalline silicon wafers. It provides the silicon wafers to several main photovoltaic producers all over the world. The company utilizes silicon feedstock to come up with multicrystaline silicon wafers and ingots. The production facilities for the silicon ingots is situated in Oxfordshire, UK, while the production services for the silicon wafers is situated in Erfurt, Germany. The company has fully owned subsidiary, solar silicon GmbH, is charged with production of silicon for the enterprise in the Bitterfeld. The company has other branches in Germany, Italy, Japan, USA, and China. Pv Crystalox is currently the leading supplier of photovoltaic silicon wafers (Pvcrystalox.com. 2013).
One of the strengths enjoyed by the company is a large market share. The company is currently commanding a half the world’s market in the production of silicon. The company has branches in several nations (Solar Power Feed-in Tariffs).
However, the company does not have any headquarters or industries in Australia and Latin America. These nations experience sunny weather over a half of the year. This gives reason for the production of solar panels in such nations. Competitors such as Sharp electronics, Kaneka Corporation, SolarWorld AG, Swiss Wafers AG, and ReneSolar Ltd have expanded their operations into many nations and established industries, as well as solar panel offices. However, in Latin America, none of these offices exist so far (Sharp-solar.com. 2013).
Strength of the company is that it has invested hugely on its research and demand sector. Its research and demand departments worldwide keep updating the business with any developing information, and projection future market demands that guide the decision makers and leaders in coming up with sound decisions with regard to the handling of its products. The other strength is that the company has focused on supply chain management. This helps in improving their productivity, speeding delivery, and reducing operations costs (Gatto).
Industry or Sector Analysis
The current environment in which Pv Crystalox operates predominantly is in the United Kingdom. The future of solar PV in this region is very vital to the subsidy level offered. Installation of big PV units in the past had been more profitable and numerous. Further installation of these units in the region would take up a large proportion of the residual budget while not meeting the aim of increasing household distribution generation of for households.
There are many estimates on the capacity of PV in the UK by 2020. DECC projects that 2.7 GW of PV will be available. The national grid projects that 1.5 GW may be installed, which was a revision from their earlier 3.5 GW estimate.
The market for PV can be broken into two—downstream and upstream. Upstream involves the marching of raw materials, like silicon, and the fabrication of inverters and PV modules. Downstream market touches on financing and installation of PV.
The United Kingdom is has little involvement in the upstream of PV. The upstream of UK capacity includes two manufacturing plants for PV units; Sharp’s Wrexham and Crystalox plant. The two combine to deliver 570 MW–a figure more than 90% of the total production capacity in UK by 2009 (IEA). Another company that manufactures in the UK is Romag.
Downstream services involve domestic businesses. It contributes up to a half of the quality established in the market of Solar PV. There is slight public information on how the downstream market unfolds. Collection of information about these values is very challenging. Majority of these units fitted in the UK are small in electrical capacity and volume.
Currently, the government supports the operation of Pv Crystalox in the UK. It does so through Feed –In Tariffs and involvement in the Renewables Obligation.
Country Analysis
The country that Pv Crystalox will venture into is Brazil. Brazil is a country found in the Latin. America. Brazil is a situated in a region that sunshine is not a problem. This implies that the production and sell of silicon wafers and ingots will be handy in Brazil. Many people will most likely buy Solar panels due to the sunny nature of Brazil.
In Brazil, there is low GDP and the GDP is projected to reduce at a rate of 4.32% due to the rise in inflation. Additionally, Brazil in the year 2012 earned revenue of $ 201.9 billion from exports. The and lower and the middle class in Brazil is composed of 67% of the total population. This creates a huge pool of demand for the solar products. Moreover, external analysis of Brazil technology shows that Brazil is constantly progressing towards a better future.
Moreover, the government of Brazil has good policies that touch on foreign direct investments and multinational enterprises. The country offers subsidies to new businesses. Its market is open to foreign direct investments. New businesses are given a six-year grace period after their founding before they start paying taxes to the government. This is hard to come by anywhere. Moreover, the tax rates levied by the government industries are same for both local and foreign countries. This means that companies have the chance of easily settling in Brazil, as there is no bias by the government.
