Through competitor analysis, the company can differentiate the products supplied to these new regions, and effectively overcome the impeding competition from existing suppliers (Johnson 2012). Overcoming competition remains fundamental towards ensuring successful entry into international markets. Competitor analysis could assist the company in reaching competitive edge within the international business ventures. The production methods utilised by competitors can provide the company with possible production methods to use within these regions. This will also enable the company to analyse possible production technological advancements that could be introduced, and improve the production. Introduction of new production technology could enhance production and reduce production costs. Economic status The economic status shall include the analysis of the economic systems, within these regions, and institutions. This would provide the company with information regarding the availability of essential natural and human resources within the target regions. The available human resources could enable the company establish the best production methods, sustainable within these regions. The economic status shall enable the company to decide on strategic approaches to take when making market entries into these regions. In a libertarian economy, for example, market entry would be easier because of limited interference from governments (Glaeser, 2010). Most economies of Eastern Europe, Africa and Asia remain relatively static with considerable government regulation. Understanding of these factors would enable the company to strategise on effective methods of coping with the government influence (Jethani 2011). Government influence in these economies limits the freedom of conducting business and could frustrate investors when assumed. Political system The company should consider the political systems in existence within the target markets. The political system immensely affects the policy formulation and economic stability of any country. The political systems within different countries determine the influences of government owned enterprises on private businesses. While the operation of government owned enterprises depends on political systems, their influence on private businesses could affect the operations of private enterprises (Hatch, et al. 2011). Political systems could therefore, affect private businesses through offering government enterprises better operating environments, hence instigating unfair competition. Bureaucratic political systems implement controls on private enterprises while letting government owned businesses to operate freely, giving government enterprises a competitive edge. International conflicts, influenced by political systems, could also have adverse effects on international businesses. Countries experiencing international conflict could have sanctions imposed on them, and participation in international activities, including business, significantly affected. Legal factors The legal system within any country affects the capacity to effectively conduct business. An analysis of the legal systems remains essential in enabling the company to determine best operating methods, applicable within the legal systems. Existence of corruption within numerous African countries could become a hindrance towards stability of operations. Corruption could become deeply rooted vice in a country’s culture that it becomes inculcated into national values
International Business Finance University/College Lecturer Date International Business Finance Factors to consider before establishing subsidiaries Competition The company needs to conduct an extensive research of the existing suppliers of similar products within the intended regions…
It will also provide information regarding the outlook of the top management for the subsidy, this information mostly will pertain to financial aspect of the companies new subsidy. Although this may be a feasible option, another proposition to be considered is whether this is worth compromising quality and customers of its base country.
This has made its clients develop a strong customer confidence on the firm solely because of its timely delivery of products (Madura 1999). The companies of such calibers are also not so much meaning that the market for office supplies is still green even in the foreign markets.
Corporate governance is the collection of procedures, civilization, rules, regulation and institution influencing the method a business is expressed, managed Controlled. Corporate governance is mainly analyzed as equally the arrangement and the relations which decide corporate way and presentation.
Introducing a firm and/or its product to the overseas market is done through overseas expansion in which a firm extends its business and operations out of its domestic work boundary into newer regions of greater opportunities. There are several methods of overseas expansion including exporting, foreign direct investments, and resource allocations etc that provide firms with means to enter the international market.
1. Franchising: an organization can expand overseas by opening its franchises in the foreign land. Franchising can only prove to be a successful strategy for overseas expansion if the organization is well renowned in its homeland and is doing business for a long time.
Assess the various methods that they use by an organisation in order to expand overseas. Several methods that are available today for organizations that they may use to enter a foreign market. These include exporting, importing, licensing, joint ventures and offshore production.
This decision has implications upon the company’s capital structure, its cash flows, and prospects for future financing. Most especially, it impacts upon the investors’ perception of the company. If dividends are too seldom declared or the amount is less than expected, then by dividend cash flow theory the present value will justify a lower stock price.
Forex rate is defined as the units of one currency that can be purchased in terms of another. The general standard for the later is considered the US Dollar (USD). The problem complicates further if the organization deals in various countries with various currencies.
The paper utilizes financial data and computes the WACC, as well as the Net Present Value. The analysis gives a WACC of 10% and an NPV of € 1.359 million, which is indicative of the value of the investment into a joint
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