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Decision making process
Decision making process
Decision making process
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When deciding to engage in international trade an enterprise must make a choice of mode of entry into a foreign market. Depending on their resources, commitments, and long-term goals, the enterprise may select exporting (direct or indirect) or equity investment (foreign direct investment (FDI) or licensing/franchising) as a mode of entry (Peng, 2014). Exporting requires the least commitment, has the lowest investment of resources (and resulting risk), and capitalizes on use of home country capital – economy of scale. However, the tradeoff is higher transportation costs, potential loss of profit from local distribution, and liability of foreignness compared to equity based modes of entry. At the other end of the spectrum, FDI requires the most commitment, highest investment (and risk), and presents the necessity of managing a satellite facility in a foreign country. Conversely, it reduces transportation costs, greater access to local knowledge and profits, and counter liability of foreignness (Quick, 2010; Carter, 1997). Therefore, analysis of a business, the industry, and the environment of home and host country is necessary to determine the best mode of entry.
Agricultural commodities such as corn, is a type of business that would be most successful as an export business. From an industry point of view, there is little distinction amongst commodities; soybeans from the US are the same as corn from Brazil. Because of product homogeneity, the incentive to form strategic alliances between rival firms and resulting FDI is low. Research by Qui (2006) indicates competing firms are more likely to form strategic alliances as product differentiation increased. Those alliances gravitated towards FDI. When product differentiation...
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Tanzania. (2011, March). 2011 investment climate statement - tanzania. Retrieved from U.S. Department of State: http://www.state.gov/e/eb/rls/othr/ics/2011/157369.htm
Timeline. (2014). Timeline. Retrieved from John Deere: http://www.deere.com/wps/dcom/en_US/corporate/our_company/about_us/history/timeline/timeline.page
UPI. (2012, December 21). Hungary bans foreign farmland ownership. Retrieved from UPI: http://www.upi.com/Business_News/Energy-Resources/2012/12/21/Hungary-bans-foreign-farmland-ownership/UPI-42121356066240/
USDA. (2013, December 16). Corn trade. Retrieved from USDA United States Department of Agriculture: http://ers.usda.gov/topics/crops/corn/trade.aspx
World. (2014). Worldwide locations. Retrieved from John Deere: http://www.deere.com/wps/dcom/en_US/corporate/our_company/about_us/worldwide_locations/worldwidelocations.page?
Indicators. United Nations, 7 July 2011. Web. 16 Nov. 2011. This data sheet shows the
Currently, the United States is the largest producer of corn in the world. In 2010, it produced 32% of the world’s corn crop. Corn is grown on approximately 400,000 U.S. farms, showing the importance of corn in the United States’ diets. Twenty percent of the corn produced is exported and corn grown for grain accounts for almost one quarter of the harvested crop acres in this country (National Corn Grower's Associatio...
Carrillo-Huerta, M., & Bonilla, I. M. (2005). The effect of NAFTA on mexican agricultural exports to the united states: The case of coffee beans, 1970-2003. The Journal of Entrepreneurial Finance & Business Ventures, 10(2), 76-93. Retrieved from http://www.econstor.eu/bitstream/10419/55949/1/662664000.pdf
While the United States has a long-standing foothold on the oil in Africa, China has been dominating the other natural resources available for the past 20 years (Bhorat 2013). Additionally, the current perception of President Obama in Kenya seems to have changed dramatically over the recent years. While much of the letdowns were due to high expectations on the Kenya’s population, the general consensus was that President Obama has not done much to help improve the current state of the Kenyan economy. The current programs in Africa are programs that were enacted or established by President's Clinton and George W. Bush (Mwangi 2013). This has allowed the Chinese government to move in and expand operations in the region.
In my previous paper I did my research on the history, production, and trade of cane sugar that was mostly produced in the United States. On our study abroad trip to Mexico we saw some sugar cane fields from the road, but we did get to tour any of the farms or see any sugar processing factories. So I was thinking to myself how I am going to write a paper on sugar cane in Mexico if I never experienced any of it while I was down there. Fortunately I found a topic that was very close to home and related to some of the agriculture in Mexico as well. While visiting the Trade Management Services, Inc., we met with the Iowa trade representative, Jose Antonio Jimenez. Jose mentioned some things about the controversy with the United States and Mexico with the imported high fructose corn syrup into Mexico and the effects it has had on the sugar markets and the producers. Since Iowa is the number one grower of corn in the United States, and number one in producing high fructose corn syrup, it is a major issue for Iowans because of the great market share we have with Mexico. In this essay I will discuss some of the issues with the trade barriers, taxes, and tariffs the two countries have opposed on each other.
