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An MNE establishing a 100% owned Greenfield factory in thailand to manufacture compact sedans for australian and south east asia - Essay Example

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An MNE establishing a 100% owned Greenfield factory in thailand to manufacture compact sedans for australian and south east asia

In this essay we will conduct an investment analysis of Thailand. We will discuss political risk, social risk and economy risk of Thailand. All the discussion will help an MNE that is trying to establish a 100 percent owned Greenfield factory in Thailand to manufacture compact sedans for Australian and South East Asian customers. There are many factors that can affect the decision of the MNE and all these factors will be discussed in great detail. Political Risk of Thailand Thailand is a country where political institutions are not as strong as in the developed world. The country has had many constitutions, 17 to be exact. This shows the political volatility of the country and this can be a problem for any MNE. Political stability is very important in order for any factory or production unit to work properly. MNE would have to employee local people and they will only be able to come to factories when there will be peace and stability in the country. Thailand has serious political risk and MNE should take this into account from starting its factory in the country. The country has seen many governments from 1997 to 2011. In 2006 there was a military coup in which military consumed power and dissolved government (MSNBC, 2006). Around a whole year the country was ran by military and politics was banned. This is the reality of the political risk of the country. The shift in politics impacts an MNE in many ways. New government usually comes with a new set of policies and this creates problems for a multinational company. The new policies may involve new tax policy and this can seriously affect the profits of the multinational company. Political risk of Thailand is also a threat for the MNE because it can affect the workers who will be working in the factories. Local employees will not be able to work properly if there will be political instability in the country. MNE will also have to plan for any major political change in the country. The multinational company should abide by the laws fully in the country so that it can continue its production without any major problem if government was to change in future. Thailand is also a country where political institution is not very developed therefore corruption exists and this can also affect the MNE. In Thailand there is a conflict between the poor and rich classes and this is conflict is not expected to end, and this conflict is creating problems for businesses in the country (Reuters, 2011). This leads to peace problem in the country and business find it difficult to function. This conflict also leads to violence in the country. All these are significant political risks are to be taken into account before a car factory is set in the country. A car factory involves a great amount of workers and these workers will be employed from local sources. Therefore any instability in the country is not good for the MNE. Social Risk of Thailand There are considerable social risks in Thailand for MNEs. The country is not a developed country and wages are not as high as in developed world. This makes the country attractive as the company will have to pay fewer wages and this will lower the costs for the factory. But at the same time lower wages will mean lower level of lifestyle and higher crime rate. This is a significant social risk of Thailand and it is likely to affect the company. Employees of the company can get affected by these social risks and their performance can be reduced. Also ...Show more

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Country Analysis: Thailand Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts (28, August, 2011) Introduction It is essential to conduct a thorough country analysis before investing even a small amount in any country…
Author : isom14
An MNE establishing a 100% owned Greenfield factory in thailand to manufacture compact sedans for australian and south east asia essay example
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