Analysis of regional organization
The region that the country will establish its business is a large industrial region. Brazil has go many industries that are situated in collections forming families of industries. They industries enhance each other in so many ways. Some industries depend on each other for labor, market, source of raw materials and much more. The specific region that Pv Crystalox will be situated will be an area with good road networks. Brazil has good road networks linking industries to their main markets. Photovoltaic solar panels, being international products, can be exported to other neighboring countries in the Latin America. Therefore, the availability of good road networks makes it easy for the products to reach the market. Another important thing that Brazil emphasizes on is education for its populace. The level of literacy is high in Brazil. Many people have gone to school and therefore there is enough pool of labor for the business. The business will not have to import expats (Athukorala).
The establishment of Pv Crystalox in Brazil will also benefit the local population due to improved infrastructure. The establishment of an industry comes with the need for social amenities, such as water, electricity, and roads. This not only profits the organization but also brings many advantages to the local population. People will be able to water, electricity and good roads due to repairs that come with industries. Corporate social responsibility is another area that Pv Crystalox might consider while if Brazil.
FMSS/Mode of Entry Analysis and Recommendation
The method of entry for any firm into a foreign market is always determined by several factors. Firms do not just wake up one day and decide to venture into a market. There needs to be a study of the chosen market before deciding on the most appropriate mode of entry. Various modes of entry exist for MNEs to choose from before getting into new markets. The most typical entry modes available include exporting mode, joint venture mode, a sole venture ode, and a licensing mode. The choice of these methods depends on a number of factors that are based on a tradeoff between returns and risks (Gilroy).
There are three main determinant factors for the choice of an entry mode. They include location advantage of the firm, ownership advantage of the firm, and internalization advantages of incorporating transactions within the firm in a given nation. Ownership advantage involves the ability of a firm to come up with differentiated products, the size of the firm and its multinational experience. Location advantage entails the market potential and the investment risks resent in the new market. Internalization advantages involves contractual risks that are concerned with the cost of drafting and enforcing contacts, the risk of decline in value of services , and the risk of knowledge dissipation in a given area (Heinecke).
The choice of the most appropriate method of investment depends on the above three mentioned factors. It is through striking a balance in the above factors that a firm is able to effectively invest in a market and draw maximum profits from it. Most firms prefer investment modes that have both high market potentials and multinational experience. This is because the two factors aid in the growth of the business as the business adapts and develops at a fast rate. The development is owed to the fact that the firm has prior knowledge and skills and there is market for its activities. However, it is difficult to come by nations that offer both advantages. Most countries have these advantages but in limited scales. Some could offer high market potential but no multination experience on the firm and vice versa (Kleinert). Moreover, nations usually have policies that govern businesses. In some countries, policies for foreign direct investments are different from those of local investments. However, some nations treat all businesses equally. Restrictive policies for foreign direct investments usually curtail MNEs from venturing in certain markets. Changes in government policies also affect the way in which businesses operate in certain markets. This is because a change in the policies of a nation may bring repatriation of business earnings. Worse still, it can cause expropriation of a company’s assets (Jäger-Waldau).
Exporting as a mode of entry has its advantages and its misgivings. Companies normally choose exporting as a mode of entry due many factors. One such factor is limited resource availability. Exporting is chosen by businesses that lack the requisite capital to invest in new economies. Others prefer exporting when there are restrictive policies in the host nation while other prefers it when the host nation has a high investment risk. Exporting is normally characterized by low resource investment and this implies that the firm incurs low risk alternatives, as well as earns low return alternatives. However, the method does not come with market control, which is indispensable for many market-oriented firms. Firms do not get full control of investment activities in the host country and have no effect on decisions made that pertain to their operations (Lymbersky).