The essential factor of an oligopolistic firm is interdependence. Oligopoly involves few producers, which means more than one producer as it is in pure monopoly but not so many as in monopolistic competition or pure competition where it is difficult to follow rival firms’ actions. Therefore, due to small number of producers on oligopoly market, the price and output solutions are interdependent. As a result, firms can cooperate or come to an agreement profitable for everyone. Therefore, they can increase, as it is possible, their joint profits (Pleeter & Way, 1990, p.129). Further, oligopoly is divided on pure, which is producing homogeneous products, and differentiated, producing heterogeneous products (Gallaway, 2000). Economists Farris and Happel insist that the more the product is differentiated, the more firms become independent, and the more the product differentiation, “the less likely joint profit maximization exists for the entire group” (1987, p. 263). Consequently, it is worth to be interdependent.
Many business owners and entrepreneurs are doubtful about the global opportunities available to their business. In other words, business owners don’t give consideration to the world markets, instead they tend think locally in terms of gaining customers. This doubt however is unfounded. The international trade commission reported that 70% of the world’s purchasing power and 95% of the world’s consumers are located outside of the United States, which means that there is a massive market that is currently untapped by 99% of business in America. In addition to doubt, there is the uncertainty about exporting to other countries, this uncertainty may stem from lack of knowledge about foreign trade and the international laws. A business owner may be uncertain about how, when, where, and to whom it is legal to ship their products. Although, this uncertainty is understandable it is not required for businesses that are conducting business legally within the United States, business owners should remain mindful of this so that they can push their uncertainties aside. The last factor that deters businesses from international trade is Fear. Fear that there will be unforeseen and uncontrollable issues with transporting goods such as: theft, loss, damages, diversions, and/or regulatory penalties that may be imposed on the business. Although, there is a
A surprising fact is that most of the corn we produce in the United States is not actually eaten. In 2008 the United States produced a total of 12.1 million bushels of maize. Of that 5.2 million was used as livestock feed, 3.6 million for ethanol production, 1.8 million for exporting, .9 million for production of starch, sweeteners, high fructose corn syrup, and oils, and finally .3 million for human consumption in grits, flour, alcohol, etc.
The topic under review is strategic alliances. This particular form of non-equity alliance between firms in the same industry (competitors) is becoming an increasingly popular way of conducting business in the global environment. Many different reasons of why such alliances are occurring have been recognized. These include: the increasing globalization of the world's economy resulting in intensified global competition, the proliferation and disbursement of technology, and the shortening of product life-cycles. This critique will use Kenichi Ohmae's viewpoint on strategic alliances as a benchmark for comparison. Firstly, a summary of Ohmae's article will be provided. Secondly, in order to critique Ohmae's opinion, it will be necessary to review other literature on the topic. Thirdly, a discussion of the various viewpoints and studies, that have hence arisen, will be discussed in detail. Finally, conclusions will be drawn with implications for companies operating in today's global environment, together with suggestions for future research on strategic alliances.
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, a company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for a company’s products may have diminished as a result of an economic crisis thus the company will target a foreign market to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture in the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for share...
Instead of location and labor consideration, Mercedes-Benz’s FDI flow decisions are affected by the difference of exchange rate and tax rate between home and host country. In short, financial incentives and international foreign opportunity are the factors of MBUSI subsidiary establishment. This paper primarily analyzes the impact of FDI towards Mercedes-Benz and the state of Alabama. Further, the writer focuses on the risk management, and cost-benefit analysis of MBUS...
There are three main political risks that can be encountered when moving business overseas which are: confiscation, expropriation, and domestication. Each of these risks can have significant adverse effects on a company that is trying to expand into foreign countries. Of the three, confiscation is considered to be the most severe political
Vollrath, T. L. (1991). U.S. trade in competitive world markets. FoodReview, 14(1), 26. Retrieved from EBSCOhost.
Porter 's competitive advantage theory which emerged in 1990 contradicts that the theories of comparative advantage and Heckscher-Ohlin cannot provide an explanation as to why some countries prosper and others fail to succeed in international competition. He distinguished four qualities that advance or hinder the creation of competitive advantage; Factor endowments, demand conditions, relating/supporting industries and firm’s strategy, structure, and rivalry. So far, Porter’s study hasn’t been appropriately experimented to know how well it holds up (Hill, Cronk & Wickramsekera 2014). Regardless of this, the key drivers of globalization have transformed the nature of international business and possibly be the reason behind the success of international business since 1970. The decline in trade and investment barriers has enabled the international business to growth further. Once a business exports/imports goods from other countries or commits to FDI, it becomes an international business. Lowering trade and investment barriers are characteristics of international business. This allows growth in FDI and moves towards regional economic integration. The advantages of the political driver on international businesses include; the diverse variety of goods available to consumers through the new trade theory, low prices, economic growth and competitive advantages. The disadvantages are; potential risk factors, foreign debt, exchange instability and high cost. Weakening the barriers also permits international businesses to station production at the ideal area for that activity. Thereby, a firm may outline a product in one nation, produce segment parts in two different nations, manufacture in another country and afterward trade the finished product around the globe. Technology has altered the nature of international business by introducing