Another investment mode adopted by MNEs if the joint venture mode. This mode implies that a multinational firm collaborates with a business that is already established in the host nation. The two are commonly businesses in the same production line. There are usually signed covenants concerning risk/return sharing. Joint ventures are usually characterized by relatively low investment. They provide returns, controls, and risks that are in tandem with the extent of equity participation of the firm concerned. The motivations behind many firms investing in this mode are usually not in harmony with those of the partner firm in the host nation (Mababaya). However, the mode comes with a competitive advantage. This competitiveness is brought about by the integration of the two companies, which gives them a wider view of the market than that which can be spotted by individual businesses. The firm has the advantage of moving resources across national boundaries with ease. They can also use the experience gotten in one nation in another country whenever needed.
Sole venture is another mode of entry that is most commonly used by large firms with enough resources and skills to utilize in host countries. This is the most appropriate method for firms that require full control of their activities. The method is characterized by high resource investment and hgh return or risk alternative. The mode also offers a high level of control for businesses. Moreover, a firm can utilize the experience gained in one country in another country when need arises. The entry modes entails that a firm gets into a country and begins its operations from zero. This gives it a chance to integrate itself into the country’s economic system and develop depending on its financial position and the other environmental factors in the host nation. Most firms chose this mode because they prefer full control of their resources foreign countries. Full control comes with general profit maximization and hence firms should remain subordinate parents to their foreign venture (McIntyre, Ivanaj, and Ivanaj. ).
Licensing is another mode of entry for firms. It is characterized by low resource investment. It also comes with low risk or return alternatives and low control. This is the most unpopular means of venturing in foreign nations by firms. Mostly small firms that are at the initial stages of growth adopt the method. There no big businesses that always claim their growth from this method. However, most big firms say that firms normally use this method as a litmus test to the feasibility of their operations in the target market (Quaschning).
Low control levels usually come with higher costs compared with the integration of assets and skills within firms whenever managers cannot predict future contingencies. A high level of uncertainties makes the cost for drafting and enforcing contracts very expensive. Low modes of control profit many businesses. This is because it allows them to benefit from the economies of scale in the market. They do not encourage bureaucratic disadvantages that come with sole ventures and joint ventures. This is because firms are not tied up by changes in local policies (Rugman). Moreover, if so, they always have the liberty to opt out any time they want. Nations that experience lower market potential are projected to possess a lower rate of attracting foreign investments. Businesses always want to grow and develop. A number of factors apart from capital determine this development. The market for the products of a company determines whether a company grows or not. Therefore, when there is no possibility of growth in the market potential, then there is no need for investment. This point explains the above case. However, ventures with branches all over the world are not hindered by such factors. Most of them could have interest in those nations because of the need to enjoy slow profit objectives and growth. Brazil and India are two third world countries that do not have some good market potential for investment, but their potential is moderate. They may not be as lucrative as developed countries, but may still harbor the market potential and strategic importance that warrants consideration for MNEs (van). Additionally, these countries act as potential markets for MNEs as they come with an extra benefit—they have a higher propensity of better returns owing to greater market instabilities.
When firms decide to venture into low markets such a Brazil and India, they normally do so with a high likelihood of adopting the sole venture entry mode. This satisfies their need for managing and monitoring their resources and services all over the world.
Joint venture and exporting are appropriate methods of entry in low potential markets. This is because there is a reduced risk view. However, these methods do not come with flexibility, control, and change required by firms to hold on to long-term competitiveness. Joint venture usually creates hindrances for strategic coordination. Therefore, larger companies with high multinational experience will most likely go for sole venture mode as an entry mode into lower market potential countries.
Joint ventures are commonly chosen by smaller firms with lower multinational experience as entry modes especially in nations with higher projected market capital. This is normally due to the greater possibility of the firms to grow in such markets. Moreover, returns in such areas are better. Joint venture allows firms to share risk and costs, as well as complementary assets and skills with the partner company in the host country. This is advantageous, as the firm does not incur all the death alone. Furthermore, the venture allows for more investments as risks are spread across a wide pool. This method cuts the long-term doubt at a reduced cost compared to ideal market approaches.
Firms that have a higher propensity of coming up with differentiated products have the capability of choosing sole venture entry mode in countries with high investment risk. However, MNEs with high multinational experience harbor lower possibilities of choosing sole entry mode in those nations.
The availability of increased market potential encourages firms to invest in foreign nations while low market growth rate implies that firms will most likely avoid entry. High levels of investment contingencies hinder firms from venturing into countries while low investment risks attract MNEs. In nations with high market potential coupled with high contingency investments, MNEs may opt for exporting modes or joint ventures. Therefore, companies should strive to strike a balance between all the above factors (Wustenhagen, Rolf, and Wuebker).
Based on the above-discussed factors, it is evident that the best method for Pv Crystalox to venture into the Brazilian market is through the sole venture entry method. Pv Crystalox is a company that has branches all over the world. It has the necessary capital to invest in a country like Brazil. Moreover, Pv Crystalox has a high market experience in many nations that will help it advance well in a nation like Brazil. Brazil has no restrictive measures for foreign direct investments. In fact, its foreign policies are very favorable. The country encourages foreign direct investments by offering subsides to MNEs. The country is a democratic country that is developing on a daily basis. There is stability in the nation. The nation has sunny weathers throughout the year. This weather, coupled with the large pool of its populace makes it a vantage point for Pv Crystalox to venture into. Sole venture for Pv Crystalox will be aided by the fact that Brazil offers subsidies to industries that promise common good for the entire population.
Pv Crystalox has ownership advantage. This is evidence by its capacity to offer differentiated products and its multinational experience. The company has many firms in nations all over the world. Going into Brazil will be a walk in the park for the MNE. This is because all the company needs is permission. Another thing that gives Pv Crystalox an ownership advantage is its size. The company is so large and has networks throughout the world this is something essential for sole mode of entry. The firm will benefit from profit maximization and grow at a fast rate.
Moreover, the investment risks in Brazil are moderate given the current state of its economy. This is advantageous to Pv Crystalox as it gives it the advantage of profiting from the unstable market of Brazil. The company may adopt a fast mover strategy and solidify its operations within a very short time. Sole mode of entry is best for emerging markets because of the inconsistent markets.
Conclusion
The paper has touched on management of international business by exploring a Multinational Enterprise, Pv Crystalox. The document began by giving an overview of multinational business and introducing us to the main purpose of this document, which was to identifying an MNE and going all the way to establishing ways of extending its operations in a new market. The current state of Pv Crystalox has been analyzed followed by a country analysis of its current area of operation. The paper also explores the target country of venture and gives a regional analysis of the country. It further goes ahead to give the possible entry modes that Pv Crystalox can adopt and selects the best mode of entry for the company after analysis its potentials. The various modes of entry discussed in the paper include no entry, exporting, joint venture, sole venture, and licensing. The method chosen for Pv Crystalox was sole venture which is so far the best method that will for its in Brazil considering regional conditions. Briefly, the aim of the project has been realized.
Works Cited
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Chapter 7. Local Governments in Texas
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Chapter 7. Local Governments in Texas
Challenges Facing County Governments
Counties are facing many issues that are becoming more demanding by the day. One such issue is problems with structural finances. Property taxes are going down when the growing cost of services is increasing, and the infrastructure in place is aging. These warrant repairs and maintenance of infrastructure under local governments such as roadways, sidewalks, water and sewer lines as well as municipal facilities. The growth of metropolitan areas is also causing increasing stress on roadways meaning these part of infrastructure requires attention as well. On top of these, counties have to deal with the economic impacts of climate change that bring about water scarcity and extreme weather. Technology is also bringing about regulatory problems to local governments as vocal parties demand that these advanced technologies be bound by regulation in ways that ensure existing industries are protected.
Declining county funding is a very significant problem for county governments. In addition to this, state governments are limiting the counties’ capacity to raise revenue. Forty-five states have put some limitations on the abilities of counties to raise money through property tax. Counties are forced to cut funding from crucial areas such as public safety to cover the deficits. States are increasing mandates for counties to implement without providing the funding required to do so.
To deal with the fragmentation of programs and services, county governments should engage nonprofits an social enterprises to generate a hybrid model of public services and one driven by profit. The need for public trash collection, habilitation of people dependent on drugs, safe housing options, and so forth have been answered by private entities. Citizens are given some degree of power to resolve their own issues that would otherwise burden these governments. Citizen engagement is thus essential, and the use of technology can help further this initiative. Citizen engagement means collaborative work that aides in building on past developments and incorporating new services.
Differences Between Strong-Mayor, Weak-Mayor and Council-Manager
A weak mayor kind of government uses a mayor-council method where he/she is subordinate to the council in terms of the mandate for policymaking and administration powers. The council employs a city manager and appoints the mayor as opposed to being elected. The council-manager is appointed by the council in which the mayor is a member. The mayor is elected by the citizens. A strong mayor or the mayor-council form of government has the mayor as the chief executive officer of the city and does not employ as city manager, maybe an admin to help run daily affairs. The strong-mayor form of government is the most desirable for me because, as a mayor, one would like to do things his way. The issues one promised the electorate deal with once elected will be easily executed without needing approval and without including limitations.
Chapter 8. Public Opinion and the Media in Texas
Why Texas Democrats Trust the Supreme Court more than Other Government Branches
Despite the Supreme Court being the least understood branch of government, it is the most trusted. Democrats in Texas believe that supreme court judges follow the law and not political ideas when rendering their decisions on issues. Texas Democrats believe that Supreme Court judges base their decision solely on the law. There have been partisan battles recently over the highest court in the land. However, a majority of people, including Texas Democrats, believe that the court holds a moderate position in this liberal-conservative continuum. This opinion about the supreme court by Texas Democrats increases with more knowledge on the court and the decision of judges. In essence, the Supreme Court is specially capable of commanding respect, especially when compared against other government branches, and most of all, those citizens that are aware of the roles of justices under the constitution.
Why Republicans and Independents in Texas Trust Trump more than the Supreme Court
Trust in the executive, particularly Trump, is strongly related to party support. Almost all Republicans have trust in the president because he is, of course, conservative as they are. Republicans trust the Supreme court more than they distrust it but not as much as they trust the president. Some believe that the Supreme Court sometimes leans to the liberal side. A good example is a decision made by the supreme court in the last few terms. The decision to stop President Trump’s addition of work as an eligibility requirement for Medicaid is one that may be considered by liberals as to lean towards the liberal direction because it was President Obama who expanded this program. Independents do not support the Supreme court as much as they do the president because they believe that the Supreme Court may be leaning to one side of this partisan continuum. Unlike the president who has the right to have biased ideas, the Supreme Court should be strictly unbiased, and when a little biasness is perceived, independents would rather side with the side that is not selling out. Independents in Texas might have supported Trump despite them being on no side, which means they have trust in him.
Chapter 9. Voting and Political Participation in Texas
Effects of voter ID laws on Turnout in Texas
The Texas voter ID laws require voters to have with them a government-issued ID such as an identification certificate, a driver’s license, a US passport or a military ID. Such requirements disenfranchise minority voters who face significant limitations when applying for these IDS. The laws accept a license to carry a gun but decline a government or school-issued ID, which is just absurd. It is known that white people in Texas are the minority with licenses to carry handguns. Minorities face huge barriers to obtain a gun license; that is why these laws can be perceived to be discriminatory. Other states permit various forms of ID that are excluded from Texas laws, which keep a lot of people from voting. These laws, according to Judge Nelva Gonzales Ramos from the US District Court of Southern District of Texas, had a discriminatory effect. These laws affect voter turn out by targeting particular races and enacting restrictions that most certainly appear to keep them away from the ballot. These patterns of requirements under these laws cannot be explained by grounds other than race.
Barriers should not accompany the right to vote. The voter ID laws keep many away from the ballot, deprive them of their constitutional right to vote, and directly oppose the country’s progress towards including more Americans in the democratic process. Many Americans do not have access to the forms of identification included in these laws. These voters are disproportionally low-income, from racial minority groups, and other vulnerable demographics. These voters have a hard time obtaining ID because either they cannot afford to obtain the documents required to obtain a photo ID card issued by the government. A study by GAO indicates that voter ID laws reduce voter turn out by about 2 to 3 percentage points, which means tens of thousands of Texas residents cannot vote.
Why I oppose these laws
I oppose these laws because almost 11 percent of Americans do not have a government-issued photo ID (ACLU). Again, obtaining this ID requires money, an expense that low-income Americans cannot foot. This includes the combined cost of document fees, waiting time, and the cost incurred during travel. When these costs are combined, they come to between $75 to $175. The elderly and people with disabilities cannot be able to travel as well as those people coming from rural areas. People from Rural Texas travel up to 170 miles to the next ID office.
The discriminatory aspect of these laws mostly influences my stand against this law. Minority voters do not have the IDs required for voting as compared to white people. A quarter of African-Americans across the nation of voting age do not have photo IDs from the government in which is quite disproportional, considering only 8 percent of whites lack these photo IDs. Besides, allowing permits for handguns to vote and disallowing other forms of ID such as student IDs is straight-up discriminatory. Again, the majority of minorities do not have handgun permits, which are also hard to obtain when one is from either of these groups.
Chapter 10. Campaigns and Elections in Texas
The Role of the Media in elections
The media is central to the proper function of a democratic nation. The media usually plays a watchful role. They conduct autonomous scrutiny and discuss the strengths and shortcomings of candidates, bodies that oversee elections, the government, and informs the public of the extent these agencies have carried out their mandate as required and join them in holding them accountable. The media also ensure public participation in elections by educating them on how to exercise this democratic right. They also provide reports on how the election is progressing. The media give candidates as well as their affiliated parties a platform to communicate with the electorate. It also allows the public to communicate their ideas, concerns and needs to the authorities and to people seeking to join the administration and provide a platform for them to interact on these issues.
The media so far has played most of its part as the backbone of this democratic nation. It has informed, criticized, and stimulated debate on various crucial occasions. The credibility of the media has, however, been in question. Its effectiveness is based on its responsibility to get its facts right, which I believe it has done. The media has dug deep, collected opinions from different people, and countercheck their facts thoroughly. It has not held back in rooting out deception and exposing liars, hypocrites, and the corrupt using counterchecked facts.
Where the media does not show much merit is avoiding to cause panic by exaggerating facts. It appears that the media these days is reliant on the information that cause havoc in order to draw public attention. The press is yet to lose the respect of the people and the nation at large, but there have been instances of irresponsibility, exaggeration, and mongering to influence sales.
Challenges that hinder minor party candidates from succeeding in statewide
Minority party candidates are a long way from ousting the Republican and Democratic hegemony that has characterized American politics for way over 150 years. Republicans and Democrats still reinforce archaic laws that ensure voters have only two choices at the ballot. When these two parties came to power during the early years, each with its turn, they created restrictions that bar outsiders from participating fully in the state as well as national elections.
In Arizona, for instance, Republicans and Democrats need to collect 6,000 valid signatures in order to be included in the ballot. However, this number is six times higher for independents who are required to bring them in the form of valid petitions. In reality, an independent would need to collect around 50,000 signature to make sure that they have 37,000 that are valid (Galen). Only candidates that are able to fund themselves or have independent notoriety can be able to make these targets. It is clear that these two dominant parties have no interest in entertaining further competition. Even if independents join the Green or Libertarian parties, which are considered traditional failures, they solve the ballot problem, but still, they suffer from the wasted-vote theory where voters see them as fringe groups with no likelihood of winning.
Works Cited
ACLU. “Oppose Voter ID Legislation – Fact Sheet.” American Civil Liberties Union, 2017, www.aclu.org/other/oppose-voter-id-legislation-fact-sheet.
Galen, R. “Opinion | Reed Galen: Here’s How to End America’s Ballot Box Duopoly.” NBC News, 17 Apr. 2018, www.nbcnews.com/think/opinion/how-republicans-democrats-prevent-independent-candidates-getting-ballot-ncna866466.